Can UC force me to reduce my pension contributions?

CRAIGSVILLE1

Hi all,

My OH is 55 , and on UC,  , has a self employed job earning approx 10k p.a . She pays pays into a SIPP £480 p.m ' which she only has £10k in.
On her last few meetings with UC people, they are trying to get her to reduce her pension payment, because they are paying towards it.
Is this normal for them to try this, and could they force her to reduce it? 
The way I see it, the longer she has  smaller pension contributions, the longer she will be on UC , but they obviously don't see it that way? 

Thanks

Rubyroobs

So half of her earnings are going into a pension? That seems very high but I don;t think there is anything they can do about it. Uc is calculated based on net earnings after tax, NI and pension contributions.

calcotti

I agree with Ruby. It does seem absurd but I don't think there is anything in the legislation that empowers them to require a claimant to reduce their pension contributions.

CRAIGSVILLE1 said: The way I see it, the longer she has  smaller pension contributions, the longer she will be on UC , but they obviously don't see it that way? 

I don't follow the logic of the above statement. 

CRAIGSVILLE1

Rubyroobs said:

So half of her earnings are going into a pension? That seems very high but I don;t think there is anything they can do about it. Uc is calculated based on net earnings after tax, NI and pension contributions

Only reason it's high, is because she has not been paying into one earlier.

calcotti said:

CRAIGSVILLE1 said: The way I see it, the longer she has  smaller pension contributions, the longer she will be on UC , but they obviously don't see it that way? 

I don't follow the logic of the above statement. 

If she pays more into pension, she can retire earlier , thus not relying on more years on UC + working ?

NedS

As always, it depends, so both Yes and No.

No, UC cannot stop anyone paying into a pension and as long as they abide by HMRC's regulations which state you cannot pay in more than you earn, she could conceivably contribute all of her earnings into a pension and receive higher UC as a result.

But, and here's the but - you mention she is self employed. If she is gainfully self employed, then the MIF will apply (maybe after a 12 month start up period) at which point assumed earnings will be used to calculate UC regardless of whether she has them or not - so paying into a pension will not derive more UC unless earnings are significantly above the MIF.

She may be in her start up year where the MIF does not yet apply, and she would be having 3-monthly reviews to assess her progress towards achieving her MIF, at which point her work coach would have good reason for questioning high pension contributions if she is not otherwise on course to meet those goals - so in those circumstances, yes it would be reasonable for the work coach to question high pension contributions. The work coach could conceivably impose the MIF immediately if she is not taking steps to achieve the MIF, and making excessively high pension contributions when the business cannot yet afford it may be seen as counter-productive.

Dazed_and_C0nfused

NedS said:

As always, it depends, so both Yes and No.

No, UC cannot stop anyone paying into a pension and as long as they abide by HMRC's regulations which state you cannot pay in more than you earn, she could conceivably contribute all of her earnings into a pension and receive higher UC as a result.

But, and here's the but - you mention she is self employed. If she is gainfully self employed, then the MIF will apply (maybe after a 12 month start up period) at which point assumed earnings will be used to calculate UC regardless of whether she has them or not - so paying into a pension will not derive more UC unless earnings are significantly above the MIF.

She may be in her start up year where the MIF does not yet apply, and she would be having 3-monthly reviews to assess her progress towards achieving her MIF, at which point her work coach would have good reason for questioning high pension contributions if she is not otherwise on course to meet those goals - so in those circumstances, yes it would be reasonable for the work coach to question high pension contributions. The work coach could conceivably impose the MIF immediately if she is not taking steps to achieve the MIF, and making excessively high pension contributions when the business cannot yet afford it may be seen as counter-productive.

Good explanation 😀

tomtom256

CRAIGSVILLE1 said:

Only reason it's high, is because she has not been paying into one earlier.

If she pays more into pension, she can retire earlier , thus not relying on more years on UC + working ?

So effectively the tax payer, funding her pension so she can retire earlier?

NedS summed it up perfectly. Any allowable expenses have to be reasonable, if deemed to be excessive, they can decide the expenses are not allowable.

CRAIGSVILLE1

Yes, she is still in her 12 month start up year. She has never mentioned anything about a MIF , so will quiz her later.
Just had a look about MIF ( didn't know about this)  It's not very kind towards full time self employed people, who don't earn much, but love their job ( dog walker she is )  It kind of tries to force people to look for a different job, just to earn more, even if they don't want a different job ??? 
She would still be wanting to pay into her pension as it is , even after the 12 months are up to get the 25% uplift. 

Thanks 

Rubyroobs

CRAIGSVILLE1 said:

Yes, she is still in her 12 month start up year. She has never mentioned anything about a MIF , so will quiz her later.
Just had a look about MIF ( didn't know about this)  It's not very kind towards full time self employed people, who don't earn much, but love their job ( dog walker she is )  It kind of tries to force people to look for a different job, just to earn more, even if they don't want a different job ??? 
She would still be wanting to pay into her pension as it is , even after the 12 months are up to get the 25% uplift. 

Thanks 

It may not seem kind but the work has to be viable, otherwise anyone could just do a hobby job they love yet which doesn't make a decent income and get topped up with benefits. Most people don't really have a choice to do this.

Alice_Holt

As she is your 'OH', is it a joint UC claim.

Or is she claiming as a single person? 

calcotti

tomtom256 said: Any allowable expenses have to be reasonable, if deemed to be excessive, they can decide the expenses are not allowable.

I’m not sure that the pension contributions come into the category of expense (allowable or otherwise) even though they are taken into account when working out the net earnings. 

The issue isn’t confined to the self employed. In theory an employed person could pay, within HMRC rules, a large portion of their wage such into a pension and thereby gain more UC. For that reason It may not be helpful to think of this specifically in terms of what is reasonable for a self employed person.