AET for Light Touch £1437 net or gross

vex13

Thank you for that list of information which confirms that RTI Data Item 61 "Value of employee pension contributions paid under “net pay arrangements” in pay period" Is shared by HMRC with DWP.

RTI Data Items used by UC computer system. Paragraph 13 states:

13. The DWP explained that RTI does not calculate net earnings for Universal Credit (UC). It provides the following calculated amounts that are used in UC net earnings calculations within UC.• Taxable-Pay• Tax• NI-Contributions • Pension-Under-Net-Pay
• Pension-Contribution-Relief-At-Source
• Benefit-In-Kind-Amount.
The detail of the Universal Credit earnings calculation are set out in regulation 55 and 61 of the Universal Credit Regulations 2013.

So when calculating net earnings, NPA pension contributions are included in the calculation.

The last one, as you say is a work in progress at the moment although the question asked seems more aimed at payroll giving rather than pensions.

Finally, and hopefully you can shed some light here for me, on the link in bold (and subsequent links), I'm struggling to see where it states that only RAS pension contributions are included and NPA pension contributions are not included in AET calculations. What am I missing or where am I missing it?

If both forms of pension contributions were considered, you would expect the FOI response to have simply said relievable pension contributions as opposed to specifying RAS pension contributions only. 

Also to say again, the explanation I received on this issue was that the UC system uses the taxable pay figure when calculating the AET. 

RTI does not provide a gross or net figure, only the gross taxable pay figure and the deduction amounts. The Net pay figure used on UC is calculated on the UC system. Logically they would not do anything at all with the Pension-Under-Net-Pay figure as it has already been removed prior to the resulting gross taxable pay figure. This seems to be suggested/confirmed in the ADM here -

See the note in ADM H3170:
"Note 1: The earnings figure provided by RTI or as a self-reported amount will be the claimant’s gross taxable earnings. Gross taxable earnings already allow for pension contributions paid under “net pay arrangements” and charitable donations. DMs should be aware of this and ensure the deduction is not made twice."

When it comes to the AET there would need to be an additional mechanism in place to add the Pension-Under-Net-Pay figure back on and this doesn't seem to be in place. I suppose this is basically a new problem. Where the AET has been lower historically it was very unlikely pension contributions were being made so this was a non issue. Using the existing gross taxable pay figure received through RTI would have been sufficient, previously. 

NedS

Yamor said:

michaels said:

NedS said:

As others have stated above, the Workgroup decision is made automatically by the system based on the information received on the RTI feed. There is not normally any human interaction (although see below for an exception!) If the system is getting the decision wrong (i.e, not in accord with the legislation) then this is a coding error (bug) in the UC platform and needs to be fixed. Without access to the code, or lots of examples to try to confirm what the system is actually doing, it's hard to know exactly what is happening, and why.

Complaining at the jobcentre level will most likely simply result in the Work Coach taking manual intervention to override the system Workgroup based on the claimant's earnings. It may resolve the issue for the claimant, but does not address nor fix the wider issue.

Recently I saw another issue whereby a claimant transferred from Tax Credits to UC under managed migration and received Transitional Protection because they had capital exceeding £16k. They pay most of their salary into a SIPP (Relief at Source) each month bringing their gross taxable earnings well under the AET. The mechanism by which DWP adjust the earnings for SIPP pension contributions is to manually update the RTI feed (exactly what they update I do not know but I suspect they simply reduce the overall earnings figure for calculating the UC award by the amount of the pension contribution, oblivious that this can have other consequences). For our claimant in question, this had the effect of bringing their earnings for UC under the AET, and because their earnings dropped below the AET for 3 months in a row, their Transitional Protection ended (see guidance below), and because their Transitional Protection ended, their claim was closed due to capital exceeding £16k - probably not the outcome the claimant was expecting!

https://www.gov.uk/guidance/transitional-protection-if-you-receive-a-migration-notice-letter#changes-that-end-transitional-protection

Changes that end transitional protection 

Significant changes to your circumstances will end your transitional protection. The following are considered as significant changes:

• a partner moving into your household
• a different partner moving into your household
• a partner leaving your household
• your earnings drop below an agreed amount for 3 months in a row
• your Universal Credit claim ends

So this was wrong. Gross pay should be used for AET whereas post sipp pay should be used for UC amount calculation.

