Universal Credit won't deduct SIPP contributions

kaMelo

michaels said:

kaMelo said:

michaels said:

Meknaasi said:

I've been in contact with UC regarding this since Jan 24, and it's still not resolved, after 9 months UC accepted that my SIPP contributions can be deducted, but they refused my wife's contribution as she is not in employment, and for the same reason they refused Junior Sipp Contributions.

I wrote to the the DWP minister who sent a letter confirming that Spousal and Dependent contributions should also be deducted from 'earnings' used to calculate UC. Now I sent the letter (excerpt below). I sent UC this letter, now it's a waiting game to see if they accept their boss' ruling.

"In calculating Universal Credit, the Department will deduct from a claimant’s ‘general earnings or benefits’ from employment any ‘relievable pension contributions made by the person as an individual. This is covered by regulation 55(5)(a) of the Universal Credit Regulations 2013.

The term ‘relievable pension contributions’ is defined by reference to section 188 of the Finance Act 2004. Section 188(2) of the Finance Act ties the concept of a ‘relievable pension contribution’ to a particular individual and says that the term means ‘contributions by or on behalf of the individual’.

the relievable pension contributions that Mr XXXXX makes to the registered SIPPs, for his own benefit but also on behalf of his family members, can be deducted for the purpose of his Universal Credit award."

- Rt Hon Sir Stephen Timms MP

Minister of State for Social Security and Disability

That is interesting, I had not realised that it was possible to 'net off' pension contributions for other family members against household income for UC.  However given how hard it is to get them to accept and process even personal contributions I am not at all surprised you are struggling with family member contributions!  My DW earns under 3.6k so we were only plannign on declaring the value of her earnings as sipp contribution for UC whilst we will make a contribution grossed up to 3.6k.  Perhaps we should try to go for the whole 2880 against household income instead?

It's not possible in the way the way @Meknaasi wants. All that happens, or should happen, is that for UC purposes the claimant's income to reduced by the amount of relievable contributions.

His earnings would reduce by the amount he put into his pension however his wife has no earnings to reduce and his children are not relevant in calculating household income.

Therefore any contribution made to his wife or children's pensions have no effect on the UC calculation as they don't reduce any household income

In your case your wife has earnings, so should be reduced by the amount of contribution but her earnings can only reduce to zero, they can't have negative earnings.

That is what I thought but what @Meknaasi suggests is that because the legislation simply refers to 'relievable pension contributions' being deducted from the contributor's income for the UC assessment, that 'relievable pension contributions' made by me, even if they are into the pension of others, should still count under the legislation against my income.... 

They are misunderstanding what effect pension contributions have in calculating how much UC someone qualifies for. Contributing income into a pension does not in and of itself give rise to any increase in UC, it just reduces a claimant's earned income by an equivalent amount. The deduction because of earnings is therefore smaller and this is why someone's UC amount may increase.

If someone has nil earnings pension contributions in their name has no effect as their earnings cannot reduce below zero. Same with children, any earnings they may have are irrelevant for UC as they are not counted in any calculation.

michaels

kaMelo said:

michaels said:

kaMelo said:

michaels said:

Meknaasi said:

I've been in contact with UC regarding this since Jan 24, and it's still not resolved, after 9 months UC accepted that my SIPP contributions can be deducted, but they refused my wife's contribution as she is not in employment, and for the same reason they refused Junior Sipp Contributions.

I wrote to the the DWP minister who sent a letter confirming that Spousal and Dependent contributions should also be deducted from 'earnings' used to calculate UC. Now I sent the letter (excerpt below). I sent UC this letter, now it's a waiting game to see if they accept their boss' ruling.

"In calculating Universal Credit, the Department will deduct from a claimant’s ‘general earnings or benefits’ from employment any ‘relievable pension contributions made by the person as an individual. This is covered by regulation 55(5)(a) of the Universal Credit Regulations 2013.

The term ‘relievable pension contributions’ is defined by reference to section 188 of the Finance Act 2004. Section 188(2) of the Finance Act ties the concept of a ‘relievable pension contribution’ to a particular individual and says that the term means ‘contributions by or on behalf of the individual’.

the relievable pension contributions that Mr XXXXX makes to the registered SIPPs, for his own benefit but also on behalf of his family members, can be deducted for the purpose of his Universal Credit award."

