(PPS), which will enable the employees of its corporate clients to take advantage of new pension rules, allowing them to transfer shares received from employer share incentive schemes into their pensions.
The new rules mean employees can make ‘in specie’ transfers from their ‘partnership share schemes’, which are HM Revenue & Customs approved savings plans where employees purchase shares in their company from their gross pay. After 5 years, any growth in the share value is free from CGT and dividends are received free of income tax. After the 5th anniversary, a member may elect to sell their shares or they can be re-registered in the employee’s name.
Pension legislation now allows individuals to make ‘in specie’ pension contributions by transferring a personal asset into a pension fund. What this means is that when the shares are re-registered after five years, they could then be transferred into his/her pension fund as a contribution, which in turn would qualify for full tax relief.
Claire Court, Head of Self Administered Pensions, Origen, said:
“Our PPS works through the framework of a group SIPP. On the fifth anniversary of the share save scheme an employer is now able to offer a third option, along with inviting the employee to sell his shares or re-register the shares in his/her name. Now the employee can pay an in specie contribution into the group SIPP by transferring some or all of the company shares he has received. The SIPP will reclaim the basic rate tax relief and this will be added to the employee’s fund. It is then down to the employee to claim the higher rate tax relief via his tax return.
“The benefits for an employer running a PPS is that it will help the employee build up his retirement savings, it is administered simply as the contributions will be paid at the same time for all employees, and competitive terms can be negotiated for the group.”
-ENDS-
Example:
Mr B, who is 45, is an employee of a FTSE 100 company which offers a Partnership Share Scheme into which he can save up to 10% of his monthly salary, before deductions for tax and NIC.
His salary is £130,000 per annum and over the past 5 years has accumulated shares to the value of £75,000 in the scheme. He has the option to have some or all of these transferred to his own name on 6 April 2007.
Whilst he is a member of the company’s final salary pension scheme he is keen to build up his pension provision, as he would ideally like to retire early at age 58.
He has decided to have £40,000 of the shares transferred to him personally on 6 April and he then plans to use them as a net in specie contribution to a SIPP. He will transfer the shares to the ownership of the Trustees of the SIPP and receive tax relief on the contribution based on the value of the shares on the day of transfer. Based on a sum of £40,000, the SIPP will reclaim tax of £11,282.05 and he will personally reclaim higher rate tax relief of £9,230.76.
In addition he will suffer no income tax or capital gains tax consequences of the transaction, as the shares coming out of the Partnership Share Scheme are free of tax at the point of transfer.
He is delighted with the concept, as it enables him to fund his early retirement with no need to part with any cash.
Origen
Origen is one of the UK’s leading providers of financial advice and services.
Origen’s principal lines of business are:
- private clients
- advice to small/medium sized companies including specialist planning for the owner-directors,
- communication and education to employees of large corporate clients including executive counselling services,
- provision of advice to affinity groups such as newspaper readers.
Origen has key specialisms in the corporate and high net worth areas. It has its own Self Administered Propositions, a dedicated Research department, Discretionary Fund Management business, Annuity, Mortgage and Healthcare operations.
AEGON UK
- AEGON UK is part of the AEGON Group, one of the world’s largest financial services groups. AEGON UK currently has assets under management of £44 billion. The AEGON group manages assets of £200 billion.
Jonathan Atkins