RPSM05101045 - Technical Pages: Contributions and tax relief: Member contributions: Overview: In specie contributions

In specie contributions

As explained at RPSM05101020 contributions to a registered pension scheme must be a monetary amount. However, it is possible for a member to agree to pay a monetary contribution and then to settle this debt by way of a transfer of an asset or assets.

For example, if a member wishes to pay a contribution he cannot do this by merely saying 'take this asset and whatever it is worth that is my contribution'.

There must be

• A clear obligation on the member to pay a contribution of a specified monetary sum, say, £10,000. This needs to create a recoverable debt obligation.
• A separate agreement between the scheme trustees and the member to pass an asset to the scheme for consideration.
• If the scheme agrees, the cash contribution debt may be paid by off set against the consideration payable for the asset. This is the scheme effectively agreeing to acquire the asset for its market value.

If the asset market value is lower than the contribution debt the balance will be paid in cash.

If the cash contribution debt is not created, then the transaction is the acquisition of an asset by the scheme not a contribution.

If the contribution is being made to a registered pension scheme that operates relief at source (RAS) the amount of cash contribution specified should, if applicable, be the net amount after the individual exercises his right to deduct from the payment the basic rate RAS relief (see RPSM05101310). The basic rate relief will be recoverable by the scheme administrator in the normal way from HMRC and if appropriate the individual can claim higher rate relief via his self assessment return.