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

bigadaj

This is all a consequence of the. Massively over complicated tax and benefit systems we have, iIDS is supposedly looking into simplifying it but it is going to take years if at all.

It's an ring point how far people take loop holes / opportunities, the poll on here on the jimmy Carr issue showed a good spread, and many people saying they wold have done the same or worse, think it was approaching half.

ukjoel

Exactly,
This year in income tax and national insurance I will be paying in over 10k. Last year it was 15k.

Thats not counting the tax on the £500 a month I spend on petrol or food or the jobs I create by sending 3 kids to nursery even though its costing us more per day than my wife can generate from working (but taking a 7 year career break is not an option in her line of work)

Some people may moan in the same way they moan about Doctors getting massive salaries but what they dont realise is the taxes the doctors pay on these big salaries pays for the NHS treatment that they get for free.

If I can front load my pension now so I dont need to rely on the state when I am older then I will.

Lets face it by the time I retire in 30 years the state pension I have paid into for years will be means tested so I wont see a penny back, and the pension I have worked hard to save will be taxed to pay for those who havent worked, saved and made the same sacrifices.

gadgetmind

ukjoel wrote: »

This year in income tax and national insurance I will be paying in over 10k. Last year it was 15k.

Based on numbers in the papers, Jimmy Carr was paying at least £35k pa in tax, and perhaps even several times that.

Yes he's the evil tax dodger?

Errr, no.

ukjoel

I spoke to tax credits people this morning.

They confirmed that this is completely legitimate and are sending the forms through.



Thanks everyone.

bigadaj

My point wasn't really supporting any individuals actions, it was a whinge at the mess the state has got itself into. If we can get a system where the majority of the population don't pay in money to then get it given back again, it would be better for the country as a whole, the administrative costs for the system are in themselves horrendous.

drc

Sorry to revive a dead thread but if the OP is still around, how did you do with your cunningly evil plan?

ukjoel

Cant answer for OP but followed his example (although not to the extreme level) and results worked out as follows.

Figures based on each 1k of salary sacrifice.

£1000 of salary sacrificed from salary for pension.

Company increased this to £1100 due to not having to pay NI

40% tax meant a £600 reduction on take home pay.

Tax credits/Child credits/Child benefit etc increased approx £400 for every 1k sacrificed. (combination of not losing CB, plus income levels low enough for CTC and WTC)

End result - £200 out of take home each month but £1100 in the pension pot.

I looked very closely at bringing it down to the 12k mark but due to owning own home their was no benefit from a housing benefit perspective and the council tax benefit only assesses sal sacrifice at 50% and after working through the options decided not to do it.

Additional potential benefits of going that low (that I dont think have been mentioned on here would be subsidised water rates or limited bills if on a meter, and free school meals)

Financially its a challenge, We wont be taking any holidays this year and the car wont be changed until its 7 years old.
I am still paying out hundreds in tax and NI each month so see myself as a net contributor still.

JoeCrystal

Unhappily, the evil plan will not work with Universal credits for Tax Credits as WTC is merged with it. The capital rule is introduced up to £16,000 and you can only deduct 50% of your pension contribution instead.

Cheers,
Joe

zagfles

JoeCrystal wrote: »

Unhappily, the evil plan will not work with Universal credits for Tax Credits as WTC is merged with it. The capital rule is introduced up to £16,000 and you can only deduct 50% of your pension contribution instead.

Cheers,
Joe

No it's 100%. The original plan was 50% but they changed their minds.

zagfles

ukjoel wrote: »

Cant answer for OP but followed his example (although not to the extreme level) and results worked out as follows.

Figures based on each 1k of salary sacrifice.

£1000 of salary sacrificed from salary for pension.

Company increased this to £1100 due to not having to pay NI

40% tax meant a £600 reduction on take home pay.

Tax credits/Child credits/Child benefit etc increased approx £400 for every 1k sacrificed. (combination of not losing CB, plus income levels low enough for CTC and WTC)

End result - £200 out of take home each month but £1100 in the pension pot.

I looked very closely at bringing it down to the 12k mark but due to owning own home their was no benefit from a housing benefit perspective and the council tax benefit only assesses sal sacrifice at 50% and after working through the options decided not to do it.

Additional potential benefits of going that low (that I dont think have been mentioned on here would be subsidised water rates or limited bills if on a meter, and free school meals)

Financially its a challenge, We wont be taking any holidays this year and the car wont be changed until its 7 years old.
I am still paying out hundreds in tax and NI each month so see myself as a net contributor still.

Don't get free school meals in England if you get WTC. Could get health costs (free prescription/dentist). Unless you have lots of children or childcare costs unlikely to get much tax credits while in the 40% tax band.