AET for UC single person gross pay reduced due to pension contributions

Rachelw99213_

I'm in a situation where I've always earnt over the AET threshold but since the higher figure of 892 was introduced I've been called into the job center for work commitment reviews saying I need to earn more. My salaried gross pay is £921 every month. I pay zero tax and NI. I do pay £50 which is 5.43% into a company LGPS every month. This net pay of £870 now takes me below. What would you do in this situation? Just ask at work to work more hours. Assuming this will increase my pension contributions? Or opt to come out the pension scheme? I'm not great with figures and find this a bit confusing. Thanks for any help in advance. 

peteuk

AET for UC works on your gross pay not your net pay,  it is the amount you take home after certain reductions.  This includes Tax, NI and employee pension.

On the face of things both you and your employer are paying into your pension, and you would have to contact HR to see if you can actually opt out of it.   

Easy option is to see if you can increase your hours or get a second job.

Brie

Blinking heck - don't opt out of the LGPS!!!  It's one of the best.  The fact that you are in it means that your employer is also paying into a pension for you and that's something you shouldn't be made to give up.

But looking at the gov.uk website it seems to say that you are in a situation where you don't have to be looking for more work as you are already about the AET.

Universal Credit and earnings - GOV.UK (www.gov.uk)

You don't say that anyone has questioned this so I would wait to see if anyone questions it.  One would hope that the DWP knows the difference between gross and net earnings. 

edit - oops - yes I see you've been called to a meeting.  Go in with your payslips and show them you are above the limit.  Likely they are looking only at the amount that is going in to your bank account and so don't know that the £50 to the pension isn't visible to them.  

TheShape

I woud expect your gross pay to place you in the Light Touch work group.

Perhaps there is a different reason for this appointment booking.

What date do you usually get paid by your employer and what is your UC Assessment period?

kaMelo

Rachelw99213_ said:

I'm in a situation where I've always earnt over the AET threshold but since the higher figure of 892 was introduced I've been called into the job center for work commitment reviews saying I need to earn more. My salaried gross pay is £921 every month. I pay zero tax and NI. I do pay £50 which is 5.43% into a company LGPS every month. This net pay of £870 now takes me below. What would you do in this situation? Just ask at work to work more hours. Assuming this will increase my pension contributions? Or opt to come out the pension scheme? I'm not great with figures and find this a bit confusing. Thanks for any help in advance. 

There was a similar post on here a few weeks back. The OP in that thread had things resolved eventually.
https://forums.moneysavingexpert.com/discussion/6535256/uc-and-pension-contributions/p1

LGPS, along with other public sector pension schemes, use what is called a net pay arrangement for pension contributions and are taken before tax and NI are deducted. When your earnings are reported via RTI your taxable income (after pension contributions) and your pension contributions are reported in different sections of the RTI report.. It sounds like they are picking up your taxable income but not your pension contributions which is why they think your earnings are below your AET. The only time those earnings wouldn't count would be if you made pension contributions via salary sacrifice. All I would say is to make your case that they are wrong, you are earning over your AET and why.

Whatever you do DO NOT opt out of the LGPS pension scheme. You'd be giving yourself a huge pay cut, losing death in service benefits and will be poorer in retirement.

Rachelw99213_

My pension is salary sacrifice. So are we all agreeing with the job centre that what they are telling me to do is correct and look for more work? 😳

kaMelo

Are you sure about that? LGPS is normally via net pay so I would clarify that point first

If however it is salary sacrifice and the amount you're sacrificing drops you below your AET then yes, you are below your AET. Contributions made via salary sacrifice don't count as it is not you making them, your employer is.

Rachelw99213_

Not if it's not salary sacrifice I believe it's that particular pension that's causing this issue as its taken out before any tax. I could be wrong. I'm totally confused by it all. The job centre said they've never been asked that question before! 😒 I still have to find more work! Which will then reduce my uc surely. 

sheramber

Rachelw99213_ said:

Not if it's not salary sacrifice I believe it's that particular pension that's causing this issue as its taken out before any tax. I could be wrong. I'm totally confused by it all. The job centre said they've never been asked that question before! 😒 I still have to find more work! Which will then reduce my uc surely. 

If your payslip shows gross pay then deducts LGPS  before calculating tax that is not salary sacrifice. 

With salary sacrifice you give up part of your salary - sacrifice- and your employer pays into the pension scheme, not you.

So your gross figure is less. 

LPGS is a net pay arrangement where the payment is deducted before tax is calculated. 

This means you do not pay tax on your pension payments

justwhat

Rachelw99213_ said:

My pension is salary sacrifice. So are we all agreeing with the job centre that what they are telling me to do is correct and look for more work? 😳

It should not matter how the pension is deducted . A copy of the payslip should show hours worked. The claim should be based on hours worked.

Spoonie_Turtle

justwhat said:

Rachelw99213_ said:

My pension is salary sacrifice. So are we all agreeing with the job centre that what they are telling me to do is correct and look for more work? 😳

It should not matter how the pension is deducted . A copy of the payslip should show hours worked. The claim should be based on hours worked.

No, the monetary thresholds are worked out based on hours x NMW, but however many hours you actually work to reach that monetary threshold is completely irrelevant.