- Rt Hon Sir Stephen Timms MP

Minister of State for Social Security and Disability

That is interesting, I had not realised that it was possible to 'net off' pension contributions for other family members against household income for UC.  However given how hard it is to get them to accept and process even personal contributions I am not at all surprised you are struggling with family member contributions!  My DW earns under 3.6k so we were only plannign on declaring the value of her earnings as sipp contribution for UC whilst we will make a contribution grossed up to 3.6k.  Perhaps we should try to go for the whole 2880 against household income instead?

It's not possible in the way the way @Meknaasi wants. All that happens, or should happen, is that for UC purposes the claimant's income to reduced by the amount of relievable contributions.

His earnings would reduce by the amount he put into his pension however his wife has no earnings to reduce and his children are not relevant in calculating household income.

Therefore any contribution made to his wife or children's pensions have no effect on the UC calculation as they don't reduce any household income

In your case your wife has earnings, so should be reduced by the amount of contribution but her earnings can only reduce to zero, they can't have negative earnings.

That is what I thought but what @Meknaasi suggests is that because the legislation simply refers to 'relievable pension contributions' being deducted from the contributor's income for the UC assessment, that 'relievable pension contributions' made by me, even if they are into the pension of others, should still count under the legislation against my income.... 

They are misunderstanding what effect pension contributions have in calculating how much UC someone qualifies for. Contributing income into a pension does not in and of itself give rise to any increase in UC, it just reduces a claimant's earned income by an equivalent amount. The deduction because of earnings is therefore smaller and this is why someone's UC amount may increase.

If someone has nil earnings pension contributions in their name has no effect as their earnings cannot reduce below zero. Same with children, any earnings they may have are irrelevant for UC as they are not counted in any calculation.

But I think the suggestion is that pension contributions made by me in my DWs name should be deducted from my income (not DWs) because I made them out of my income - I think.

Grumpy_chap

michaels said:

But I think the suggestion is that pension contributions made by me in my DWs name should be deducted from my income (not DWs) because I made them out of my income - I think.

AIUI, pension contributions to an individual's pension can only be made by the individual or by the individual's employer.  I understand that pension rules do not allow anyone else to make the contributions - not the individual's spouse, parent, rich guardian angel, no-one.

Consequently, Mr Michaels would need to gift the money (£2,880) to his wife.  She can then chose to make a pension contribution (which will be grossed up to £3,600) or she could use the money to buy a handbag or some shoes or whatever.

I know with making contributions to my wife's pension (she is not working), the pension company were very particular about this.  I had to transfer the money to my wife's account and then she had to make the pension contributions.

This would mean that Mr Michaels cannot have the pension contributions to his wife's pension deducted from his earnings as he has not made the pension contributions.  All he has done is gifted his wife the money.

This is my understanding - I am happy to be corrected.

kaMelo

michaels said:

kaMelo said:

michaels said:

kaMelo said:

michaels said:

Meknaasi said:

I've been in contact with UC regarding this since Jan 24, and it's still not resolved, after 9 months UC accepted that my SIPP contributions can be deducted, but they refused my wife's contribution as she is not in employment, and for the same reason they refused Junior Sipp Contributions.

I wrote to the the DWP minister who sent a letter confirming that Spousal and Dependent contributions should also be deducted from 'earnings' used to calculate UC. Now I sent the letter (excerpt below). I sent UC this letter, now it's a waiting game to see if they accept their boss' ruling.

"In calculating Universal Credit, the Department will deduct from a claimant’s ‘general earnings or benefits’ from employment any ‘relievable pension contributions made by the person as an individual. This is covered by regulation 55(5)(a) of the Universal Credit Regulations 2013.

The term ‘relievable pension contributions’ is defined by reference to section 188 of the Finance Act 2004. Section 188(2) of the Finance Act ties the concept of a ‘relievable pension contribution’ to a particular individual and says that the term means ‘contributions by or on behalf of the individual’.

the relievable pension contributions that Mr XXXXX makes to the registered SIPPs, for his own benefit but also on behalf of his family members, can be deducted for the purpose of his Universal Credit award."

