UC & pension contributions

leviathan

Hi all,


I was reading the advice given on the entitled to website:


https://www.entitledto.co.uk/help/pension-contributions


"For Universal Credit all one hundred percent of contributions made to a personal or occupational pension are disregarded when calculating income."


I wasn't sure I was reading this correctly. So I followed through on the calculator, entered my salary and put down 100% pension contributions. And the calculator spat out my entitlement to UC.


So I did it again, but this time took the 12.5k personal allowance out of my salary and the rest into pension.
Once again the calculator gave me the UC entitlement figures.




Is this correct? Because it seems a little "odd" to say the least.
That I can actually put more into my pension and then qualify to claim UC thus being better off by putting more of my wage into my workplace pension scheme.


If I've misunderstood how it works, please enlighten me.

Kayalana99

That is correct. UC works out based on your net income so if your pension is paid directly from your wage then your net income is less and this is the figure they use.

calcotti

Kayalana99 wrote: »

That is correct. UC works out based on your net income so if your pension is paid directly from your wage then your net income is less and this is the figure they use.

It doesn't have to be paid directly out of the wage. If someone makes pension contributions out of the income they actually receive they are entitled to have these pension contributions taken into account. They would need to provide evidence to UC and UC should then make a manual adjustment to the UC calculation. Having said that, getting this accepted and done may not be smooth - much easier if pension deductions are made at source.

leviathan

Thanks for your replies.
I find this rather an odd situation. I can be doing well financially and then take a morally questionable path to legally under declare my income to obtain benefits and yet still be saving for retirement.


I'd imagine it's quite attactive and a niche that some are taking advantage of

tomtom256

leviathan wrote: »

Thanks for your replies.
I find this rather an odd situation. I can be doing well financially and then take a morally questionable path to legally under declare my income to obtain benefits and yet still be saving for retirement.


I'd imagine it's quite attactive and a niche that some are taking advantage of

No different to the many tax loopholes companies use.

huckster

There is probably some restriction that applies within legislation, that stops someone paying large sums into pensions, so they can claim benefits.

NedS

huckster wrote: »

There is probably some restriction that applies within legislation, that stops someone paying large sums into pensions, so they can claim benefits.

Only the pension regulations that limit the total relievable amount you can pay into a pension scheme in any given year, currently £40K gross.

The legislation (UC Regs 2013, reg 55(5)(a)) states that any relievable pension contributions made by the person in that assessment period are to be deducted when calculating net income for UC purposes.

In practice, this is far simpler if you can make additional contributions through your employer directly from your salary so your net income is reduced before it is declared to UC, than after you have received your pay and maybe contributed into a SIPP and then had to report that contribution to UC and get them to agree to deduct it each month from your net earnings before recalculating your entitlement to UC (and having to repeat that process every month).