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

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Robber Broon the buffoon and Tony Liar created this behemoth of a social state taxing people with one hand and then giving them back the same money in benefits, quickly glossing over the billions of pounds it costs to employ all these people to undertake this meaningless task. Now we've got to pay for the pensions of these unwanted pen pushers.

People should get over themselves. I certainly am not going to shed a tear if someone thinks it wrong to claim what you are entitled too under this lunacy.

atush

Tax relief isn't morally questionable for things like pensions. I consider it an incentive.

What some find morally questionable is applying for and receiving benefits for things like housing when in reality you can afford to house your family.

But if it is legal, do it. I won't, as I have no desire to live on 12K per year with 3 children. Sounds fairly miserable.

rich11

But thats the thing though he wont be surviving on £12k a year.With the benefits etc it is more like £50k a year he will be on

shays_mum

Ok so you divert the money, but what happens to that pension pot if it all goes wrong like Equitable Life?. Can you have a pension that you can dip in & out off?!. It seems with things as they are, there is no guarantee of a golden pot at the end of this & in reality you could stand to lose out in the long term?....please correct me if i am wrong!

gadgetmind

shays_mum wrote: »

Ok so you divert the money, but what happens to that pension pot if it all goes wrong like Equitable Life?

Modern pensions are quite unlike those back then and you can be very much in control of where the money goes regards assets.

in reality you could stand to lose out in the long term?

Short and even medium term dips are likely, but long-term the odds are that the money will grow at well above inflation.

Zelazny

shays_mum wrote: »

Ok so you divert the money, but what happens to that pension pot if it all goes wrong like Equitable Life?. Can you have a pension that you can dip in & out off?!. It seems with things as they are, there is no guarantee of a golden pot at the end of this & in reality you could stand to lose out in the long term?....please correct me if i am wrong!

In addition to what Gadgetmind has said above, the OP will be putting £50k into his pension pot each year, but will still have £30k+ to live on thanks to benefits. So the actual cost is a fraction of the value of the investments. With that sort of head start, the OP stands to have a very comfortable retirement.

adindas

Sofar I have not seen anyone has pointed out the authocrative source whihc cleallymention that yourdeclared salalry is Actual Salary minus pension ...

Could anyone put the link about thie ....

Zelazny

adindas wrote: »

Sofar I have not seen anyone has pointed out the authocrative source whihc cleallymention that yourdeclared salalry is Actual Salary minus pension ...

Could anyone put the link about thie ....

Someone phoned the tax office and asked (http://forums.moneysavingexpert.com/showpost.php?p=49280047&postcount=197). You can do the same if you doubt.

There's also lots of data to be found on the government websites, such as http://taxcredits.hmrc.gov.uk/Calculators/CalcEarningsQualify.aspx where it specifically points out that "Personal pension contributions and statutory maternity pay are not included for tax credits calculations and will be deducted from the grand total shown below."

jamesd

adindas wrote: »

Sofar I have not seen anyone has pointed out the authocrative source whihc cleallymention that yourdeclared salalry is Actual Salary minus pension ... Could anyone put the link about thie ....

I did in this post. That links to the instructions for filling out the form applying for tax credits. You'll find pensions in the "deductions" from income part.

I'd also phoned to check when I was considering doing this a few years ago, and did go as close to minimum wage with salary sacrifice as I could. But that was still above WTC level.

If it matters to you, phone the helpline. They are helpful people and will tell you all you need to know.

tartanterra

adindas wrote: »

Sofar I have not seen anyone has pointed out the authocrative source whihc cleallymention that yourdeclared salalry is Actual Salary minus pension ...

Could anyone put the link about thie ....

Tax credit form TC825 Working sheet for tax credit relief for Gift Aid donations, pension contributions and trading losses, fully explains how to work out your declarable income for tax credit purposes.

Put simply:

Add your gross Gift Aid donations

Plus gross personal pension or retirement annuity contributions

Plus your trading loss

Equals Total loss and relief