Setting up a pension pot whilst claiming UC.

WiseOldBird_2

Asking for a friend who is my self employed mobile hairdresser and a single mum of 2. Despite working all hours in her business she doesn’t make a lot of money and is entitled to UC to supplement her earnings. As she is in her early 40’s she is looking to the future and wants to pay into a pension scheme but the UC person has told her that whatever amount she pays into a scheme, it is counted as part of her profit and that her UC will be reduced by the same amount. She is therefore worried about the situation. Can anyone shed any light on this? Is that the case? Thanks for any help. 

calcotti

That is wrong.
She is entitled to contribute into a pension fund and the pension contributions are allowable expenses.

See guidance here
https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/how-to-report-your-earnings-from-self-employment#how-your-self-employed-earnings-are-worked-out

Business income and allowable expenses
Pension contributions
These are paid into a registered pension scheme by or on behalf of a member of that scheme. They can be paid by an individual member, who must be a UK citizen, or by a third party for them.

Wish they wouldn't make this stuff up!

She does however need to take into account that if her earnings are too low she will be subject to the Minimum Income Floor which would be applied to her UC entitlement.

Dazed_and_C0nfused

And from recent experience of other posters she may find it tough going to get DWP to accept the correct position.

calcotti

Dazed_and_C0nfused said:

And from recent experience of other posters she may find it tough going to get DWP to accept the correct position.

Unfortunately that may well be the case but they can use the appeal process to challenge any incorrect application of the rules.