Universal credit and private pension contributions

Poormum

Hi, 

I’ve just sat and read this entire thread and just want to clarify… 

I’ve recently had to move from a full time job to part time due to my mental health and struggling with childcare.. so have gone back on UC.. I was feeling really disheartened that my pension contributions were going to take a massive hit and been stressing out over the future. 

From this thread it looks as though, say I earn £2000 per month and receive UC, after being paid my monthly salary, I can pay into a sipp, upload evidence of this, and then my monthly UC statement be reassessed as though I’d never been paid that money in my monthly pay in the first place?

can I ask would this apply to the investment SiPP I have with vanguard  (VAFTGAG)? 

It’s a shame more people aren’t aware of this as it’s massively useful for people on low income and saving for retirement (albeit it doesn’t look like an easy process) 

justwhat

Poormum said:

Hi, 

I’ve just sat and read this entire thread and just want to clarify… 

I’ve recently had to move from a full time job to part time due to my mental health and struggling with childcare.. so have gone back on UC.. I was feeling really disheartened that my pension contributions were going to take a massive hit and been stressing out over the future. 

From this thread it looks as though, say I earn £2000 per month and receive UC, after being paid my monthly salary, I can pay into a sipp, upload evidence of this, and then my monthly UC statement be reassessed as though I’d never been paid that money in my monthly pay in the first place?

can I ask would this apply to the investment SiPP I have with vanguard  (VAFTGAG)? 

It’s a shame more people aren’t aware of this as it’s massively useful for people on low income and saving for retirement (albeit it doesn’t look like an easy process) 

Any registered pension scheme is relievable. 

You may have to work out what is  the best amount to contribute to  maximize pay/uc/tax benefits and savings.  

NedS

Poormum said:

Hi, 

I’ve just sat and read this entire thread and just want to clarify… 

I’ve recently had to move from a full time job to part time due to my mental health and struggling with childcare.. so have gone back on UC.. I was feeling really disheartened that my pension contributions were going to take a massive hit and been stressing out over the future. 

From this thread it looks as though, say I earn £2000 per month and receive UC, after being paid my monthly salary, I can pay into a sipp, upload evidence of this, and then my monthly UC statement be reassessed as though I’d never been paid that money in my monthly pay in the first place?

can I ask would this apply to the investment SiPP I have with vanguard  (VAFTGAG)? 

It’s a shame more people aren’t aware of this as it’s massively useful for people on low income and saving for retirement (albeit it doesn’t look like an easy process) 

@Poormum As above, yes any UK registered pension scheme is OK, so any UK SIPP should be absolutely fine.

With respect to the difficulty in dealing with DWP/UC, a far easier option may be to make larger contributions into your employers pension scheme, directly from your pay packet. This way UC will automatically be notified of your lower take home pay and you will not need to worry about convincing UC to deduct them from your salary, and in some cases may even benefit from higher employer contributions too.

Then if you would really like the extra pension contributions to go into your Vanguard SIPP, you can always transfer a portion out of your employers scheme and into your Vanguard SIPP on an annual basis to achieve the same thing with a lot less hassle (pension transfer, not a pension withdraw). Had I realised this 5 years ago, with hindsight, this is probably what I would have done rather than spend 12 months fighting DWP through a lengthy mandatory reconsideration and a lapsed tribunal appeal.

Poormum

Thank you both so much, this is amazing and potentially future life changing information!! 

thebionic

NedS said:

Poormum said:

Hi, 

I’ve just sat and read this entire thread and just want to clarify… 

I’ve recently had to move from a full time job to part time due to my mental health and struggling with childcare.. so have gone back on UC.. I was feeling really disheartened that my pension contributions were going to take a massive hit and been stressing out over the future. 

From this thread it looks as though, say I earn £2000 per month and receive UC, after being paid my monthly salary, I can pay into a sipp, upload evidence of this, and then my monthly UC statement be reassessed as though I’d never been paid that money in my monthly pay in the first place?

can I ask would this apply to the investment SiPP I have with vanguard  (VAFTGAG)? 

It’s a shame more people aren’t aware of this as it’s massively useful for people on low income and saving for retirement (albeit it doesn’t look like an easy process) 

@Poormum As above, yes any UK registered pension scheme is OK, so any UK SIPP should be absolutely fine.

