Many Ssas providers allow employers to pay money into a scheme without allocating it to any member. This is sometimes used so the value of the pension seems lower than it is, for example, during a divorce.
But under the Budget changes, annual contributions are capped at £20,000, except for savers who have been making regular contributions above that.
Therefore, if a member allocates previously unallocated funds of more than £20,000, or their regular payment, it is classed as a pension contribution and the member will be subject to special annual allowance charge.
Richard Jacobs Pensions & Trustee Services managing director Richard Jacobs says: “There are definitely cases out there where members with unallocated funds are now in a mess, effectively through no fault of their own. Through trying to be too clever, some Ssas providers are now going to land their members with a possible tax charge.”