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Technically, the current pension tax regime does not generally allow in specie contributions but it is possible to achieve them indirectly through a variety of methods. However, they tend to be complicated and great care needs to be taken to ensure that everything is done correctly to avoid possible issues with Revenue and Customs. Advisers and clients in the Sipp market have been showing great interest in making contributions through direct transfer of assets known as in specie contributions rather than through cash payments. The Government is more than happy with direct in specie contributions if they come from an employee share scheme. This can be either a maturing share incentive plan or a save as you earn option scheme. These types of scheme are most commonly seen in big companies which have their own occupational schemes so the opportunities to reinvest the proceeds in a Sipp were limited by the concurrency rules before A-Day. Of course, these rules have been scrapped, so a Sipp is now a potential home for these share schemes once the tax benefits have been secured. Share incentive plans allow employers to award up to 3,000 of free shares to an employee in a tax year. In addition, employees can buy up to 1,500 of partnership shares in a tax year and the employer can add up to two matching shares for each partnership share, making a maximum of 4,500 in-partnership shares in any tax year. Employees pay for their partnership shares from gross earnings so they are not immediately liable to income tax and National Insurance. If shares are retained in the incentive plan for five years, there is no liability to income tax, capital gains tax or National Insurance contributions. For those willing to forfeit tax benefits, partnership shares bought by the employee can be cashed in at any time but free and matching shares must be held for at least three years (unless the individual leaves the company). With save as you earn share option schemes, employees can contribute up to 250 a month out of net pay over a period of three, five or seven years. If the scheme runs through to the end, a guaranteed bonus is added. This varies with the length of the term and market interest rates at the start but is typically equivalent to 2.5-3 per cent a year. As part of the scheme, the company gives an option to buy shares at a fixed price within six months of the end of the savings period. The minimum price is 80 per cent of the share price at the start of the savings period. If employees surrender their holding before the end of the period, they forfeit the bonus and the share option but may be given some interest. The bonus and the extra value from the share option are not subject to income tax or National Insurance but there is a potential capital gains tax liability arising from the share option. In many cases, this will be covered by the annual capital gains tax exemption. Both types of share scheme can be rolled over into a Sipp. Where the shares were in an incentive plan, they must be put into the Sipp within 90 days of the member asking the incentive plan trustees to transfer the shares to him/ her. This does not have to be at the end of the five-year period required to get tax benefits. Shares can remain in the incentive plan indefinitely without any tax liability. Where the shares arose from an SAYE share option scheme, they must be placed in the Sipp within 90 days of the share option being exercised. Since the share option must be exercised within six months of the end of the saving period (three, five or seven years), the employee effectively has a maximum of nine months in which to buy the shares and contribute them to the Sipp. The benefit of this, of course, is that the shares put into the Sipp attract tax relief, based on the market value at the date that the shares are contributed into the scheme. Twenty-two per cent tax relief (28.2 per cent of the value of the shares) is added to the scheme while a further 18 per cent (23.1 per cent of the value of the shares) is available to higher-rate taxpayers through their tax returns. This means that incentive plan partnership shares have been bought out of gross earnings but still qualify for tax relief when they go into the Sipp. For example, Joe, who is a higher-rate taxpayer with earnings above the upper earnings’ limit, wants to invest 1,500 (gross) at the end of the tax year when he has not yet bought any partner- ship shares. His employer is willing to put matching shares into the Sip on a two-for-one basis. Option 1 If Joe invests in an Isa, he will have to pay 40 per cent tax and 1 per cent National Insurance, meaning that 1,500 x (1 – 0.4 – 0.01) = 885 will go into the Isa. Option 2 If Joe contributes immediately to a pension, he will suffer 1 per cent National Insurance, leaving 1,485 to go into the pension, including tax relief. Option 3 If Joe chooses the incentive plan, his full 1,500 is used to buy shares and additional 3,000-worth of shares is added by his employer. He can then put these shares into a Sipp. Ignoring any increase in value, 4,500 goes into the Sipp plus tax relief of 1,269.23 – a total of 5,769.23. In addition, Joe can claim higher-rate relief of 0.18 x 5,769.23 = 1,038.46. By using a share incentive plan and Sipp, Joe ends up with 5,769.23 in his Sipp and 1,038.46 in his hand compared with 885 in an Isa. Even ignoring the employer’s matching shares, Joe would have 1,923.08 in his pension and 346.15 cash in hand. Many share option schemes will be maturing over the next year or two and there are opportunities for advisers to encourage clients to place the shares into a Sipp. The amounts involved are not huge – a maximum of 7,500 a year in an incentive plan plus up to 3,000 a year in an SAYE share scheme – but with any investment growth added in, they can make a significant contribution to Sipp assets. If the client does not want to keep the shares, then they can be sold before or after placing them in the Sipp with the same tax benefits.