UC and Pension Contributions

Grumpy_chap

bored_accountant said:

Partner works 37 hrs earns approximately 25k,

I work 14 hrs pw, earn about 10k

my partner pays 15k annually into her work pension, through AVCs

I pay 6k into my work pension, again through AVCs

kaMelo said:

bored_accountant said:

My partner tells me that we have a 'net pay arrangement ' with LGPS and Prudential who run the LGPS AVC fund 

That is why UC think you are earning less than your AET.

Deductions via net pay arrangements are reported via RTI but under a different section. As they are deducted before tax and NI, they will only report earnings as what is left after those deductions. UC are only picking up the "earnings" section and concluding you are under your AET.

So, I am not an expert on the various ways in which pension contributions can be made, nor on UC.
However, I wonder whether there is a metric linked to NMW that is having an impact here.

PARTNER
37 hours x 52 weeks x £11.44 = £22k.
Earns £25k so greater than NMW.
£15k into pension reduces salary reported to £10k.  Less than NMW.

OP
14 hours x 52 weeks x £11.44 = £8k.
Earns £10k so greater than NMW.
£6k into pension reduces salary reported to £4k.  Less than NMW.

I do know that when pension contributions are made via SS, it is not possible to sacrifice to below NMW.
The 'net pay arrangement' seems to be achieving the same gains with regard to income tax and NI contributions but also facilitating the reduction in pay to below NMW.
I do not really understand how 'net pay' pension contributions function, but I assume the rules allow this to be processed in this way from a pension / salary / NMW perspective.

Could it be, however, that the DM is seeing the reported earnings (£10k - PARTNER plus £4k - OP) and then doing a reverse calculation to number of hours worked (rather than what the PARTNER 37 hours plus OP 14 hours are advising)?
It would not be an unreasonable / unforeseeable rule for UC to link hours worked and earnings to NMW.  Whether the rules cover this scenario in that way I do not know.

This apparent discrepancy between hours worked (as advised by OP + PARTNER) and earnings could very easily have been noted by a DM.  It would be reasonable for the DM to then seek further clarification, at least.

Dazed_and_C0nfused

Unless the op has other income on top of the Carers Allowance I think it's unlikely they will be receiving any income tax saving from these net pay pension contributions.  Either the ones for the normal LGPS scheme or the AVC.

Although that is changing for the current tax year and HMRC will potentially give them a payment of £1,200+ 😳.  Exact amount depends on how much is paid for the normal LGPS scheme.

https://www.gov.uk/government/publications/low-earners-anomaly-pensions-relief-relating-to-net-pay-arrangements

Spoonie_Turtle

Grumpy_chap said:

bored_accountant said:

Partner works 37 hrs earns approximately 25k,

I work 14 hrs pw, earn about 10k

my partner pays 15k annually into her work pension, through AVCs

I pay 6k into my work pension, again through AVCs

kaMelo said:

bored_accountant said:

My partner tells me that we have a 'net pay arrangement ' with LGPS and Prudential who run the LGPS AVC fund 

That is why UC think you are earning less than your AET.

Deductions via net pay arrangements are reported via RTI but under a different section. As they are deducted before tax and NI, they will only report earnings as what is left after those deductions. UC are only picking up the "earnings" section and concluding you are under your AET.

Could it be, however, that the DM is seeing the reported earnings (£10k - PARTNER plus £4k - OP) and then doing a reverse calculation to number of hours worked (rather than what the PARTNER 37 hours plus OP 14 hours are advising)?
It would not be an unreasonable / unforeseeable rule for UC to link hours worked and earnings to NMW.  Whether the rules cover this scenario in that way I do not know.

This apparent discrepancy between hours worked (as advised by OP + PARTNER) and earnings could very easily have been noted by a DM.  It would be reasonable for the DM to then seek further clarification, at least.

I think you're overcomplicating it.

For UC, actual hours worked don't matter, only earnings do.  (That's aside from the fact that using NMW one can only calculate a maximum possible number of hours someone is working, but it could be fewer if their pay is above NMW so any calculation is speculative at best.)

I think the actual problem for the OP is AET is supposed to be gross - IIRC - but the system is going by net instead and placing the partner in a work group accordingly.
OP's earnings don't make a huge difference (unless the couples CET comes into play?  But I've never quite got my head round all that) because OP is a carer and therefore has no work requirements anyway.

bored_accountant

Dazed_and_C0nfused said:

Unless the op has other income on top of the Carers Allowance I think it's unlikely they will be receiving any income tax saving from these net pay pension contributions.  Either the ones for the normal LGPS scheme or the AVC.

