Student Loans: Household income, SIPP contributions, and CYI = Madness...

spacemongoose

Our daughter started university this year, and only received about half the maintenance loan, based on our household income from two years ago (23/24 tax year).

If household income drops by at least 15%, then you can request that the loan level be re-evaluated based on the current year's income, using a 'CYI' (Current Year Income assessment form).  Sounds reasonable, though why does it need to be at least 15%?

SIPP contributions are deductable when calculating effective household income for the purposes of determining the level of loan available. As they should be, since money put into SIPPs is money that is not available.

This year, we have paid substantially more into personal SIPPs (I hope to retire in the next few years, and so am now putting as much into my SIPP as I can.)

So, I filled in the CYI which shows that after SIPP deductions, household income has dropped by more than the 15% threshold required for re-evaluation.

BUT, Student Finance refuse to process the form...
The short version appears to be that if they were to process the form, then the loan would indeed be increased due to the reduction in net household income.
But they won't process the form because gross household income has not dropped by 15%.

So even though loan amount is calculated based on net income, they refuse to look at current year's net income because gross income hasn't dropped.

This is worthy of Douglas Adams.

Is this really how it works?  Or are they wrongly rejecting this?

silvercar

@spacemongoose I’ll move this thread to the student board.

some experts drop in over there. Maybe @Ed-1 knows??

Ed-1

spacemongoose said:

Our daughter started university this year, and only received about half the maintenance loan, based on our household income from two years ago (23/24 tax year).

If household income drops by at least 15%, then you can request that the loan level be re-evaluated based on the current year's income, using a 'CYI' (Current Year Income assessment form).  Sounds reasonable, though why does it need to be at least 15%?

SIPP contributions are deductable when calculating effective household income for the purposes of determining the level of loan available. As they should be, since money put into SIPPs is money that is not available.

This year, we have paid substantially more into personal SIPPs (I hope to retire in the next few years, and so am now putting as much into my SIPP as I can.)

So, I filled in the CYI which shows that after SIPP deductions, household income has dropped by more than the 15% threshold required for re-evaluation.

BUT, Student Finance refuse to process the form...
The short version appears to be that if they were to process the form, then the loan would indeed be increased due to the reduction in net household income.
But they won't process the form because gross household income has not dropped by 15%.

So even though loan amount is calculated based on net income, they refuse to look at current year's net income because gross income hasn't dropped.

This is worthy of Douglas Adams.

Is this really how it works?  Or are they wrongly rejecting this?

https://www.legislation.gov.uk/uksi/2011/1986/schedule/4

"residual income" means taxable income after the application of paragraph 4 (in the case of an eligible student), paragraph 5 (in the case of an eligible student's parent), paragraph 6 (in the case of an eligible student's partner) or paragraph 7 (in the case of the partner of a new eligible student's parent) and income referred to in sub-paragraph (2) received net of income tax

Calculation of parent's residual income

5.(2) For the purposes of determining the residual income of an eligible student’s parent (“A” in this paragraph) there is deducted from the taxable income of A the aggregate of any amounts falling within any of the following sub-paragraphs (unless already deducted in determining a person’s taxable income)—

(a) the gross amount of any premium or sum relating to a pension (not being a premium payable under a policy of life assurance) in respect of which relief is given under section 188 of the Finance Act 2004, or where the income is computed for the purposes of the income tax legislation of a Member State, the gross amount of any such premium in respect of which relief would be given if that legislation made provision equivalent to the Income Tax Acts;

(b) in any case where income is computed for the purposes of the Income Tax Acts by virtue of sub-paragraph (7) any sums equivalent to the deduction mentioned in paragraph (a) of this sub-paragraph, provided that any sums so deducted do not exceed the deductions which would be made if the whole of A's income were in fact income for the purposes of the Income Tax Acts;

(c) where A is a parent student or A holds a statutory award, £1,130.

(3) The Secretary of State may, for the purpose of enabling the eligible student to attend the course without hardship, ascertain A’s residual income for the financial year beginning immediately before the relevant year (“the current financial year”) if the Secretary of State is satisfied that—

(b) where the eligible student’s household income is determined by reference to the residual income of both parents, the aggregate of the residual incomes of A and the other parent in the current financial year is likely to be not more than 85% of the sterling value of the aggregate of the residual incomes of A and the other parent in the prior financial year

So it's the residual income that matters.

spacemongoose

Ok, thank you.  So they are wrongly rejecting this.
Thanks for pointing me at the relevant legislation - I'll write them a letter and quote the appropriate bits at them.