UC, pension contributions and working hours

the_pink_panther_2

I'm a lone parent of a primary school aged child, currently in receipt of WTC+ CTC.  I'm expecting a managed migration notice shortly.  Currently I'm expected to work 16+ hrs/week, which I am exceeding, though believe I'm expected to work 25+hrs/week @min wage when on UC.  My pension contributions are paid at source as it's a workplace pension, so if I calculate my working hours pre-pension contribution, NI etc, I make it 24hrs 50 min/week at min wage, but when I log into my HMRC account, I understand that the pay from employer represents my pay after pension contributions have come out, which are more in line with about 23 hrs/week at min wage, so I'd need to look for another 2 hrs work per week.  The way I understand UC to work is that they calculate working hours before pension, NI etc are taken, which would mean I'm expected to look for another 10 mins/week work, but I'm worried that DWP may argue that because pension contributions are taken at source, then I need to look for another 2 hrs/week.  Can anyone advise, whether if pension contributions are paid at source as in work place pension, whether in this case I need to find another 2 hrs/week, or 10 mins per week, and if it's easy enough to evidence for DWP (evidence is in my payslip) that what is in my online HMRC account is pay after pension has come out.

Dazed_and_C0nfused

Not an expert on this but pension contributions don't alter the number of hours worked.

As you are contributing via the "net pay" method your taxable pay will be slightly less than your salary but there is nothing unusual in that.

When your employer sends the pay details to HMRC they have to include some information about the number of hours worked and I don't think that that's something you can see on your Personal Tax Account, you just get a very limited amount of information from each Real Time Information report.

Taxable pay, tax deducted and NI deducted I think from memory.

Spoonie_Turtle

Dazed_and_C0nfused said:

Not an expert on this but pension contributions don't alter the number of hours worked.

The thresholds on UC are a monetary value, so that's what matters not how many hours are actually being worked.  They only say X hrs at NMW so people know how they've set the thresholds.

(I don't know the answer to OP's question though, sorry.)

NedS

The AET and CET are gross thresholds, so it is gross earnings (before deductions) that should be evaluated against those thresholds when deciding in which regime to place a claimant.

To compare net earnings against a gross threshold would be detrimental to the claimant and not in keeping with the UC policy / regulation.

I'll be completely honest - I'm not sure if the UC system is using net or gross earnings, but if it's doing it wrong, DWP will need to fix that quickly.

I would hope that they are comparing gross earnings against the gross AET/CET thresholds.

However, I would not be surprised if they are taking the net earnings that are reported and comparing them against the gross AET/CET thresholds adjusted downward for NI and tax deductions but making no allowances for pension conts (after all, how could they as how would they know how much any given claimant is contributing as this will vary by employer).*

EDIT: * Potentially related to this post: https://forums.moneysavingexpert.com/discussion/comment/80189340/#Comment_80189340

kaMelo

Earnings reported via RTI to HMRC are gross so I don't see how, or why, UC would calculate net earnings to apply against AET/CET. UC would surely just take the figures given to them from HMRC as is.

The only possible glitch could be how the OP's workplace pension is paid, the last sentence in the opening post would suggest pension contributions are paid via net pay. This is the guidance for RTI reporting: 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/915807/RTI_Data_Item_Guide_21-22_v1-0.pdf

The gross pay reported would be net of pension deductions because net pay deductions are reported in a different data field (58b) (61)  There is also the data field for the number of normal hours worked (54)  So while HMRC have all the data needed it's unclear whether all of this data is shared with DWP or just the gross pay figure. If only the latter is shared then this will mean an incorrect calculation for UC purposes..

Dazed_and_C0nfused

kaMelo said:

Earnings reported via RTI to HMRC are gross so I don't see how, or why, UC would calculate net earnings to apply against AET/CET. UC would surely just take the figures given to them from HMRC as is.

The only possible glitch could be how the OP's workplace pension is paid, the last sentence in the opening post would suggest pension contributions are paid via net pay. This is the guidance for RTI reporting: 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/915807/RTI_Data_Item_Guide_21-22_v1-0.pdf

The gross pay reported would be net of pension deductions because net pay deductions are reported in a different data field (58b)  There is also the data field for the number of normal hours worked (54)  So while HMRC have all the data needed it's unclear whether all of this data is shared with DWP or just the gross pay figure. If only the latter is shared then this will mean an incorrect calculation for UC purposes..

Not sure where you have got that from, data item 58b isn't for reporting net pay pension contributions.

The guidance for data item 58b states,

Enter value of deductions made from your employee’s net pay after deductions for tax, National Insurance and all types of Student Loans.