- Rt Hon Sir Stephen Timms MP

Minister of State for Social Security and Disability

That is interesting, I had not realised that it was possible to 'net off' pension contributions for other family members against household income for UC.  However given how hard it is to get them to accept and process even personal contributions I am not at all surprised you are struggling with family member contributions!  My DW earns under 3.6k so we were only plannign on declaring the value of her earnings as sipp contribution for UC whilst we will make a contribution grossed up to 3.6k.  Perhaps we should try to go for the whole 2880 against household income instead?

It's not possible in the way the way @Meknaasi wants. All that happens, or should happen, is that for UC purposes the claimant's income to reduced by the amount of relievable contributions.

His earnings would reduce by the amount he put into his pension however his wife has no earnings to reduce and his children are not relevant in calculating household income.

Therefore any contribution made to his wife or children's pensions have no effect on the UC calculation as they don't reduce any household income

In your case your wife has earnings, so should be reduced by the amount of contribution but her earnings can only reduce to zero, they can't have negative earnings.

That is what I thought but what @Meknaasi suggests is that because the legislation simply refers to 'relievable pension contributions' being deducted from the contributor's income for the UC assessment, that 'relievable pension contributions' made by me, even if they are into the pension of others, should still count under the legislation against my income.... 

They are misunderstanding what effect pension contributions have in calculating how much UC someone qualifies for. Contributing income into a pension does not in and of itself give rise to any increase in UC, it just reduces a claimant's earned income by an equivalent amount. The deduction because of earnings is therefore smaller and this is why someone's UC amount may increase.

If someone has nil earnings pension contributions in their name has no effect as their earnings cannot reduce below zero. Same with children, any earnings they may have are irrelevant for UC as they are not counted in any calculation.

But I think the suggestion is that pension contributions made by me in my DWs name should be deducted from my income (not DWs) because I made them out of my income - I think.

 The only thing the DWP are interested in is how much a claimaint deposits into their own pension, any earnings will be reduced by an equal amount (if they have earnings to reduce)

If someone could deposit money into someone else's pension and get a corresponding reduction on their own earnings for UC calculations then it would be wide open to abuse.

Yamor

kaMelo said:

michaels said:

kaMelo said:

michaels said:

kaMelo said:

michaels said:

Meknaasi said:

I've been in contact with UC regarding this since Jan 24, and it's still not resolved, after 9 months UC accepted that my SIPP contributions can be deducted, but they refused my wife's contribution as she is not in employment, and for the same reason they refused Junior Sipp Contributions.

I wrote to the the DWP minister who sent a letter confirming that Spousal and Dependent contributions should also be deducted from 'earnings' used to calculate UC. Now I sent the letter (excerpt below). I sent UC this letter, now it's a waiting game to see if they accept their boss' ruling.

"In calculating Universal Credit, the Department will deduct from a claimant’s ‘general earnings or benefits’ from employment any ‘relievable pension contributions made by the person as an individual. This is covered by regulation 55(5)(a) of the Universal Credit Regulations 2013.

The term ‘relievable pension contributions’ is defined by reference to section 188 of the Finance Act 2004. Section 188(2) of the Finance Act ties the concept of a ‘relievable pension contribution’ to a particular individual and says that the term means ‘contributions by or on behalf of the individual’.

the relievable pension contributions that Mr XXXXX makes to the registered SIPPs, for his own benefit but also on behalf of his family members, can be deducted for the purpose of his Universal Credit award."

- Rt Hon Sir Stephen Timms MP

Minister of State for Social Security and Disability

That is interesting, I had not realised that it was possible to 'net off' pension contributions for other family members against household income for UC.  However given how hard it is to get them to accept and process even personal contributions I am not at all surprised you are struggling with family member contributions!  My DW earns under 3.6k so we were only plannign on declaring the value of her earnings as sipp contribution for UC whilst we will make a contribution grossed up to 3.6k.  Perhaps we should try to go for the whole 2880 against household income instead?

