Your mum paying into your pension?

zagfles

Wickers wrote: »

"Why not make things simple, get your Mum to gift you the money. Live off that money. Put your earnings into your own pension. Same end result, no complications about who paid into your pension".

If my friends mum gifted him the money it would require everything to be paid by cash. Any gift paid into his account would reduce his tax credits. Thanks for the idea but not sure it would "make things simple"

No it wouldn't - gifts don't affect tax credits. However paying into your own pension increases tax credits (subject to the income change disregard/max amounts etc).

Wickers_2

zagfles wrote: »

No it wouldn't - gifts don't affect tax credits. However paying into your own pension increases tax credits (subject to the income change disregard/max amounts etc).

Thanks zagfles
Sorry to doubt you
If friends mum put £30,000 into his bank account;
1. His tax credits would remain unchanged?
2. In theory could he then put £30,000 into a pension and get 20% tax relief added ?
3. Will the 'gifting rule' apply when they change over to universal credits?

Thanks

Wickers_2

I take it that the £30,000 put into a pension would not be deducted from the income calculations, for tax credit purposes, because the money is not earned income ??

Wickers_2

Forgot that you can't have more than £16,000 in savings when U/C comes in

zagfles

Wickers wrote: »

Thanks zagfles
Sorry to doubt you
If friends mum put £30,000 into his bank account;
1. His tax credits would remain unchanged?

Yes. Interest earned may affect them but that presumably won't be much if anything if he moves it soon.

2. In theory could he then put £30,000 into a pension and get 20% tax relief added ?

Only if he earns at least £37500. You can only get tax relief on 100% of earnings, a £30k net contribution is £37500 gross.

3. Will the 'gifting rule' apply when they change over to universal credits?

Thanks

Not sure, when I last looked at it don't think gifts counted but they keep changing the rules. Ask on the benefits board. But if he's not on UC now and not due to move soon it shouldn't be an issue.

zagfles

Wickers wrote: »

I take it that the £30,000 put into a pension would not be deducted from the income calculations, for tax credit purposes, because the money is not earned income ??

That's why I suggested putting his earned income into the pension, which would reduce income for tax credits, and living off the gift. But be aware of the limits as above.

zagfles

Wickers wrote: »

Forgot that you can't have more than £16,000 in savings when U/C comes in

Pension savings won't count, until he actually draws it or gets to pension credit age, as discussed above.

Possibility of deprivation but unlikely if he's not moving to UC soon.

Wickers_2

zagfles wrote: »

Pension savings won't count, until he actually draws it or gets to pension credit age, as discussed above.

Possibility of deprivation but unlikely if he's not moving to UC soon.

Thanks zagfles
That's possibly the issue regarding deprivation of capital. I think for certain items they can look back quite a few years to see what capital you had? Might be best for the mum to pay direct to the pension? Probably can't accuse a person of deprivation of capital if it's the parent depriving themselves??