I am still waiting 5 months later for my first MR to actually happen for my sipp contributions 

I actually don't think it's wrong, which is why I asked what happened in the end in that case.

Although for AET/CET purposes they are supposed to use gross earnings, for the rule about ending transitional protection they are supposed to use net earnings.

The decision in that case was only wrong if even in the first AP of the award the claimant had made pension contributions which brought their earned income below the AET level.

The claimant had earnings above the AET in the first AP, and then below the AET in the subsequent 3 APs once their RTI earnings had been adjusted to take into account their reported SIPP contributions.

Interestingly, the system detected the drop in earnings and automatically removed the Transitional Protection, including the capital disregard which allowed the system to NIL the claim due to capital exceeding £16K (the statement shows the individual UC element entitlements but shows a deduction due to capital of the full amount of the UC award thus giving a £0 award). The system then generated a claim closure action for the Case Manager to close the claim due to capital over £16k, so the whole process was pretty automated.

michaels

NedS said:

Yamor said:

michaels said:

NedS said:

As others have stated above, the Workgroup decision is made automatically by the system based on the information received on the RTI feed. There is not normally any human interaction (although see below for an exception!) If the system is getting the decision wrong (i.e, not in accord with the legislation) then this is a coding error (bug) in the UC platform and needs to be fixed. Without access to the code, or lots of examples to try to confirm what the system is actually doing, it's hard to know exactly what is happening, and why.

Complaining at the jobcentre level will most likely simply result in the Work Coach taking manual intervention to override the system Workgroup based on the claimant's earnings. It may resolve the issue for the claimant, but does not address nor fix the wider issue.

Recently I saw another issue whereby a claimant transferred from Tax Credits to UC under managed migration and received Transitional Protection because they had capital exceeding £16k. They pay most of their salary into a SIPP (Relief at Source) each month bringing their gross taxable earnings well under the AET. The mechanism by which DWP adjust the earnings for SIPP pension contributions is to manually update the RTI feed (exactly what they update I do not know but I suspect they simply reduce the overall earnings figure for calculating the UC award by the amount of the pension contribution, oblivious that this can have other consequences). For our claimant in question, this had the effect of bringing their earnings for UC under the AET, and because their earnings dropped below the AET for 3 months in a row, their Transitional Protection ended (see guidance below), and because their Transitional Protection ended, their claim was closed due to capital exceeding £16k - probably not the outcome the claimant was expecting!

https://www.gov.uk/guidance/transitional-protection-if-you-receive-a-migration-notice-letter#changes-that-end-transitional-protection

Changes that end transitional protection 

Significant changes to your circumstances will end your transitional protection. The following are considered as significant changes:

• a partner moving into your household
• a different partner moving into your household
• a partner leaving your household
• your earnings drop below an agreed amount for 3 months in a row
• your Universal Credit claim ends

So this was wrong. Gross pay should be used for AET whereas post sipp pay should be used for UC amount calculation.

I am still waiting 5 months later for my first MR to actually happen for my sipp contributions 

I actually don't think it's wrong, which is why I asked what happened in the end in that case.

Although for AET/CET purposes they are supposed to use gross earnings, for the rule about ending transitional protection they are supposed to use net earnings.

The decision in that case was only wrong if even in the first AP of the award the claimant had made pension contributions which brought their earned income below the AET level.

The claimant had earnings above the AET in the first AP, and then below the AET in the subsequent 3 APs once their RTI earnings had been adjusted to take into account their reported SIPP contributions.

Interestingly, the system detected the drop in earnings and automatically removed the Transitional Protection, including the capital disregard which allowed the system to NIL the claim due to capital exceeding £16K (the statement shows the individual UC element entitlements but shows a deduction due to capital of the full amount of the UC award thus giving a £0 award). The system then generated a claim closure action for the Case Manager to close the claim due to capital over £16k, so the whole process was pretty automated.

But at the start of this thread it is suggested that earnings for AET assessment are those before any sipp contributions so how would the AET earnings be based on income after SIPP deduction?

NedS

michaels said:

NedS said:

Yamor said:

michaels said:

NedS said:

As others have stated above, the Workgroup decision is made automatically by the system based on the information received on the RTI feed. There is not normally any human interaction (although see below for an exception!) If the system is getting the decision wrong (i.e, not in accord with the legislation) then this is a coding error (bug) in the UC platform and needs to be fixed. Without access to the code, or lots of examples to try to confirm what the system is actually doing, it's hard to know exactly what is happening, and why.

