If you run your own business and manage your retirement through a Small Self-Administered Scheme (SSAS), you may already know how flexible and tax-efficient it can be.
But there’s a lesser-known feature that can make your SSAS even more powerful: unallocated employer contributions.
This advanced pension planning tool lets your company make a large one-off contribution to the SSAS without immediately allocating it to specific members, giving you more flexibility, potential tax savings, and intergenerational benefits.
Let’s break down what that means, how it works, and why it could matter to you.
What Are Unallocated Employer Contributions?
In simple terms, your company can make a payment into the SSAS that isn’t linked to any one member right away.
It’s called an unallocated contribution, and it stays in the pension as part of the scheme’s assets until the trustees decide who should benefit later on.
According to HMRC’s Pensions Tax Manual (PTM133500):
- It’s not automatically an unauthorised payment. It only becomes unauthorised if allocated to a connected person above the permitted maximum (normally linked to their taxable earnings).
- The unallocated pot remains in the SSAS, growing or falling with investment performance.
- When no one connected to the company is involved, future allocations can be made without restriction, potentially many years down the line.
How Much Can You Pay?
Employer contributions to pensions are usually deductible as a business expense, reducing corporation tax.
The HMRC Business Income Manual states that if pension contributions jump significantly (more than 210% year-on-year), tax relief may be spread, unless the increase is under £500,000.
That means your company could contribute up to £500,000 as an unallocated employer payment and still likely receive full corporation tax relief in the same year.
For contractors or owner-managed businesses that experience good trading years, this offers a way to smooth pension funding while keeping the tax benefits.
Planning Opportunities for Business Owners
Unallocated contributions can open the door to several valuable planning opportunities:
- Flexibility in Timing – Fund your SSAS generously during profitable years and allocate later, even after you’ve retired or sold the business.
- Support for Family Members – Children or other relatives who join the business in the future can become members of the SSAS and benefit from earlier contributions.
- Tax-Efficient Growth – Investment growth on unallocated funds can be distributed to members without counting toward annual allowances.
- No Restrictions Once You’re Unconnected – When you or your family are no longer connected to the business, allocations can be unlimited.
- Succession and Estate Planning – Upon death, allocations can continue without the usual pension limits, although future IHT rules (from April 2027) should be kept in mind.
Example: The Freelance Consultancy Team
Imagine a husband-and-wife team, Alex and Jo, who run a successful limited company providing engineering consultancy services.
- Each contributes £60,000 annually to their SSAS.
- After an exceptional year, the company pays an unallocated employer contribution of £400,000, claiming full corporation tax relief.
- The funds are invested alongside their existing pension assets.
Ten years later, their two adult children join the company and become SSAS members. When Alex and Jo retire and sell the business, none of the family members remain connected to the company.
At that point, the unallocated fund (now worth £1.1 million) can be allocated equally among the family members, without triggering annual allowance issues or additional tax charges.
That’s a flexible, tax-efficient way to build intergenerational wealth while keeping control of the pension assets.
Why This Matters for Contractors and Small Businesses
Most contractors and small business owners focus on making the maximum £60,000 annual contribution to their SSAS.
But unallocated contributions can go far beyond that, letting your business invest in your future success without overstepping HMRC rules.
It’s a strategy that rewards good financial years and supports long-term family wealth — perfect for those who value control, flexibility, and tax efficiency.
Important Information
This article is provided for information and discussion purposes only. It reflects our understanding of HMRC guidance at the date of publication. It should not be taken as financial, tax, or legal advice.
You should always seek guidance from a qualified adviser before making pension or tax-related decisions.