It's not possible in the way the way @Meknaasi wants. All that happens, or should happen, is that for UC purposes the claimant's income to reduced by the amount of relievable contributions.

His earnings would reduce by the amount he put into his pension however his wife has no earnings to reduce and his children are not relevant in calculating household income.

Therefore any contribution made to his wife or children's pensions have no effect on the UC calculation as they don't reduce any household income

In your case your wife has earnings, so should be reduced by the amount of contribution but her earnings can only reduce to zero, they can't have negative earnings.

That is what I thought but what @Meknaasi suggests is that because the legislation simply refers to 'relievable pension contributions' being deducted from the contributor's income for the UC assessment, that 'relievable pension contributions' made by me, even if they are into the pension of others, should still count under the legislation against my income.... 

They are misunderstanding what effect pension contributions have in calculating how much UC someone qualifies for. Contributing income into a pension does not in and of itself give rise to any increase in UC, it just reduces a claimant's earned income by an equivalent amount. The deduction because of earnings is therefore smaller and this is why someone's UC amount may increase.

If someone has nil earnings pension contributions in their name has no effect as their earnings cannot reduce below zero. Same with children, any earnings they may have are irrelevant for UC as they are not counted in any calculation.

But I think the suggestion is that pension contributions made by me in my DWs name should be deducted from my income (not DWs) because I made them out of my income - I think.

 The only thing the DWP are interested in is how much a claimaint deposits into their own pension, any earnings will be reduced by an equal amount (if they have earnings to reduce)

If someone could deposit money into someone else's pension and get a corresponding reduction on their own earnings for UC calculations then it would be wide open to abuse.

But the legislation does seem to allow it, and the letter from the Minister earlier in the thread seems to corroborate that.
I would be comfortable defending such a case in front of a Tribunal.

michaels

Grumpy_chap said:

michaels said:

But I think the suggestion is that pension contributions made by me in my DWs name should be deducted from my income (not DWs) because I made them out of my income - I think.

AIUI, pension contributions to an individual's pension can only be made by the individual or by the individual's employer.  I understand that pension rules do not allow anyone else to make the contributions - not the individual's spouse, parent, rich guardian angel, no-one.

Consequently, Mr Michaels would need to gift the money (£2,880) to his wife.  She can then chose to make a pension contribution (which will be grossed up to £3,600) or she could use the money to buy a handbag or some shoes or whatever.

I know with making contributions to my wife's pension (she is not working), the pension company were very particular about this.  I had to transfer the money to my wife's account and then she had to make the pension contributions.

This would mean that Mr Michaels cannot have the pension contributions to his wife's pension deducted from his earnings as he has not made the pension contributions.  All he has done is gifted his wife the money.

This is my understanding - I am happy to be corrected.

Apparently this is not the case, 'third party contributions' are permitted but in general the tax relief relates to the person who benefits not the person making the contribution.  The OP however seems to be arguing that the wording of the UC regulations means that 'all relievable pension contributions', including those made to a third party (as there is no mention that the contributions have to be to the pension of the person making the contribution - only that they are subject to tax relief), should be deducted from the contribution maker's income when working out UC entitlement.

Grumpy_chap

michaels said:

Apparently this is not the case, 'third party contributions' are permitted but in general the tax relief relates to the person who benefits not the person making the contribution.  The OP however seems to be arguing that the wording of the UC regulations means that 'all relievable pension contributions', including those made to a third party (as there is no mention that the contributions have to be to the pension of the person making the contribution - only that they are subject to tax relief), should be deducted from the contribution maker's income when working out UC entitlement.

OK with regard to "third party contributions".
It may be that not all pension schemes will accept contributions in that manner.  Scheme rules can be more restrictive than legislation.

It is a bit odd - all pension relief is related to the individual.  Annual Allowance - restriction to earned income - lifetime allowance (now tax free lump sum cap) - contribution limits (£2,880 = £3,600) when there is no relevant UK earnings.

Income tax is also related to the individual's income and not impacted by others - save for Marriage Allowance.

UC, however, is determined on the basis of household income.

I wonder whether the letter that was copied above had an error in it?

