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Pensions and WTC?
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moggins
Posts: 5,190 Forumite
Thanks to a wage increase of £45 a month we will be losing most of our CTC, I was unaware that you could deduct a pension from your gross income when claiming CTC, after finding this out I rang the IR to clarify things.
Apparently you can only deduct your pension if you are paying into a private pension and not one run by your employer. To retain our CTC which is the most important priority at the moment with me not working and us having 3 children, would it be best for him to opt out of his government pension scheme and start paying into a private pension, he would be paying the £101 that normally goes straight out of his wages plus whatever we figure he can afford out of the payrise too.
We desperately need help as the pensions thing is something that confuses us both?
Apparently you can only deduct your pension if you are paying into a private pension and not one run by your employer. To retain our CTC which is the most important priority at the moment with me not working and us having 3 children, would it be best for him to opt out of his government pension scheme and start paying into a private pension, he would be paying the £101 that normally goes straight out of his wages plus whatever we figure he can afford out of the payrise too.
We desperately need help as the pensions thing is something that confuses us both?
Organised people are just too lazy to look for things
F U Fund currently at £250
F U Fund currently at £250
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Comments
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This question is more "benefits" than pensions. Unless anyone posts in the next day I will move the thread to the benefits board if you don't mind.
In the meantime, I have no idea how WTC and CTC credits work, but I cannot see any reason why the Revenue should discriminate between an occupational scheme and a private pension. Are you sure you understood that correctly?
I also cannot see how you would be worse off. Surely your benefits just reduce by the £45 you have received as a payrise?
Sorry I can't help.0 -
You will not find a financial advisor that would set up a personal/stakeholder pension arrangement if you choose to opt out of the occupational scheme.
To acheive the benefits that cost you currently £101, you would need to pay around £300-£400pm and still no guarantees of getting the same.
You could make additional contributions into a stakeholder/personal pension arrangement on top of the occupational scheme. Indeed, if you are in a borderline tax credit situation, you could find that the Govt paying most of the pension contribution in the form of tax relief and tax credits.
However, the net effect is still going to cost you more and there is no way to avoid that.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Hi moggins
What i will say about the tax credit helpline is that in its time it has given me, my sister and my friend incorrect info!!!! I knew myself friend had been incorrectly informed but have only recently found out me and sis had, due to this site and one of our members.
I also saw the post about being able to deduct pension payments. What about posting or moving this thread to benefits to see if our member who is very knowledgeable about tax credits can help.0 -
Good idea! Consider it done...0
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That's nonsense. As far as I am aware, there is no distinction between occupational and personal pensions.
In fact IR's guide says thiscontributions to an approved pension scheme (such as, an occupational pension scheme, a personal pension plan or retirement annuity) and payments under the Gift Aid or Payroll Giving schemes are not included when you work out your income for a tax credit claim.
The only thing I can think of that they might mean is that your occupational pension may already have been deducted. At the end of the tax year, when you send in your renewal form, you should quote the taxable income from your P60, which you get from your employer. This figure is your gross income less your pension contributions - so you automatically get the benefit in tax credits at this point, even if you have reported an income figure mid-year without deducting pension contributions.
He should absolutely not opt out of his work pension scheme. While you will have your contribution to invest, he loses the employers contribution, and for public sector schemes that is worth around 17% of income on average.
Incidentally, you can also deduct donations to charity that you have gift aided.
I would also report this advice to the Director of IR Contact Centres, giving the date and time of the call, because if they really did say that, they need to be "retrained".
irs0 -
Thank you so much, so this year I have to nag him into bringing home his P60 instead of sitting there adding up 12 payslips on a calculator
Organised people are just too lazy to look for things
F U Fund currently at £2500
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