Although that is changing for the current tax year and HMRC will potentially give them a payment of £1,200+ 😳.  Exact amount depends on how much is paid for the normal LGPS scheme.

https://www.gov.uk/government/publications/low-earners-anomaly-pensions-relief-relating-to-net-pay-arrangements

Yes, I appreciate this, but reasoning behind paying into pension through this route was that it seemed less hassle than having to upload a pension statement each month, and maybe having to raise MRs every month

bored_accountant

Thank you all for your comments and knowledge, we have another meeting with work coach tomorrow so I will update with any developments.

One final question though, could it be possible that paying more than a certain amount into a pension be regarded as deprivation of income? Would be useful to know ahead of tomorrow's meeting. Thank you.

HillStreetBlues

bored_accountant said:

Thank you all for your comments and knowledge, we have another meeting with work coach tomorrow so I will update with any developments.

One final question though, could it be possible that paying more than a certain amount into a pension be regarded as deprivation of income? Would be useful to know ahead of tomorrow's meeting. Thank you.

No it's not.
It's something some JC don't like or understand. 
EDIT: to make clear this applies to pension & wages.

Grumpy_chap

Spoonie_Turtle said:

I think you're overcomplicating it.

For UC, actual hours worked don't matter, only earnings do.  

Well, my reference to hours worked was linked to the comments by the OP:

bored_accountant said:

My partner has been told she needs to work more hours, even though she works 37 hrs already. We did ask 'how many more hours?' and we're told 'we don't know'

Now my partner has been told she is on the intensive work search program

This is why I suggested a DM may be looking at the earnings, equating that to a low number of hours (at NMW) and then saying to work more hours.
The fact that the amount of UC payable is linked to earnings and not hours may be why the DM has said "don't know" when asked how many hours - one extra hour at a high rate of pay does more than two extra hours at a low rate of pay.

I just noticed that the OP said they recently went through managed migration.  Does that mean they do, or should, benefit from transitional protection in the short term?

justwhat

bored_accountant said:

Thank you all for your comments and knowledge, we have another meeting with work coach tomorrow so I will update with any developments.

One final question though, could it be possible that paying more than a certain amount into a pension be regarded as deprivation of income? Would be useful to know ahead of tomorrow's meeting. Thank you.

no , there is no max pension contribution. We pay 100%  of our income into pension.  Both SE and PAYE.  i could pay more than i earn into my pension there is nothing UC can do about it. (i would not get all the tax back though lol )

Largs

I noticed today someone had written in to one of the papers about moving to UC from Tax Credits and asking about a pension contribution.  Not sure if this will help.....

https://www.thisismoney.co.uk/money/pensions/article-13526097/Im-Universal-Credit-private-pension-payments-taken-account-STEVE-WEBB-replies.html

Spoonie_Turtle

Grumpy_chap said:

Spoonie_Turtle said:

I think you're overcomplicating it.

For UC, actual hours worked don't matter, only earnings do.  

Well, my reference to hours worked was linked to the comments by the OP:

bored_accountant said:

My partner has been told she needs to work more hours, even though she works 37 hrs already. We did ask 'how many more hours?' and we're told 'we don't know'

Now my partner has been told she is on the intensive work search program

This is why I suggested a DM may be looking at the earnings, equating that to a low number of hours (at NMW) and then saying to work more hours.
The fact that the amount of UC payable is linked to earnings and not hours may be why the DM has said "don't know" when asked how many hours - one extra hour at a high rate of pay does more than two extra hours at a low rate of pay.

I just noticed that the OP said they recently went through managed migration.  Does that mean they do, or should, benefit from transitional protection in the short term?

Honestly I think it's just a work coach seeing the system has put her down as needing to work more (to reach the earnings threshold) and has phrased it as 'you need to work more hours', which given she already has a job is probably the most sensible way of advising someone to earn more if they do genuinely need to do that.  The other options would be to find an additional job, or to change altogether to a higher paid one. 

^ Ordinarily, if the system is correct.

Here it's just because the pension contributions have brought the net earnings down and the work coach either doesn't know about the pension contributions, or doesn't understand the details of how the AET is supposed to work.  [And let's be fair, it ought to be reasonable for a work coach to assume the system is putting out the correct information, after 11 years of this benefit existing … ]

Note: I'm assuming here that before pension contributions, OP's partner does in fact meet the AET.  Which I inferred from their comment saying after pension contributions "now we don't meet the AET".


Transitional protection is about whether someone's notional UC award falls below what they were receiving before, and to savings over £16,000.  Not to work search commitments.