With respect to the difficulty in dealing with DWP/UC, a far easier option may be to make larger contributions into your employers pension scheme, directly from your pay packet. This way UC will automatically be notified of your lower take home pay and you will not need to worry about convincing UC to deduct them from your salary, and in some cases may even benefit from higher employer contributions too.

Then if you would really like the extra pension contributions to go into your Vanguard SIPP, you can always transfer a portion out of your employers scheme and into your Vanguard SIPP on an annual basis to achieve the same thing with a lot less hassle (pension transfer, not a pension withdraw). Had I realised this 5 years ago, with hindsight, this is probably what I would have done rather than spend 12 months fighting DWP through a lengthy mandatory reconsideration and a lapsed tribunal appeal.

Hi there, I do pension contributions by salary sacrifice, but also contribute to my own sipp, the company pension gets reported, but I have found UC is a headache to work with, so just wondering if you know answer to this. If I change my contribution to net instead of salary sacrifice, will it still get reported as me not having that cash, or will I still have to battle with UC every month?

I contribute about 80% to my pension at the moment, but have to battle with landlord delayed payments and all that.

NedS

thebionic said:

NedS said:

Poormum said:

Hi, 

I’ve just sat and read this entire thread and just want to clarify… 

I’ve recently had to move from a full time job to part time due to my mental health and struggling with childcare.. so have gone back on UC.. I was feeling really disheartened that my pension contributions were going to take a massive hit and been stressing out over the future. 

From this thread it looks as though, say I earn £2000 per month and receive UC, after being paid my monthly salary, I can pay into a sipp, upload evidence of this, and then my monthly UC statement be reassessed as though I’d never been paid that money in my monthly pay in the first place?

can I ask would this apply to the investment SiPP I have with vanguard  (VAFTGAG)? 

It’s a shame more people aren’t aware of this as it’s massively useful for people on low income and saving for retirement (albeit it doesn’t look like an easy process) 

@Poormum As above, yes any UK registered pension scheme is OK, so any UK SIPP should be absolutely fine.

With respect to the difficulty in dealing with DWP/UC, a far easier option may be to make larger contributions into your employers pension scheme, directly from your pay packet. This way UC will automatically be notified of your lower take home pay and you will not need to worry about convincing UC to deduct them from your salary, and in some cases may even benefit from higher employer contributions too.

Then if you would really like the extra pension contributions to go into your Vanguard SIPP, you can always transfer a portion out of your employers scheme and into your Vanguard SIPP on an annual basis to achieve the same thing with a lot less hassle (pension transfer, not a pension withdraw). Had I realised this 5 years ago, with hindsight, this is probably what I would have done rather than spend 12 months fighting DWP through a lengthy mandatory reconsideration and a lapsed tribunal appeal.

Hi there, I do pension contributions by salary sacrifice, but also contribute to my own sipp, the company pension gets reported, but I have found UC is a headache to work with, so just wondering if you know answer to this. If I change my contribution to net instead of salary sacrifice, will it still get reported as me not having that cash, or will I still have to battle with UC every month?

I contribute about 80% to my pension at the moment, but have to battle with landlord delayed payments and all that.

@thebionic What you say is correct.

If you make pension payments into your employer scheme as deducted from your payslip, then UC will automatically take these into consideration - it does not matter whether they are by way of salary sacrifice or under net pay arrangements, the pension contributions will be reported to UC via HMRC as reported by your employer.

If you make contributions to a SIPP (or similar) out of your taxed pay under relief at source, then you will need to declare these to UC each month and battle to have UC deduct them from your take home pay.

If you can use your employer scheme, then this is far simpler (automated) as far as UC is concerned. You can always make a transfer out of your employer pension scheme every year into your SIPP if you'd prefer the pension contributions to be in your SIPP long term.

NedS

The Telegraph published a related story this week:

https://www.telegraph.co.uk/politics/2025/05/26/higher-paid-workers-paid-benefits-labour-loophole-pensions

Within the article, a DWP person commented:

A DWP spokesman said: “There are clear rules in Universal Credit to prevent a claimant deliberately depriving themselves of earnings in order to gain or increase their entitlement to benefit.

