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

molerat

Yes it is morally wrong but no more than the non working generations of spongers. This is one of the reasons why the benefit system needs taking apart right down to the ground and starting again.

mania112

spadoosh wrote: »

pensions are a weak subject but arent they capped at a million or is that just capp how much you put in?!

O and naughty OP!! Thats very selfish. It make me soo angry that this guy is bumming a few grand from the government when every major organisation 'avoids' millions in tax and are catered for before anyone else.

the most you can have in a pension (before huge penalties) is £1.8m

the most you can contribute to a pension is £50k a year (including tax relief) or 100% of your salary, if less than £50k pa.

There are then 'count back' rules for those who haven't paid into a pension (but had one) for the past 3 years. So essentially you could put £150k into a pension in year one.

gadgetmind

CSL0183 wrote: »

That is a good point, I currently pay my pension by salary sacrifice.

Be aware that you can't sal sac to below minimum wage.

spadoosh

mania112 wrote: »

the most you can have in a pension (before huge penalties) is £1.8m

the most you can contribute to a pension is £50k a year (including tax relief) or 100% of your salary, if less than £50k pa.

There are then 'count back' rules for those who haven't paid into a pension (but had one) for the past 3 years. So essentially you could put £150k into a pension in year one.

Is that the value of the pension is 1.8m or the contributions?!

CAN1976

CSL0183 wrote: »

The government are planning on taking £2500 away from me because I am a higher rate taxpayer. £2500pa is £208pm so its not small change (It is useful as it currently pays the council tax/BT phone bill and Internet)

Me too, but that's fine with me if it helps balance the books. Benefits should be for those that need them not just extra money for people who don't.

gadgetmind

CSL0183 wrote: »

it would be worth it retiring at 55 with a nest egg in the millions.

The lifetime allowance has recently been *lowered* to £1.5 million, and there are complex rules for when your pot is assessed against that limit and nasty tax charges if you exceed it. It still might be worth doing for a while as you can always swap back later once the bulk of the money is in there.

You should start a regular blog about this and try and get some papers to cover it. The advertising income should come in handy!

Regards morality, making pension contributions to avoid higher tax bands, and losing benefits, is very common. You're just taking it to a (probably!) legal extreme.

Bigsmak

Basically no you can't do it..

You cannot pay more into a pension than you currently have as a Salary..


So even if you messed with the figures / dividends / pay into a pension before you take a salary, you would only ever be allowed to pay in a maximum of £50k or match your current Salary.. whatever is lower.

So ... the answer is no..

as for your attitude towards the benefits system.. I hope you get caught doing something wrong and go to jail.

have a good day!

CSL0183

Bigsmak wrote: »

Basically no you can't do it..

You cannot pay more into a pension than you currently have as a Salary..


So even if you messed with the figures / dividends / pay into a pension before you take a salary, you would only ever be allowed to pay in a maximum of £50k or match your current Salary.. whatever is lower.

So ... the answer is no..

as for your attitude towards the benefits system.. I hope you get caught doing something wrong and go to jail.

have a good day!

My salary is £65k, pension contributions of £50k, salary is higher.

Are you suggesting I cant pay more into a pension than I draw in a salary? So best possible outcome is a 50/50 split which would be a £32.5k split? I have never read anything relating to that, can you point me to your source of this information? In any case as I salary sacrifice, my income is not £65k, it's whatever I want it to be, i.e £12.1k or whatever minimum wage is if needs be;)

For example as it stands at the moment, my salary is £65k - £4900 pension (7.5%) - £2900 childcare vouchers = £58,200. My plan is just to play with that pension part to read £50k

corbyboy

CSL0183 wrote: »

Then there is childcare, currently costs me around £1k per month to which I would get 70% paid for me so £700pm

Can't help you with the other stuff but with the childcare element of tax credits you can only get help on the "cash" amounts. You have to take away the amount you get in vouchers.

gadgetmind

CSL0183 wrote: »

In any case as I salary sacrifice, my income is not £65k is it, it's whatever I want it to be;)

Exactly. It's just an agreement under employment law that you will take less pay in exchange for more pension. You'll be a low-paid employee on a gold-plated pension but in the private sector for once!

I'm sure public sector workers on low pay (there must be some!) make full use of whatever benefits they are entitled to and would complain bitterly (strike!) if there was any hint that their pension provision would affect said benefits.

If/when you go about £50k pa total pension contributions, your employer will probably want you to confirm in writing that you understand the carry forward rules.