Diverting £50k of salary into pension fund to claim welfare benefits
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Sorry, I still cant see anything there where it states I cannot divert £50k of my £65k salary into my pension, it states its possible to pay in upto 100%, not 50%
The £50k is just the tax relief limits, I suspect I would still need to be paid a minimum wage from my company. The inland revenue would just see a minimum paid job of £12k due to the way SS works.
If you pay your pension contributions by salary sacrifice, by definition you are foregoing your salary by the amount that you contribute i.e. if you give up £50k of what becomes your notional salary, your taxable earnings reduces to £15k and this will be the upper limit to your Annual Allowance.0 -
Sorry, I still cant see anything there where it states I cannot divert £50k of my £65k salary into my pension, it states its possible to pay in upto 100%, not 50%
My understanding (now I've had a glass of wine and am thinking more clearly!) is that employer contributions (inc sal sac) are unlimited but you need to watch your annual allowance.
Please pay your accountant and/or IFA a few bob to sanity check the whole plan.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
your taxable earnings reduces to £15k and this will be the upper limit to your Annual Allowance.
It will limit the amount the employee can pay into a pension, but I don't think it affects what the employer can contribute. Both are subject to the annual allowance but only the employee's contributions are limited to 100% of taxable income.
I think!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
And how would the plan to divert the majority of your employment income into a pension in order to qualify for means tested benefits work under the proposed Universal Credit system?
UC will do away with separate benefits and is already causing a stir in some quarters. For example, a household with large savings currently qualify for tax credits as only the interest, not the capital, is taken into account. This will not carry on under UC. Currently, a self employed person with a dismal profit will qualify for considerable means tested benefits as long as they work x number of hours to qualify but if/when UC comes in, they will be treated as if they earn the national minimum wage - a new threshold. Personally, I think tax credits kill real self-employment - should be a springboard out of state subsidies but so many people set up carp businesses just to remain within the benefits system.
Any ideas how UC could close other loopholes or unintended perverse incentives that make people change their behaviour to cling onto benefits instead of self sufficiency ?0 -
I was thinking of advising DH to start increasing his pension so I looked up today how much he can pay in and found something that said he can pay up to 25% of salary at age 48. Was I looking at something from another country, as no one else has mentioned a similar cap on pension payments?:j Trytryagain FLYLADY - SAYE £700 each month Premium Bonds £713 Mortgage Was £100,000@20/6/08 now zilch 21/4/15:beer: WTL - 52 (I'll do it 4 MUM)0
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shop-to-drop wrote: »found something that said he can pay up to 25% of salary at age 48.
Contributions limits based on age went many years ago. Instead, there is an annual cap that bobs around unpredictably (but usually downwards) on an almost annual basis!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Any ideas how UC could close other loopholes or unintended perverse incentives that make people change their behaviour to cling onto benefits instead of self sufficiency ?
Extract from Universal Credit White Paper (page 49):In calculating the amount of earnings to be taken into account in Universal Credit, 50 per cent of contributions to an occupational or personal pension will be disregarded, as now under Income Support.
Once the 2012 pension reforms and Universal Credit are fully in place, based on a withdrawal rate in Universal Credit of 65 per cent, each £1 that goes into the pension pot of an employee who is a basic rate taxpayer and in receipt of Universal Credit will only reduce take-home income by 34 pence after minimum employer contributions, tax relief and increased Universal Credit payment are taken into account.
This makes pensions more affordable for those with the lowest incomes, providing a clear incentive for individuals to put money into a pension and benefit from forthcoming pension reforms in 2012.0 -
Are you saying that on a salaryof £65,000 you rent a property and don't own one?
If so LHA would only disregard a % of your pension contributions, I think it's 50% but it's a long time since I was an assessor so not totally sure on that.
You may well be right, currently it's just a thought that I want to explore. As to LHA, again, my salary would be £15k, not £65k. If it were not a SS scheme it would of course be £65000 - pension - childcare vouchers. £65k doesnt exist in a salary sacrifce scheme though, quite handy;)
I shall seek advice and explore all options. It looks like the £1.8m limit would eventually sting me, I would expect to get there well within 20yrs if I were diverting the max possible every year.
I do currently own a property yes although there is no real equity in it so I would be able to sell and keep my profit under the £16k limit for benefits. 25% tax free cash from my pension pot would buy me a property outright at 55 so I have no qualms about renting and getting my rent paid for me until that happens.
I know I must be annoying a lot of you with these posts, it isn't morally right, I know that, but neither are a lot of things today in the UK, 2 wrongs do not make a right no but if I can do this and get away with it, then I would be a fool not to exploit.
Anyway I shall seek advice, thanks for the input already everyone, good and bad.
edit....I havent looked into the UC so again thanks for the heads up, I shall also have a read with regards to this too.0 -
Whether or not it is possible misses the point, imo it is morally corrupt and it is no wonder the country is in such a mess because it has created a society where people think it is ok to even consider this to be an option.
On one level, I agree of course. Hard not to. But it's a bit more complex than that. There is something about the welfare system as it's evolved in the UK that almost encourages "morally corrupt" thoughts/behaviour.
I worked for 30 solid years before being made redundant. God knows how much NI and tax I paid into the system, most of it at the higher rate. When I lost my job I was able to claim my £64 a week JSA for 6 months before the shutters came down. It was probably wrong of me to feel slightly aggrieved but I couldn't help feeling that I wanted the state to say "thanks for paying so much into the system, now we're going to return the favour, and help you out for as long as you need it". As it turned out, I landed a job very soon after, so my irritation never festered too much. But I freely admit that I started looking into (legal) ways of trying to get additional financial help from the state, even if they might have been morally questionable in a perfect world.
The trouble is that the welfare system is so widely abused and taken for granted, that it's very easy to fall into a mindset that says "Why should I be the only mug to play by the spirit of the law, rather than the letter?" It's like footballers who dive to the ground at the merest touch from an opponent. Their view is simple -- a) they are are technically correct to claim an infringement, and b) if everyone else does it, why shouldn't I?"I don't mind if a chap talks rot. But I really must draw the line at utter rot." - PG Wodehouse0 -
As to LHA, again, my salary would be £15k, not £65k.
And *your* pension contributions would be zero: under sal sac, it's all your employer's contributions.I shall seek advice and explore all options. It looks like the £1.8m limit would eventually sting me,
It's now a £1.5m limit. Yes, the 20% tax band, the pension annual allowance, and the pension lifetime allowance are all dropping like crazy. Is it any wonder that those caught by these changes are looking at creative alternatives?I know I must be annoying a lot of you with these posts, it isn't morally right,
There is no such thing as objective moral standards.
Please keep us informed as to how this goes as it's a fascinating example of how the benefits system isn't fit for purpose.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0
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