Pension contributions - Universal Credit white paper

tartanterra

I have just taken this from the Universal Credit white paper.

Pension saving and Universal Credit
21. In calculating the amount of earnings to be taken into account in Universal Credit, 50 per cent of contributions to an occupational or personal pension will be disregarded, as now under Income Support.

22. Once the 2012 pension reforms and Universal Credit are fully in place, based on a withdrawal rate in Universal Credit of 65 per cent, each £1 that goes into the pension pot of an employee who is a basic rate taxpayer and in receipt of Universal Credit will only reduce take-home income by 34 pence after minimum employer contributions, tax relief and increased Universal Credit payment are taken into account.

23. This makes pensions more affordable for those with the lowest incomes, providing a clear incentive for individuals to put money into a pension and benefit from forthcoming pension reforms in 2012.

I can't really get my head round the figures.

Is it worse than people can gain currently if they qualify for tax credits?

Is it specifically referring to NEST?
(I mention this because it would appear to be a bit of a con if it's true. - Nest has just been deferred again for most employees, so the figures they are quoting are not going to be applicable to everyone when UC is implemented (i.e. - it's not "Universal"!) )

Dominic9

Is it worse than people can gain currently if they qualify for tax credits?

Better if you have access to salary sacrifice, worse if you don't (although there are a number of ways it could be done, so can't be definitive).

Is it specifically referring to NEST?

No, NEST is just a pension scheme like any others in most regards. It is referring to the new employer duties, the full implementation of which has been pushed back a bit.

Nest has just been deferred again for most employees

Although NEST is often used interchangably with the new employer duties, they are different things. It is the employer duties which have been deferred a bit for some. NEST (the pension scheme) is still going to be taking on new members as planned.

so the figures they are quoting are not going to be applicable to everyone when UC is implemented

They never were even on the old timetable - the example uses figures based on the employer reforms reaching full contribution levels (8% of banded earnings) which wouldn't have happened until 2017 under the old timetable.

tartanterra

Dominic9 wrote: »

Better if you have access to salary sacrifice, worse if you don't (although there are a number of ways it could be done, so can't be definitive).



No, NEST is just a pension scheme like any others in most regards. It is referring to the new employer duties, the full implementation of which has been pushed back a bit.



Although NEST is often used interchangably with the new employer duties, they are different things. It is the employer duties which have been deferred a bit for some. NEST (the pension scheme) is still going to be taking on new members as planned.



They never were even on the old timetable - the example uses figures based on the employer reforms reaching full contribution levels (8% of banded earnings) which wouldn't have happened until 2017 under the old timetable.

As I thought.

I work for a very small company. No chance of salary sacrifice, and due to the government pushing the timetable back, no chance of employers contributions for a good few years.