Need some pension help please after triggering MPAA

Albermarle

You could also look at her pension details online, or you should receive an annual update.
If there are separate employer and employee contributions and 25% tax relief is added to the employee contributions , it is a 'Relief at Source' scheme.
If there are separate employer and employee contributions, but no tax relief it is a 'Net Pay' scheme.
If there are only employer contributions it is a 'salary sacrifice' scheme.

happyhero

Dazed_and_C0nfused said:

happyhero said:

Dazed_and_C0nfused said:

happyhero said:

Apologies I have not been back here sooner, something got in the way for a few days but I'm here now and I'm very grateful to you all for the help. 

If its ok I'd like to ask one furher question, sort of related as you have said the employer contributions count. We usually contribute as large a sum as we can to the SIPP to boost my wifes pension and we have to mention this on our tax credits forms every year. This effectively has the benefit of reducing my wifes income in their calculations, ie if my wife earns £11k and we put 9k into the SIPP gross then they have instructed us to put down 2k as her income as there is no seperate box for it. We have done this for several years and they are happy with it, its their method anyway. This boosts our tax credits ie its an encouragement to put money into a private pension.

So if this is the case would her NT L&G pension contributions also needed to be added in the Tax Credits form, ie do we treat it like same as her SIPP contributions?

Here is the wording from the 2 entries on the Tax Credits guidance on the Gov.UK site under "What to take off your Gross pay" :-

"Any pension contributions made to a registered scheme not paid through an employer"

"Any pension contributions made to a registered scheme paid through an employer out of your net income, for example after tax and national insurance has been paid"

Reading the 2nd entry I think we do, am I right?

You need to establish the method used.

If it's relief at source, where the pension company adds 25% to her contributions then yes they can be included for tax credits.

But if it's "net pay" they can't be included.  That's because her P60 would already reflect the reduced taxable income.

Thank you for your help but I am struggling how to read this and the more I read online the more I seem to confuse myself so how can I tell on my wifes payslip which method she is doing, can you guide me to the answer please, sorry if I'm being a bit thick here?

Net pay would show up as a difference between "salary" and taxable pay.

For example monthly salary of £1,000 with 10% net pay contribution would mean her taxable pay was only £900.  And £100 would be added to her pension with no tax relief being added.

If it was relief at source her taxable pay would be £1,000, not £900, but when the £100 was added to her pension the pension company would add £25 in tax relief giving her a pension fund of £125.

Thank you so much for the help Dazed_and_ C0nfused

Ok, so its relief at source, if I understand correctly as although both her employer and her are paying 4% which equates to £41.48 each, but she is only having £32.76 taken from her pay and when it gets to the pension company the tax relief is added making her contribution £41.48 also.

That makes sense what I have said doesn't it?

So it is relief at source and can be added to her tax credit calculation as contributions to a privatre pension, correct?

Dazed_and_C0nfused

happyhero said:

Dazed_and_C0nfused said:

happyhero said:

Dazed_and_C0nfused said:

happyhero said:

Apologies I have not been back here sooner, something got in the way for a few days but I'm here now and I'm very grateful to you all for the help. 

If its ok I'd like to ask one furher question, sort of related as you have said the employer contributions count. We usually contribute as large a sum as we can to the SIPP to boost my wifes pension and we have to mention this on our tax credits forms every year. This effectively has the benefit of reducing my wifes income in their calculations, ie if my wife earns £11k and we put 9k into the SIPP gross then they have instructed us to put down 2k as her income as there is no seperate box for it. We have done this for several years and they are happy with it, its their method anyway. This boosts our tax credits ie its an encouragement to put money into a private pension.

So if this is the case would her NT L&G pension contributions also needed to be added in the Tax Credits form, ie do we treat it like same as her SIPP contributions?

Here is the wording from the 2 entries on the Tax Credits guidance on the Gov.UK site under "What to take off your Gross pay" :-

"Any pension contributions made to a registered scheme not paid through an employer"

"Any pension contributions made to a registered scheme paid through an employer out of your net income, for example after tax and national insurance has been paid"

Reading the 2nd entry I think we do, am I right?

You need to establish the method used.

If it's relief at source, where the pension company adds 25% to her contributions then yes they can be included for tax credits.

But if it's "net pay" they can't be included.  That's because her P60 would already reflect the reduced taxable income.

Thank you for your help but I am struggling how to read this and the more I read online the more I seem to confuse myself so how can I tell on my wifes payslip which method she is doing, can you guide me to the answer please, sorry if I'm being a bit thick here?

Net pay would show up as a difference between "salary" and taxable pay.

For example monthly salary of £1,000 with 10% net pay contribution would mean her taxable pay was only £900.  And £100 would be added to her pension with no tax relief being added.

If it was relief at source her taxable pay would be £1,000, not £900, but when the £100 was added to her pension the pension company would add £25 in tax relief giving her a pension fund of £125.

Thank you so much for the help Dazed_and_ C0nfused

Ok, so its relief at source, if I understand correctly as although both her employer and her are paying 4% which equates to £41.48 each, but she is only having £32.76 taken from her pay and when it gets to the pension company the tax relief is added making her contribution £41.48 also.

That makes sense what I have said doesn't it?

So it is relief at source and can be added to her tax credit calculation as contributions to a privatre pension, correct?

Yes, RAS pension contributions are deductable for tax credit purposes.

They are mentioned in the tax credit renewal notes.

https://www.gov.uk/government/publications/tax-credits-renewal-pack-notes