Complaining at the jobcentre level will most likely simply result in the Work Coach taking manual intervention to override the system Workgroup based on the claimant's earnings. It may resolve the issue for the claimant, but does not address nor fix the wider issue.

Recently I saw another issue whereby a claimant transferred from Tax Credits to UC under managed migration and received Transitional Protection because they had capital exceeding £16k. They pay most of their salary into a SIPP (Relief at Source) each month bringing their gross taxable earnings well under the AET. The mechanism by which DWP adjust the earnings for SIPP pension contributions is to manually update the RTI feed (exactly what they update I do not know but I suspect they simply reduce the overall earnings figure for calculating the UC award by the amount of the pension contribution, oblivious that this can have other consequences). For our claimant in question, this had the effect of bringing their earnings for UC under the AET, and because their earnings dropped below the AET for 3 months in a row, their Transitional Protection ended (see guidance below), and because their Transitional Protection ended, their claim was closed due to capital exceeding £16k - probably not the outcome the claimant was expecting!

https://www.gov.uk/guidance/transitional-protection-if-you-receive-a-migration-notice-letter#changes-that-end-transitional-protection

Changes that end transitional protection 

Significant changes to your circumstances will end your transitional protection. The following are considered as significant changes:

• a partner moving into your household
• a different partner moving into your household
• a partner leaving your household
• your earnings drop below an agreed amount for 3 months in a row
• your Universal Credit claim ends

So this was wrong. Gross pay should be used for AET whereas post sipp pay should be used for UC amount calculation.

I am still waiting 5 months later for my first MR to actually happen for my sipp contributions 

I actually don't think it's wrong, which is why I asked what happened in the end in that case.

Although for AET/CET purposes they are supposed to use gross earnings, for the rule about ending transitional protection they are supposed to use net earnings.

The decision in that case was only wrong if even in the first AP of the award the claimant had made pension contributions which brought their earned income below the AET level.

The claimant had earnings above the AET in the first AP, and then below the AET in the subsequent 3 APs once their RTI earnings had been adjusted to take into account their reported SIPP contributions.

Interestingly, the system detected the drop in earnings and automatically removed the Transitional Protection, including the capital disregard which allowed the system to NIL the claim due to capital exceeding £16K (the statement shows the individual UC element entitlements but shows a deduction due to capital of the full amount of the UC award thus giving a £0 award). The system then generated a claim closure action for the Case Manager to close the claim due to capital over £16k, so the whole process was pretty automated.

But at the start of this thread it is suggested that earnings for AET assessment are those before any sipp contributions so how would the AET earnings be based on income after SIPP deduction?

Assessment of what? This thread was discussing assessment of which work group (regime) a claimant would be placed in, and for that assessment it is based on gross earnings (before pension conts)

I sidetracked the discussion into the conditions under which Transitional Protection would end (earnings fall below the AET for 3 APs), which is apparently based on net earnings, hence after pension conts are taken into consideration. Apologies if this caused confusion - heck, I'm confused by it!

michaels

NedS said:

michaels said:

NedS said:

Yamor said:

michaels said:

NedS said:

As others have stated above, the Workgroup decision is made automatically by the system based on the information received on the RTI feed. There is not normally any human interaction (although see below for an exception!) If the system is getting the decision wrong (i.e, not in accord with the legislation) then this is a coding error (bug) in the UC platform and needs to be fixed. Without access to the code, or lots of examples to try to confirm what the system is actually doing, it's hard to know exactly what is happening, and why.

Complaining at the jobcentre level will most likely simply result in the Work Coach taking manual intervention to override the system Workgroup based on the claimant's earnings. It may resolve the issue for the claimant, but does not address nor fix the wider issue.

