Finally we have some news on Cru, well nothing in black and white but Capita are nearly at the end of their valuation process.

This has been signified by the suspension of trade in the underlying cell companies.  We therefore hope that the funds will reopen shortly, though at present no timescale has been given. We will be in touch will all investors as soon as we hear any further news.

From A-day In-specie contributions have been available. They can offer individuals and companies a way to significantly increase pension funds whilst not having to find liquid cash. Commercial property can be used to make contributions.

Basic rules apply;

If the property is owned by the company the contribution will be an “Employer Contribution” If the property is owned by an individual then the contribution will be a “Personal Contribution”
If the in-specie contribution comes from the company then they will receive corporation tax relief as they would on a normal “Employer Contribution”.

If the in-specie contribution comes from the individual then the amount of the property that can moved into the fund, giving full tax relief, is a net amount at basic rate against the individual’s income. Tax relief of 20% currently, is then claimed back into the pension and if the individual is a higher rate tax payer then the additional 20% is claimed back via their personal tax return

In-specie Case Study

•         Property valuation £ 300,000
•         Earned income of £ 125,000 p.a. for 3 years
•         Move net contribution of property value into SIPP £ 100,000 p.a. for 3 Years
•         Tax relief £ 25,000 p.a. for 3 years

RESULT

After three years;

•         Full property value in SIPP                £ 300,000  •         Cash fund from tax relief                    £   75,000
•         Rent 6% will have gone in                 £   36,000
•         Pension fund                                      £ 411,000
•         TFC available of 25%  equals           £  102,750
•         Rental income of £18,000 p.a. can become pension

If an individual contributes an amount equal to their income it is worth pointing out that they will be a nil tax payer as they get full tax relief into their pension. This should be considered when there is a need to increase the personal income significantly to allow larger amounts of the property into the pension.

There is a move in the market to show that this option can work very well for groups of individual’s or a number of directors. There has been a significant increase in this type of contribution during the first 6 months of this year.

It if worth bearing in mind that once the in-specie contribution has been made it does create a pension fund that can be used to borrow against and we will look at this in more detail moving forward.

I have taken this from Standard Life's press release that has just been issued:

The Cutting Edge - Finance Act 2009 receives Royal Assent
The Finance Act 2009 has now received Royal Assent. The Act includes the pension and tax changes announced in this year's Budget dealing with pension contributions made between Budget day and 5 April 2011 by high income individuals. While the changes only have an immediate impact on a small fraction of the UK population the shockwaves, which resonate from removing the principle that people get tax relief on pension contributions at their highest marginal rate, should not be underestimated.
Following some sustained lobbying by the industry there was a relatively late change to the rules, introducing some further leeway for those high income individuals who have a history of paying irregular contributions. Full details of the revised rules and how they impact upon people is detailed below.
While the Finance Act is now law it is likely that some further changes will be introduced in two specific areas through forthcoming regulations. The first is around transfers. As things stand, high income individuals who move their pension provision to a new provider may fall foul of the new special annual allowance tax charge even if they don't increase contributions.
This Finance Act contains the rules covering the position between Budget day and 5 April 2011 - so that part is largely done and dusted. The Government suggests the rules for 2011 onwards will be included in a Finance Bill early in 2010. It's therefore likely that these measures will be law before any General Election. The Conservatives have said they are unlikely to repeal any legislation if they win the election, so it seems likely we will have to cope with these rules whichever Government is in power in future.

If you are wondering how this is likely to affect you, feel free to contact me.