Employer contributions to SIPP

Can my employer pay into my SIPP?

Chances are your employer is paying contributions into your workplace pension each month. However, you can ask your company if it can make its employer contributions into your SIPP, if you prefer.

This would bring more of your retirement savings under one roof and give you more control over how your employer pension contributions are invested.

You can ask your employer to make regular monthly contributions to your SIPP or make a single payment.

What are the tax benefits of employer contributions to SIPPs?

Employer contributions to your SIPP can be incredibly tax-efficient, but just how tax-efficient they are will depend on how your employer sets up the payments.

By using something called salary sacrifice, both you and your employer can save tax. This is where your employer deducts money from your pre-tax income to pay it into your pension, saving both you and your employer National Insurance.  

In some cases your employer might pass all or some its NI savings on to you too, giving your SIPP an additional boost.

You may also see salary sacrifice arrangements referred to as a type of ‘net pay’ pension scheme.

How much can my employer contribute into my SIPP?

There is no official SIPP employer contribution limit. Between you and your employer, you can pay as much as you like into your pension, so long as you don’t breach the annual allowance.

However, the contribution would need to be considered justifiable and proportionate by HMRC.

The maximum you can pay into your pension each year is 100% of your earnings, up to a maximum of £60,000 a year. Pension contributions above this amount will not receive tax relief (any tax relief automatically received would have to be paid back). 

Any money that is paid into your pension counts towards this allowance, including contributions from yourself, your employer and tax relief.

If you use salary sacrifice to pay into your pension, the whole amount will be considered an employer contribution.

Any unused allowance from the previous three tax years may also be paid in. However, you cannot pay in more than 100% of your earnings in that year.

How to set up employer contributions to your SIPP

Setting up a company contribution to a SIPP should be pretty straightforward if your employer is willing.

That means as a first step you need to talk to your employer. It should then simply be a case of giving them your SIPP account details and asking them to complete the employer contribution forms. 

Single transfers can be arranged by bank transfer or a direct debit can be set up for monthly contributions.

Tax relief on SIPP employer contributions

It’s important you know how your company will make payments into your SIPP.

If your SIPP employer contributions are set up on a salary sacrifice or net pay basis, your tax relief will be included in your contribution. This applies whether you pay the basic, higher or additional rate of income tax.

However, if your SIPP employer contribution comes from your taxed income (known as a ‘relief at source’ scheme) only basic rate tax relief will automatically be applied.  Higher and additional rate tax payers will need to claim the remainder back through a self-assessment tax return.

For many people, it’s more tax effective for employer contributions to their SIPP to be made on a net pay basis. If your employer doesn’t offer a salary sacrifice, it’s always worth discussing the option with them. It’s straightforward to set up and saves them National Insurance contributions too.