“If a claimant is found to have done this, their entitlement would be adjusted accordingly.”

Yes, there are clear rules on deprivation of income, but they are not relevant in this case. I am frustrated that DWP still seek to conflate the issue. If earnings have been received from an employer, then deprivation of income cannot by definition have occurred. You cannot receive earnings and contribute those earnings into a pension if you have been deprived of them (not received them).

This is clearly stated in the Advice for Decision Makers guidance:

https://assets.publishing.service.gov.uk/media/67eaac09f0edd954a99fe991/adm-chapter-h3-earned-income-employed-earnings.pdf

H3205 Claimants cannot deprive themselves of income that they have already received. If a payment of
earned income is received it is actual income and should be taken into account in the normal way.

I'm not sure DWP's conflation is deliberate, I think it's just that the people commenting on the issue do not understand their own legislation and guidance.

One could also argue that the 'loophole' has existed since the introduction of Tax Credits in 2003, so it's only taken the Telegraph 22 years to pick up on the story. When it was under HMRC's remit, and a 'Tax Credit', people didn't seem so 'offended' as since moved under DWP and the 'benefits' system. [Rhetorical] As a society, do we see it as somehow more acceptable to (legally) minimise the tax we pay than to (legally) maximise the benefits we claim?

HillStreetBlues

NedS said:

The Telegraph published a related story this week:

https://www.telegraph.co.uk/politics/2025/05/26/higher-paid-workers-paid-benefits-labour-loophole-pensions

Within the article, a DWP person commented:

A DWP spokesman said: “There are clear rules in Universal Credit to prevent a claimant deliberately depriving themselves of earnings in order to gain or increase their entitlement to benefit.

“If a claimant is found to have done this, their entitlement would be adjusted accordingly.”

Yes, there are clear rules on deprivation of income, but they are not relevant in this case. I am frustrated that DWP still seek to conflate the issue. If earnings have been received from an employer, then deprivation of income cannot by definition have occurred. You cannot receive earnings and contribute those earnings into a pension if you have been deprived of them (not received them).

This is clearly stated in the Advice for Decision Makers guidance:

https://assets.publishing.service.gov.uk/media/67eaac09f0edd954a99fe991/adm-chapter-h3-earned-income-employed-earnings.pdf

H3205 Claimants cannot deprive themselves of income that they have already received. If a payment of
earned income is received it is actual income and should be taken into account in the normal way.

I'm not sure DWP's conflation is deliberate, I think it's just that the people commenting on the issue do not understand their own legislation and guidance.

One could also argue that the 'loophole' has existed since the introduction of Tax Credits in 2003, so it's only taken the Telegraph 22 years to pick up on the story. When it was under HMRC's remit, and a 'Tax Credit', people didn't seem so 'offended' as since moved under DWP and the 'benefits' system. [Rhetorical] As a society, do we see it as somehow more acceptable to (legally) minimise the tax we pay than to (legally) maximise the benefits we claim?

The DWP reply is spin, if gives a "political" answer not a direct answer to the question.

Grumpy_chap

thebionic said:

Hi there, I do pension contributions by salary sacrifice, but also contribute to my own sipp, the company pension gets reported, but I have found UC is a headache to work with, so just wondering if you know answer to this. If I change my contribution to net instead of salary sacrifice, will it still get reported as me not having that cash, or will I still have to battle with UC every month?

I contribute about 80% to my pension at the moment, but have to battle with landlord delayed payments and all that.

If you are currently contributing 80% of your salary to pension via SS (I think that is what you are stating), then you may be constrained in contributing more via this method because of NMW compliance.

I do not understand your comment referencing landlord delayed payments.

NedS said:

The Telegraph published a related story this week:

https://www.telegraph.co.uk/politics/2025/05/26/higher-paid-workers-paid-benefits-labour-loophole-pensions

That article is behind a paywall...

HillStreetBlues

NedS said:

The Telegraph published a related story this week:

https://www.telegraph.co.uk/politics/2025/05/26/higher-paid-workers-paid-benefits-labour-loophole-pensions

That article is behind a paywall...

Not for me, I do use a VPN thou.