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

michelle1506

Is this a joke??? GREED, GREED, GREED!!:mad:

mishoo

I had three children at uni and am aged 60. I am self employed and was about to make a taxable profit of 50k. Decided to make a big pension contribution to minimise my income so the children would each qualify for non repayable grants of £3600 each. Got tax credits too and as you say a a decent pension inn t he bargain. Needless to say prudent Gordon did me well. I beat him at his game.

shadydaz

OP at the end of the day, it's your children who are going to suffer. You are choosing not to provide them with everything that you could easily do now even without the CB, to serve your own needs later in life. Even scrounging as much as you can get your hands on will not be enough to satisfy their needs.

(Brasso, thankyou for your concern, but I have no need to be resnentful or jealous of anyones earnings, your retort is without foundation)

That is why I think it is selfish.

shadydaz

On a seperate note, I do not agree with the benifits system in this country, money easy for people who do not want to earn it. If it is possible for someone to exploit it in this way then it is an absolute shambles.

One other thing that you are probably aware of CSL1083, if you are able to "sacrifice" so much of your salary, then any death in service allowance paybale to your family will only be based on your notional income. That is quite a difference should it come into play before your retirement. Any pension contributions will stil be tax liable in some way upon your death.

Aberdeenangarse

It won't do you a great deal of good if you're run over by a bus!

nomoreboomandbust

mishoo wrote: »

I had three children at uni and am aged 60. I am self employed and was about to make a taxable profit of 50k. Decided to make a big pension contribution to minimise my income so the children would each qualify for non repayable grants of £3600 each. Got tax credits too and as you say a a decent pension inn t he bargain. Needless to say prudent Gordon did me well. I beat him at his game.

Presumably you did this via a limited company, you would not be able to do this as a sole trader.

heathcote123

BLB53 wrote: »

Whether or not it is possible misses the point, imo it is morally corrupt and it is no wonder the country is in such a mess because it has created a society where people think it is ok to even consider this to be an option.

Yes, it's exactly what happens when you let socialists run the country, thinking they can fix everything & make it all fair.

property.advert

shadydaz wrote: »

On a seperate note, I do not agree with the benifits system in this country, money easy for people who do not want to earn it. If it is possible for someone to exploit it in this way then it is an absolute shambles.

One other thing that you are probably aware of CSL1083, if you are able to "sacrifice" so much of your salary, then any death in service allowance paybale to your family will only be based on your notional income. That is quite a difference should it come into play before your retirement. Any pension contributions will stil be tax liable in some way upon your death.

No, the death in service benefit would be linked to the official salary and not the commuted amount, thus unaffected by this decision.

jamesd

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?

It's completely legal and there is no need for any concealment at all with HMRC or any other bodies that you deal with. The public policy objective is to encourage retirement investing and this is consistent with it.

Since you're using salary sacrifice that reduces your income effectively and you save the NI as well. Even without salary sacrifice pension contributions do reduce income for the common benefits.

Your employer isn't allowed to let your post-sacrifice pay drop below minimum wage so that'll be as low as you can go. But at your income level it looks as though you'll need to use some past years' money to get down as low as minimum wage. No problem, you're allowed to do that for up to three years where you didn't use the full £50k allowance.

CSL0183 wrote: »

then surely this is a no brainer option if you can of course afford to live off a 'low' welfare income.

The catches are:

1. The earliest pension payment age, currently 55 and likely to be higher by the time that you get there. This means that some use of S&S ISAs can be prudent.
2. You might also plan for what you do if you can't work before you get to 55, like long term injury. The pension money won't help you, ISA money can. But ISA money counts against means tests so if you try to support yourself before pension age there are potentially huge financial costs from means tests between when you start doing it and when you reach the target income level. You could lose almost all of the money you've put away. This means that it becomes more practical as you get closer to 55, when you need to support yourself for fewer years, so can accumulate the required money with a reduced time window of vulnerability to means tests.
3. The limited tax relief below higher rate relief that might or might not make it a good idea to go below that for pension contributions. The effect of the benefits paid may make up for much of it.

You might consider schemes like alternating years with some years going down to minimum wage and others using pension investing for all of your higher rate income and putting away two years worth of ISA contributions from the remaining basic rate income.

The universal credit rules probably won't affect you since you're using salary sacrifice and never have the money as income anyway.

If you find too many troublesome posts please do report them to MSE. Various people dislike the ways that the benefits systems work but harassing people using the system to maximise their benefits isn't acceptable here.

jamesd

shadydaz wrote: »

One other thing that you are probably aware of CSL1083, if you are able to "sacrifice" so much of your salary, then any death in service allowance paybale to your family will only be based on your notional income. That is quite a difference should it come into play before your retirement. Any pension contributions will stil be tax liable in some way upon your death.

Death in service benefits of salary sacrifice schemes are based on the scheme salary, the salary before sacrifice. Pension pot payouts to survivors are tax free if benefits haven't been taken yet.