Student Loan/Grant "Loophole"?

NottinghamDad

Hi

I think I have found a good way to save money for my children but wondered if anyone could shoot me down before I do this.

I have been saving in ISAs for years and have a tidy sum put away. We also have 3 children about to go to university who I am sure will eat into it in a big way.

I have been looking at student finance and it appears as though the grant they are eligible for does not have to be repaid but depends on my income. Based on my income of about £35k after tax they qualify for about £1000 each per year as a grant.

However if my income was only £25k they would each qualify for a grant of over £3000 per year. My understanding is that if I paid £10k into a pension SIPP each year they are at university it would bring my taxable income down to £25k and increase their grants. We can't afford ordinarily to do this but we could if we started spending our ISAs to compensate. It is basically transferring our ISAs into a SIPP. I would get tax relief on the contribution to the SIPP and could then start taking the money back from the SIPP once the children have finished University. With 3 children averaging 3 years each at Uni it means they get £27k in non-repayable grants as opposed to £9k between them.

Is this ok/legal/doable.

Thanks

Lokolo

You say I then you say we.

It is based on household income, so it isn't just your income taken into account. Do you have a husband/wife that you live with?

NottinghamDad

Sorry, bad English/consistency.

We are a couple but only have the one income.

Lokolo

That is fine I believe. However when applying for student finance they ask for the previous years P60s. This will show £35k (Year 13-14). You have to use a different form to use this years expected income.

I don't know what this form is though.

It will be similar to this http://www.studentfinanceni.co.uk/pls/portal/docs/PAGE/NPIPG001/NPIPS001/NPIPS110/SFNI_CYI_FORM_1415_D.PDF which is the Northern Ireland student finance form.

- edit - they ask for 12/13 as Cliff says. However

What happens if my household income has dropped since tax year 2012-13?

If your household income will be at least 15% less than it was in tax year 2012-13 you can apply for a ‘Current Year Income Assessment’. This means we would use your expected income for tax year 2014-15 instead of your actual income from tax year 2012-13 when calculating the student’s entitlement. However, there must be at least a 15% drop in the overall household income (not just your own income) between these two tax years for us to do this and we will ask for evidence of your 2014-15 income at the end of that tax year.

http://www.sfengland.slc.co.uk/media/682892/sfe_pn1_form_1415_d.pdf Page 25

System

For a student starting university in September 2014 the income assessment year is 2012/13. So you are already 2 years late with your plan.

thenudeone

But if your net income (after pension contributions and other tax-deductible allowances) has fallen by more than 15%, you can request to be re-assessed on the current year income. This applies even if gross income remains unchanged

As a starting point, they will ask for information on the most recent complete tax year, rather than the year before that, which (at the time of applying to SF) is the most recent tax year for which you would have been obliged to have completed a tax return.

If the only change in your circumstances is a massive increase in pension contributions, you will probably need to provide evidence of the contributions, and you may have to wait until after the relevant tax year ends before submitting the information, although once you have done so, your offspring's grant and loan should be re-calculated and backdated to the beginning of that academic year. You/ your offspring may need to be quite persistant.

If you leave it until after the academic year ends, they will probably not re-assess the loan / grant even if you can prove a 15% drop in income.

Also , you might have to fight to get SF to accept that they must look at NET INCOME and not Gross when assessing the 15% drop (I did); but that's what the rules say.

silvercar

Whatever year is used, the assessment is based on all income.

Earned and unearned income (eg benefits, pension or investments) for a certain tax year will be assessed.

From here: https://www.gov.uk/apply-for-student-finance/household-income

epicurate

@silvercar I don't think that's referring to pension contributions, I think that's referring to pension income.

Nonetheless I'm a bit sceptical that this could work - an obvious loophole if it did. The guidance notes don't give a clear answer to my mind, but taking it at face value I think they're asking for gross income. The form I saw asks for "total income".

scotkiwi

Hi ND, I am attempting a similar strategy with twins starting uni in Sept '15. But I understand that there are major changes to the availability of these grants after this year. Bear in mind that an income of £25k may also make you eligible for child tax credits in the meantime.