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

Hudson1984

is this morally wrong: Yes

am I considering using some of the ideas: Yes!

mania112

The moral issue is void in many respects.

There are so many ways to 'cheat the system' it is sometimes not even clear you're doing it.

For example, if you pay into your pension by salary sacrifice, you're avoiding NIC - while legal, it's morally wrong.

gadgetmind

mania112 wrote: »

it's morally wrong.

I don't have an issue up until the point that someone is taking more out in the way or direct and indirect benefits from the state than they are paying in via tax and NI.

As long as we're all net contributors (averaged over lifetime, if you like) then the system will keep on working.

jamesd

It's not morally wrong. You're losing some money in your pockets today that is going to reduce the risk of future costs to taxpayers in the future, and getting only a small part of that back in potential benefits now. It's a good deal for taxpayers as well as you.

gadgetmind wrote: »

I don't have an issue up until the point that someone is taking more out in the way or direct and indirect benefits from the state than they are paying in via tax and NI. ... As long as we're all net contributors (averaged over lifetime, if you like) then the system will keep on working.

Bit late for that. More than half are already net recipients, not net contributors. You're probably one of the net contributors, as are most who would be in the higher rate tax bracket for more than a short time.

drc

zagfles wrote: »

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

Sorry, can you just confirm what this means? Are you saying they do not count 100% of pre-tax pension contributions under UC? Thanks.

gadgetmind

jamesd wrote: »

More than half are already net recipients, not net contributors.

Fortunately, there is action being taken to address this, but it's far too little, and may be far too late.

zagfles

drc wrote: »

Sorry, can you just confirm what this means? Are you saying they do not count 100% of pre-tax pension contributions under UC? Thanks.

Pension contributions are fully deductible for UC. Eg salary £20k, contribute £5k to a pension, your income for the purposes of UC will be £15k minus tax & NI.

The original plan was to follow the HB/CTB rule and for pension conts to only be 50% dedictible, but they changed their minds probably because it would make the real-time information system (where employers update HMRC every month with income details etc) far more complicated.

zagfles

mania112 wrote: »

The moral issue is void in many respects.

There are so many ways to 'cheat the system' it is sometimes not even clear you're doing it.

For example, if you pay into your pension by salary sacrifice, you're avoiding NIC - while legal, it's morally wrong.

Don't really see why - the govt and HMRC know full well about salary sacrifice schemes and there's detailed guidance on them on the HMRC website. They could easily legislate (eg) to make all pension conts subject to NI, whether made by employers or employees. Many benefits aren't subject to employee NI, eg company car, so is that equally morally wrong?

civil12345

Will this still be possible under UC or will it be classed as deprivation of income?

hugheskevi

Will this still be possible under UC or will it be classed as deprivation of income?

It will still be possible, but it will be much more difficult due to the rules about capital- capital over £6,000 will be taken into account in the calculation of entitlement and no Universal Credit payable if capital over £16,000.