For example, pension contributions that are not paid under a net pay arrangement, trade union subscriptions, subscriptions for health cover and attachment of earnings orders

You have to use data item 61 for net pay contributions.

kaMelo

Apologies, you are of course correct.
I somehow missed the "not" in 58b

the_pink_panther_2

NedS said:

The AET and CET are gross thresholds, so it is gross earnings (before deductions) that should be evaluated against those thresholds when deciding in which regime to place a claimant.

To compare net earnings against a gross threshold would be detrimental to the claimant and not in keeping with the UC policy / regulation.

I'll be completely honest - I'm not sure if the UC system is using net or gross earnings, but if it's doing it wrong, DWP will need to fix that quickly.

I would hope that they are comparing gross earnings against the gross AET/CET thresholds.

However, I would not be surprised if they are taking the net earnings that are reported and comparing them against the gross AET/CET thresholds adjusted downward for NI and tax deductions but making no allowances for pension conts (after all, how could they as how would they know how much any given claimant is contributing as this will vary by employer).*

EDIT: * Potentially related to this post: https://forums.moneysavingexpert.com/discussion/comment/80189340/#Comment_80189340

Thank you so much.  Yes, I read that thread and posted on it to ask if the issue was ever resolved, but suspect that the person with the issue similar to mine may not see my question.   My understanding is also that they should take gross, but  I'm unclear to what extent they are aware, based on what others here have posted, or how they would necessarily know what my pension contributions are, as I have no idea what details are reported to them and how this is done. I tried to google what details a claimant can see, or completes on their version of the log etc, but I couldn't see anything for pension contributions, where a claimant could see it, or even declare it if they made their own private contributions either, so I can't really see how this side of thing is reliably communicated, and given previous posts on here I did get quite lost with some of the terminology as I'm not used to dealing with this sort of financing and the wording and concepts I can't really be sure I've understood correctly or not as I'm just not familiar with that sort of thing).

the_pink_panther_2

kaMelo said:

Earnings reported via RTI to HMRC are gross so I don't see how, or why, UC would calculate net earnings to apply against AET/CET. UC would surely just take the figures given to them from HMRC as is.

The only possible glitch could be how the OP's workplace pension is paid, the last sentence in the opening post would suggest pension contributions are paid via net pay. This is the guidance for RTI reporting: 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/915807/RTI_Data_Item_Guide_21-22_v1-0.pdf

The gross pay reported would be net of pension deductions because net pay deductions are reported in a different data field (58b) (61)  There is also the data field for the number of normal hours worked (54)  So while HMRC have all the data needed it's unclear whether all of this data is shared with DWP or just the gross pay figure. If only the latter is shared then this will mean an incorrect calculation for UC purposes..

Thanks.  Is RTI how the finance dept. at a workplace report employee pay?  I'm taking it from this then that HMRC can see the breakdown, and if this is shared with DWP then so can UC?

huckster

There are 2 data fields on the RTI returns related to pensions. One of them is for company pension schemes deducted from gross income I believe. The other data field I am not totally sure when that would be used, other than guess it might be some form of pension contribution deducted from net pay ?

On the UC system, I think they only take into account the company pension scheme deduction amount when calculating gross taxable pay.

In regard to calculating AET on the UC system, the gross taxable pay may partly be how the system decides the threshold is met. Within the UC legislation for AET, there is also the 3 assessment period average applied when calculating if claimant has met AET, where the earnings have been variable.

kaMelo

the_pink_panther_2 said:

kaMelo said:

Earnings reported via RTI to HMRC are gross so I don't see how, or why, UC would calculate net earnings to apply against AET/CET. UC would surely just take the figures given to them from HMRC as is.

The only possible glitch could be how the OP's workplace pension is paid, the last sentence in the opening post would suggest pension contributions are paid via net pay. This is the guidance for RTI reporting: 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/915807/RTI_Data_Item_Guide_21-22_v1-0.pdf

The gross pay reported would be net of pension deductions because net pay deductions are reported in a different data field (58b) (61)  There is also the data field for the number of normal hours worked (54)  So while HMRC have all the data needed it's unclear whether all of this data is shared with DWP or just the gross pay figure. If only the latter is shared then this will mean an incorrect calculation for UC purposes..

Thanks.  Is RTI how the finance dept. at a workplace report employee pay?  I'm taking it from this then that HMRC can see the breakdown, and if this is shared with DWP then so can UC?

Yes, but how much of the information HMRC have is shared with DWP is unclear.
Dazed_and_C0nfused as to whether your pension contributions are made via a net pay method.