Recently I saw another issue whereby a claimant transferred from Tax Credits to UC under managed migration and received Transitional Protection because they had capital exceeding £16k. They pay most of their salary into a SIPP (Relief at Source) each month bringing their gross taxable earnings well under the AET. The mechanism by which DWP adjust the earnings for SIPP pension contributions is to manually update the RTI feed (exactly what they update I do not know but I suspect they simply reduce the overall earnings figure for calculating the UC award by the amount of the pension contribution, oblivious that this can have other consequences). For our claimant in question, this had the effect of bringing their earnings for UC under the AET, and because their earnings dropped below the AET for 3 months in a row, their Transitional Protection ended (see guidance below), and because their Transitional Protection ended, their claim was closed due to capital exceeding £16k - probably not the outcome the claimant was expecting!

https://www.gov.uk/guidance/transitional-protection-if-you-receive-a-migration-notice-letter#changes-that-end-transitional-protection

Changes that end transitional protection 

Significant changes to your circumstances will end your transitional protection. The following are considered as significant changes:

• a partner moving into your household
• a different partner moving into your household
• a partner leaving your household
• your earnings drop below an agreed amount for 3 months in a row
• your Universal Credit claim ends

So this was wrong. Gross pay should be used for AET whereas post sipp pay should be used for UC amount calculation.

I am still waiting 5 months later for my first MR to actually happen for my sipp contributions 

I actually don't think it's wrong, which is why I asked what happened in the end in that case.

Although for AET/CET purposes they are supposed to use gross earnings, for the rule about ending transitional protection they are supposed to use net earnings.

The decision in that case was only wrong if even in the first AP of the award the claimant had made pension contributions which brought their earned income below the AET level.

The claimant had earnings above the AET in the first AP, and then below the AET in the subsequent 3 APs once their RTI earnings had been adjusted to take into account their reported SIPP contributions.

Interestingly, the system detected the drop in earnings and automatically removed the Transitional Protection, including the capital disregard which allowed the system to NIL the claim due to capital exceeding £16K (the statement shows the individual UC element entitlements but shows a deduction due to capital of the full amount of the UC award thus giving a £0 award). The system then generated a claim closure action for the Case Manager to close the claim due to capital over £16k, so the whole process was pretty automated.

But at the start of this thread it is suggested that earnings for AET assessment are those before any sipp contributions so how would the AET earnings be based on income after SIPP deduction?

Assessment of what? This thread was discussing assessment of which work group (regime) a claimant would be placed in, and for that assessment it is based on gross earnings (before pension conts)

I sidetracked the discussion into the conditions under which Transitional Protection would end (earnings fall below the AET for 3 APs), which is apparently based on net earnings, hence after pension conts are taken into consideration. Apologies if this caused confusion - heck, I'm confused by it!

Assessment of earnings for AET.

You have mentioned a case where net (post SIPP) earning fell below AET but I thought 'we' had decided that AET assessment was based on gross earnings and thus why would net earnings falling below AET impact on a claim?

Agree re confusing!

Yamor

I think I've contributed to the confusion with my suggestion that for the ending of TP it depends on net earnings.

I do stand by that from a legal perspective, but I think that the DWP computer will simply use the same figure as that which is used to determine whether a claimant has earnings above the AET, and that is the "Taxable pay" figure, which is gross pay, LESS pension deductions for a NPA scheme, LESS payroll giving.

As such, @michaels's question above about why the SIPP deduction caused TP to end is a valid one. I think the answer is what @NedS suggested earlier as well, that when UC eventually agreed to deduct the SIPP contributions, the agent who implemented it did it by reducing the "Taxable pay" figure, causing TP to end as an unintended consequence.

alchemist777

Useful information. Simply substitute the old AET threshold figures for the new.


''The AET is set at both an individual and a household level based on gross
earnings (earnings before any deductions)....

Claimants with individual or household earnings above the AET, but whose
earnings are not above the relevant individual or household CET, are subject to
the Light Touch regime.''

https://data.parliament.uk/DepositedPapers/Files/DEP2023-0791/003.Administrative_and_Conditionality_EarningsV13.0.pdf

Yamor

I have been informed that DWP have agreed internally that NPA scheme deductions should be added back to the "taxable earnings" figure for AET/CET purposes. They are aware that the system does not currently do this (thereby causing some claimants to be assigned to the wrong conditionality regime).

A fix is apparently being worked on to correct this, and is currently in testing at the moment.

This won't help for the past however, so if anyone has been hit with a sanction because they've been placed in the wrong conditionality group, I would urge them to submit an MR/appeal.

(Even if it has been longer than a month, or even 13 months, since the decision to apply a sanction, still appeal, as it would appear to be a clear case of official error, so the normal deadlines don't apply.)

kaMelo

It's good to know it was at least on their radar and common sense may finally prevail.

NedS

Thank you for the update @Yamor, that's really good to know.