"In calculating Universal Credit, the Department will deduct from a claimant’s ‘general earnings or benefits’ from employment any ‘relievable pension contributions made by the person as an individual. This is covered by regulation 55(5)(a) of the Universal Credit Regulations 2013.

The term ‘relievable pension contributions’ is defined by reference to section 188 of the Finance Act 2004. Section 188(2) of the Finance Act ties the concept of a ‘relievable pension contribution’ to a particular individual and says that the term means ‘contributions by or on behalf of the individual’.

the relievable pension contributions that Mr XXXXX makes to the registered SIPPs, for his own benefit but also on behalf of his family members, can be deducted for the purpose of his Universal Credit award."

- Rt Hon Sir Stephen Timms MP

Minister of State for Social Security and Disability

PARA 1 - refers to relievable pension contributions made by the person as an individual.  (Not made by the person on behalf of another.)
PARA 2 - also links the relievable contributions to the individual.
PARA 3 - is seemingly not consistent with PARA 1 & 2 as this extends the relievable pension contributions to the benefit of the individual plus family members.

Does PARA 3 mean contributions to a wife's pension?
Does PARA 3 mean contributions to own pension but it will benefit the wife when drawn down in retirement?
To how many does PARA 3 extend under "on behalf of family members"?  Children?  Grandchildren?  Brother / Sister?  Niece / Nephew?

That PARA 3 does seem as though it could be potentially open to abuse.  It does not seem consistent with the letter as a whole.  It would need someone more knowledgeable than I on the very precise wording of the legislation.  It may need to be tested in Court.

I don't think we should place too much on the fact this is a letter signed off by a Minister - the letter will have been prepared by a member of the Departmental staff and only signed by the Minister and will not make a difference to the actual law as it stands.  (Eventually, if tested through the Court and the legislation is found to be imprecise, it may lead to an amendment.)

Can the letter be read differently to how I have read it such that PARA 3 is consistent with PARA 1 & PARA 2?

I am mindful of not debating politics or policy, but simply the understanding of the letter from the Minister and how that can be interpreted correctly.
It will potentially make a difference to several Forum members if the additional pension contributions (£2,880 - £3,600) can be made on behalf of spouse and deducted from the income assessed for UC.
(Added to the practicality as reported in these forums of DWP staff struggling with deducting individual's own contributions to own pension.)

Welcome comments and thoughts from other as to how the letter reads.

EnPointe

NewBe said:

Thank you for all the comments. From the looks of things, I'm not the only one struggling with DWP's definition of a pension scheme.

Just to clarify, my wife works as a care worker. Her employer does not contribute to the company pension scheme. We decided a SIPP would be better as it gives us more control of investments and retirement options. During tax credits we had no issues deducting the SIPP contributions from overall income.

I do have an occupational pension which is automatically deducted from the RTI figures sent to UC. It's contributions to the SIPP, a 'registered pension scheme', that we are having problems with.

if you assertion with  regard to your wife's employer is correct ,then the employer is in breach of the law  and the DWP and HMRC would be VERY interested 

https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

sheramber

EnPointe said:

NewBe said:

Thank you for all the comments. From the looks of things, I'm not the only one struggling with DWP's definition of a pension scheme.

Just to clarify, my wife works as a care worker. Her employer does not contribute to the company pension scheme. We decided a SIPP would be better as it gives us more control of investments and retirement options. During tax credits we had no issues deducting the SIPP contributions from overall income.

I do have an occupational pension which is automatically deducted from the RTI figures sent to UC. It's contributions to the SIPP, a 'registered pension scheme', that we are having problems with.

if you assertion with  regard to your wife's employer is correct ,then the employer is in breach of the law  and the DWP and HMRC would be VERY interested 

https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

Only if the employee meets the earnings limits and has not opted out of the workplace pension.

The OP said they decided a SIPP was a better option, so has his wife opted out?

Since both  incomes count for UC   should/ could his wife’s pension payments not be deducted from her earnings?

kaMelo

Grumpy_chap said:

michaels said:

Apparently this is not the case, 'third party contributions' are permitted but in general the tax relief relates to the person who benefits not the person making the contribution.  The OP however seems to be arguing that the wording of the UC regulations means that 'all relievable pension contributions', including those made to a third party (as there is no mention that the contributions have to be to the pension of the person making the contribution - only that they are subject to tax relief), should be deducted from the contribution maker's income when working out UC entitlement.

