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

Dazed_and_C0nfused

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. 

The main LGPS is not salary sacrifice.

It uses the net pay method i.e. your monthly earnings might be £920 but your income for tax purposes is only £870 as the pension contributions are deducted before tax is calculated.

Your income for NI purposes is still £920.

DWP staff should understand this as their own pension scheme is a net pay one!

8dayweek

Isn’t the issue that the pension is excluded from tax and therefore not counted as earnings? 

See H3108 - https://assets.publishing.service.gov.uk/media/650335ee702634001389b8f9/admh3.pdf

So earnings for UC (and HMRC) are the post-pension amount only?

Dazed_and_C0nfused

Calculating the amount of earnings

H3170 When taking into account employed earnings (and the benefts treated as earnings) in respect of an assessment period, the DM should allow a deduction for

1. the total relievable pension contributions made in that period and

2. any amounts of

2.1 income tax and

2.2 class 1 contributions

that have been deducted or paid in that assessment period and

3. any amounts withheld as donations to charity in a scheme approved by HMRC in that assessment

period

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.

8dayweek

Is pension provision that is exempt from taxation a “relievable” pension contribution?

Does number 2 apply here?

https://www.lexisnexis.co.uk/legal/glossary/relievable-pension-contribution#:~:text=What%20does%20Relievable%20pension%20contribution,of%20the%20following%20exceptions%20applies.

I’m thinking there’s a distinction between a relievable pension contribution vs. pension provision that is exempt from taxation? 

justwhat

Spoonie_Turtle said:

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.

I made the assumption the OP was working over the hourly threshold(35hrs?) and would be on NMW or higher.

vex13

Thanks to KaMelo and others that replied on the other topic. I'll just continue here as it's the most recently active.

Dazed_and_C0nfused said:

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.

This seems to be the issue. The UC system uses gross taxable earnings so the contributions deducted prior to tax are not used towards the AET. 

8dayweek said:

Is pension provision that is exempt from taxation a “relievable” pension contribution?

Does number 2 apply here?

I’m thinking there’s a distinction between a relievable pension contribution vs. pension provision that is exempt from taxation? 

Is this what the DWP are saying? 

Reg 99 (6)
the claimant has monthly earnings (excluding any that are not employed earnings) that are equal to, or more than, the amount that a person would be paid at the hourly rate set out in regulation 4 of the National Minimum Wage Regulations for 18 hours per week, converted to a monthly amount by multiplying by 52 and dividing by 12; or

Reg 99 (6A)
In paragraph (6) “employed earnings” has the meaning in regulation 55.

Reg 55
(2) Employed earnings comprise any amounts that are general earnings, as defined in section 7(3) of ITEPA, but excluding—
(a)amounts that are treated as earnings under Chapters 2 to 11 of Part 3 of ITEPA (the benefits code); and
(b)amounts that are exempt from income tax under Part 4 of ITEPA.

This tax legislation is too confusing for me to understand.

Are pension contributions made through the NET pay arrangement (prior to tax) excluded as being considered employed earnings somehow based on this?