Diverting £50k of salary into pension fund to claim welfare benefits

xylophone

jamesd - very many thanks for the explanation of FUD - I would never wish to be a panic monger! However, in terms of what views HMRC might take on innovative tax/benefit avoidance schemes I admit to wishing to remind people to be very, very careful.

As you say, I can ring up and say " I wish to put a hypothetical question because I am anxious to check whether a proposal on an internet forum which suggests that individuals on very high incomes can maximise their entitlement to all the state benefits available by paying virtually all their salary into their pension scheme is indeed perfectly viable under current rules....;)

In fact, it now occurs to me that we have all wasted a lot of time on this because (a) the original poster could have rung up and asked in the first place and (b) if he had not wished to do so himself, he could have been entirely reassured by your reply.

gadgetmind

BigAunty wrote: »

many members there have a ferocious dislike of the benefit system.

Doesn't everyone? Those who fund it certainly don't, and I doubt those that run it or claim from it are any more enthusiastic.

Hmmmm, the OP might end up being the only person in the UK who likes the benefit system!

usa1

CSL0183 wrote: »

Say I am a 28yr old man with a £65k income, are there any legal issues in diverting the maximum allowable £50k into my company pension plan, the maximum £243pm into childcare voucher plan (£2.9k) and living off the remainder £12.1k salary?

I would then declare £12.1k salary to the benefits office/HMRC in order to receive every benefit I would be entitled to on that income? 3 kids would equal a lot of LHA, a lot of child tax credit, a lump of WTC, probably council tax benefit and of course child benefit (Which looks like its going to be taken away in 2013 for higher rate tax payers)

The aim would be to retire at 55 with a very large pension pot. Forget the morals behind it, all I am asking, if its legally possible to do? If so, then surely this is a no brainer option if you can of course afford to live off a 'low' welfare income.

Thanks in advance.

Good for you. I hope your plan works out for you, I wish I had your courage. Its about time the middle earners benefitted from the system. :T

adindas

CSL0183 wrote: »

As far as I'm aware you declare income less pension provision so in this case £12.1k, they need not know about the £50k pension and £2.9k childcare vouchers.

CSL0183
You have a brilliant idea mate, I love it ...

I do not have a lot of knowledge in tax system.

But What I am thinking is that majority of people have their pension could be taken from their salary.

For these people , are the declared salary the official salary minus all of pension ?

If this was true than Most of these people would have done that ..

jamesd

They may need to know about the childcare vouchers.

It's not even necessary to have the pension taken direct from salary. You can make the payments yourself if you like, outside work.

adindas

If the declared salary was the official salary minus all of pension, what I am thinking is that this was probably the silliest government in the world ….

I have heard about the child care voucher. But is it possible to put 50k minus 12.1K a year into child care voucher without raising an eyebrows. I also want to know If someone manage to do this …

What I am also thinking is that let say in the future you have dispute with your children, what happen with the money??

CSL0183 wrote: »

As far as I'm aware you declare income less pension provision so in this case £12.1k, they need not know about the £50k pension and £2.9k childcare vouchers.

Even if it is required to be declared on the forms, although not 100%, I asked my sister who does claim tax credits and she informed me that they do not take pensions into account only taxable income (£12.1k taxable, £52.9k non taxed) I have also asked many others who have told me the same, pensions are disregarded.

gadgetmind

adindas wrote: »

If the declared salary was the official salary minus all of pension, what I am thinking is that this was probably the silliest government in the world ….

Yes, HMG are silly, but what's the other alternative?

As it would require in the region of 20-25% of the salary of a public sector salary to pay their gilt-edged pensions, should this number be added to their salaries when working out if they are due any tax credits or child benefit?

BTW, does anyone know how HMG works out what the pension contributions are for those in the public sector for checking against various allowances?

jem16

gadgetmind wrote: »

As it would require in the region of 20-25% of the salary of a public sector salary to pay their gilt-edged pensions, should this number be added to their salaries when working out if they are due any tax credits or child benefit?

That would apply to anyone with an employer contribution whether DB or DC or private sector or public sector. So why did you feel the need to just mention public sector pensions?

BTW, does anyone know how HMG works out what the pension contributions are for those in the public sector for checking against various allowances?

Strangely enough it's the actual contribution that the employee pays just the same as everyone else in the country.

hugheskevi

BTW, does anyone know how HMG works out what the pension contributions are for those in the public sector for checking against various allowances?

For annual allowance, take amount of pension accrued at end of PIP, subtract amount accrued one year previously (increased by September CPI) and multiply by 16.

For lifetime allowance, multiply annual benefit when crystalised by 20.

gadgetmind

jem16 wrote: »

That would apply to anyone with an employer contribution whether DB or DC or private sector or public sector. So why did you feel the need to just mention public sector pensions?

For balance.