Universal Credit and SIP

marksandygill

Hiya,

So looks like I will be on UC from early next year (merry xmas, divorce and all that shiz ) at the moment I pay money into a company share incentive plan, now I know in general shares count as capital but is that the same for a SIP, also if it does, do I take the full amount or the amount that is 'available'?

If so I am thinking of stopping the SIP and putting the money into a SIPP instead which I believe are discounted from capital...not confusing at all...

Mark

NedS

Hi Mark,

First thing, I'm guessing the first surprise might be that the amount deducted from your salary each month for the Share Incentive Plan is still considered as income for UC purposes, even though you haven't 'received' it as take home pay. View it like you have received it, and then paid it into a 'savings' account, so it is taken into account as income.

Because your shares are available to you (even if tax may be due for early redemption), the value is treated as capital and you will need to declare that when you make your claim. If there is a penalty (or tax due) for selling early, this may be deducted from the value, but UC will perform that calculation when you give them the information.

As you suggest, any money contained within a registered pension scheme (e.g, a UK registered SIPP) is disregarded in full, so it may be better to contribute extra to your works pension or a SIPP that the Share Incentive Plan (obviously depends on the terms of the SIP as some very generously match share contributions so may still be worth contributing).

marksandygill

Hiya, yes well aware it still counts as income, my problem is that matching shares from my work are unavailable because I haven't held them for 3 (I think) years, so they cannot be sold as I don't own them so they aren't capital? Slowly over time they will be available to me so become capital I need to declare?

I can't work out if, as my pension is smart, UC will take my wages after it is taken out or before? If it is after then I think I'm better off increasing my work pension as my UC payment will also increase...

NedS

marksandygill said:

Hiya, yes well aware it still counts as income, my problem is that matching shares from my work are unavailable because I haven't held them for 3 (I think) years, so they cannot be sold as I don't own them so they aren't capital? Slowly over time they will be available to me so become capital I need to declare?

I can't work out if, as my pension is smart, UC will take my wages after it is taken out or before? If it is after then I think I'm better off increasing my work pension as my UC payment will also increase...

WRT your shares, I think you can sell them, therefore they are available to you, but you will likely have to pay the tax you have saved on the purchase. The 3 year condition before selling is usually associated with the tax saving you made when purchasing them. But you do own them, just that they are held on your behalf inside the scheme. Your SIP scheme should be able to clarify for you.

Regarding pension contributions - UC considers your net pay, that is your gross pay after deductions have been made for tax, NI and any relievable pension contributions. Making extra pension contributions into your workplace scheme is by far the easiest way of doing this as your employer will report these extra contributions when reporting your salary to HMRC (shared with UC) each month. If you make additional pension contributions into a non-workplace personal pension (e.g, SIPP) out of your 'take home' pay, you would have to report these contributions to UC and get them to accept and deduct them from your pay for UC (good luck with that!)