Sponsoring Companies Make Contributions
Probably the least understood area of SSAS pensions is how the sponsoring company makes contributions into their pension.
A Company can make two types of contribution to its pension:
- Standard contributions
- Advance contributions
A Standard Contribution is made by the company on behalf of its members. The contribution goes directly from the company into the member’s fund.
The maximum amount of this contribution is their available annual allowance (plus any carry forward of unused allowances).
This contribution is an allowable expense for corporation tax in the period the contribution is made (subject to the contribution being wholly and exclusively for the purpose of trade)
An Advanced Contribution is made by a company into the general fund of its SSAS. This contribution is not for any specific member. It is there to provide funds for future contributions for current and or future members, in current or future years.
In simple terms the Advanced Contribution allows a company to make contributions when it has a good trading period. In doing so it provides funds to make pension contributions when perhaps the trading conditions aren’t as good.
The key benefits of this facility are:
- The funds in the general fund can be invested as soon as they are received
- Providing all the conditions are met, these contributions are an allowable expense for Corporation Tax in the year they are made.
- They provide for future members contributions, so help build members retirement funds in both good and bad trading conditions
The maximum amount of this contribution will always be more than the member’s annual allowance.
As this is a relatively complex area, we recommend you book an appointment with one of our consultants to discuss this.