UC and payments into a SIPP (Pension)

michaels

I am lucky enough to be being migrated to UC this month from WTC.

I plan to make some payments into my freestanding sipp if my pay varies between months (possible small bonuses etc) so that my pay for UC purposes is constant which will hopefully also keep my UC payments constant.

Does anyone have any experience of how this happens practically, how do I inform UC of the payments?  DO I give them the net payment I make into the SIPP or do I add the tax relief that the pension company adds to the contribution?  There is often a lag of about 6 weeks between the sipp payment and the tax relief so the sipp statement does not show the two amounts (my payment and tax relief) in the same month.

Thanks for any help

peteuk

Are you self employed or employed?  Only if self employed do you have to inform DWP of your monthly income, so if your employed as then DWP will be automatically provided your take home wage through your PAYE tax.  

There has been a few posts about paying into a private pension and having the payment taken into account however someone with a better understanding will be able to advise you further. 

michaels

Correct, I am employed and am making extra payments into a private pension not through my employer.

peteuk

michaels said:

Correct, I am employed and am making extra payments into a private pension not through my employer.

So as above your UC will be calculated on your “Take home pay” and deducted from your UC at 55p per pound.   If you were making monthly contributions to a private pension or adding to one from a further deduction form your wage you can have this taken into consideration.   However if it’s Adhock then it’s going to be difficult.  

The reality is unless your wages zero your UC, you will still get extra on those months you get bonuses. 

£100 equally £55 reduction, but £150 is 82.5 reduction - so earning £50 more leads to a further £32.5 reduction. 

The same happens if your are given a delayed wage increase and back pay, eg Wage increase is in April but paid July, so you have 4 months back pay of the difference.   This automatically reduced the UC payment. 

michaels

Thanks again

Pretty sure according to the rules it should be possible but it is a matter of how to inform UC of each months private pension payment and getting them to action it - and that is before the complication that the tax relief (which should also be taken account of in the UC calculation) is added about 6 weeks after the pension company receive the additonal contribution. 

I also don't want any extra deduction to be made in any month that might bump me below light touch threshold - life was so much simpler under tax credits where they just redid the calcs at the end of each FY based on total annual income and total pension payments and made an adjustment if there was under or overpaid benefit.

peteuk

As you say it should be possible… but have a look at the thread below.

https://forums.moneysavingexpert.com/discussion/6001734/universal-credit-and-private-pension-contributions#latest

Spoonie_Turtle

I'm not conversant with the details but I'm not sure UC works on gross to include tax relief, when it comes to making deductions for income it goes by net for everything else so I wouldn't assume pension contributions are any different.

I held off saying anything because I don't *know* for sure, but nobody else has mentioned anything and I think it's something you need to be sure what they will take into account, especially as you'll likely (per the other thread) have to fight for the correct deduction each time.