OK with regard to "third party contributions".
It may be that not all pension schemes will accept contributions in that manner.  Scheme rules can be more restrictive than legislation.

It is a bit odd - all pension relief is related to the individual.  Annual Allowance - restriction to earned income - lifetime allowance (now tax free lump sum cap) - contribution limits (£2,880 = £3,600) when there is no relevant UK earnings.

Income tax is also related to the individual's income and not impacted by others - save for Marriage Allowance.

UC, however, is determined on the basis of household income.

I wonder whether the letter that was copied above had an error in it?

"In calculating Universal Credit, the Department will deduct from a claimant’s ‘general earnings or benefits’ from employment any ‘relievable pension contributions made by the person as an individual. This is covered by regulation 55(5)(a) of the Universal Credit Regulations 2013.

The term ‘relievable pension contributions’ is defined by reference to section 188 of the Finance Act 2004. Section 188(2) of the Finance Act ties the concept of a ‘relievable pension contribution’ to a particular individual and says that the term means ‘contributions by or on behalf of the individual’.

the relievable pension contributions that Mr XXXXX makes to the registered SIPPs, for his own benefit but also on behalf of his family members, can be deducted for the purpose of his Universal Credit award."

- Rt Hon Sir Stephen Timms MP

Minister of State for Social Security and Disability

PARA 1 - refers to relievable pension contributions made by the person as an individual.  (Not made by the person on behalf of another.)
PARA 2 - also links the relievable contributions to the individual.
PARA 3 - is seemingly not consistent with PARA 1 & 2 as this extends the relievable pension contributions to the benefit of the individual plus family members.

Does PARA 3 mean contributions to a wife's pension?
Does PARA 3 mean contributions to own pension but it will benefit the wife when drawn down in retirement?
To how many does PARA 3 extend under "on behalf of family members"?  Children?  Grandchildren?  Brother / Sister?  Niece / Nephew?

That PARA 3 does seem as though it could be potentially open to abuse.  It does not seem consistent with the letter as a whole.  It would need someone more knowledgeable than I on the very precise wording of the legislation.  It may need to be tested in Court.

I don't think we should place too much on the fact this is a letter signed off by a Minister - the letter will have been prepared by a member of the Departmental staff and only signed by the Minister and will not make a difference to the actual law as it stands.  (Eventually, if tested through the Court and the legislation is found to be imprecise, it may lead to an amendment.)

Can the letter be read differently to how I have read it such that PARA 3 is consistent with PARA 1 & PARA 2?

I am mindful of not debating politics or policy, but simply the understanding of the letter from the Minister and how that can be interpreted correctly.
It will potentially make a difference to several Forum members if the additional pension contributions (£2,880 - £3,600) can be made on behalf of spouse and deducted from the income assessed for UC.
(Added to the practicality as reported in these forums of DWP staff struggling with deducting individual's own contributions to own pension.)

Welcome comments and thoughts from other as to how the letter reads.

You sum up things pretty accurately, Paragraph 3 is inconsistent as it is something he thinks whereas paragraph 1 and 2 are direct copy and paste from legislation. Nowhere in either piece of legislation does it refer to "on behalf of family members" which is so ambiguous as to be useless.  Indeed the finance act is very specific in defining relievable pension contributions as "contributions by or on behalf of the individual under the pension scheme" 

Yamor said:

But the legislation does seem to allow it, and the letter from the Minister earlier in the thread seems to corroborate that.
I would be comfortable defending such a case in front of a Tribunal.

I'm intrigued as to why you think that?  
I can understand the argument that, as UC is a joint claim and qualification is calculated on joint earnings then those joint earnings should be reduced by any contributions made into either claimants pension scheme (irrespective of whether they have individual earnings). Even though UC is littered with joint claimants being assessed individually I think that may be a reasonable argument.  Other than that I'm struggling to see where you could argue the case.