Share rollover - still a valid exercise?

Legal & General Managing Director of Workplace Savings, Tony Filbin, comments on the ongoing attraction of share rollover into a Company SIPP: "The Chancellor's budget last month sparked much comment around the increase in tax on high earners as a result of the reduction in tax relief for those earning over £150,000. Most of those commenting suggest this would be likely to put high earners off making contributions or reinvesting their maturing share schemes into a Company SIPP.

As one of the leading workplace saving providers in the UK we'd like to put a counter view forward.

All contributions into a company pension, including share rollover from approved and unapproved share schemes remain the most tax advantageous way to provide an income for retirement, whether you're a basic rate taxpayer or a high rate taxpayer.

Group SIPP, even after the changes announced on 22 April still presents a fantastic opportunity for employees to save more for retirement and hold shares tax-efficiently.

One of the main benefits is the ‘much loved' tax free lump sum. No matter which way you cut this, even if you assume the recipient of the tax free lump sum was a high rate taxpayer when their contributions were made, they will have had a 25 per cent uplift in the contribution on the way in (equivalent to 20 per cent tax relief) and there is no income tax (at 40/50 per cent) or CGT (at 18 per cent) to pay on this amount.

Secondly, one should not overlook the benefits of income withdrawal from the SIPP or pension. After taking Tax Free cash you can opt for a lower income which may keep you under the 40/50% band (obviously tax planning is essential in this situation).

Thirdly, a fundamental step for any saving, whatever level of tax you pay, is to use your ISA allowance.

It is now possible for companies to integrate their SIPP or pension with a Corporate ISA. This will enable employees to take full advantage of the considerable tax benefits of transferring savings from an ISA to a SIPP at a time of their choosing.

Clearly the alternative of leaving the proceeds of maturing company shares schemes outside of the tax efficient shelter afforded by a Company SIPP makes little sense. Continuing to pay 40/50 per cent income tax on any dividends, 18 per cent CGT on capital value realised could be an inferior strategy.

This year we expect to see real growth in SIPPs as many more forward looking employers take steps to integrate a Corporate ISA with their existing pension arrangements and adopt Group SIPP schemes to replace existing DC arrangements for employees."