Whole salary into pension

prowla

This is a hypothetical, but if you salary sacrifice down to minimum wage, can you then claim benefits?

retiringin26

https://forums.moneysavingexpert.com/discussion/comment/82073343#Comment_82073343

You might need to test your payroll cluelessness: in a former role, as a salaried member of staff, the 'floor' for my sal sac was determined by the number of working days in the month. So it wasn't a fixed amount, as that varied from 20 to 23 during the course of a year. Therefore quite a variation for me terms of what I could put in.

Fortunately my pension provider and employer was able to flex the sal-sac deduction on a month by month basis. Which was good.

So you might need to ask again what their calculation basis will be.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82074807#Comment_82074807

Not hypothetical at all - e.g. a lot of people use salary sacrifice to ensure they can claim Child Benefit.

Having lower gross pay could also increase eligibility/amount of means-tested benefits such as UC.

hugheskevi

https://forums.moneysavingexpert.com/discussion/comment/82074807#Comment_82074807

In theory, yes, but the big hurdles will be whether you are entitled to anything even at minimum wage, and capital. Capital over £6,000 reduces the award, and over £16,000 will disqualify entirely. The definition of capital is quite wide-ranging (and in particular includes stocks and shares ISAs). Unless there are things like disability or children that can increase Universal Credit entitlement, the entitlement may well be zero.

Someone with a decent income who salary sacrifices to minimum wage is likely to struggle to maintain lifestyle for long as they will have to have low capital. I guess the only group that might manage this for a while would be someone between minimum pension age and State Pension age who could have all their money in a pension which until drawn does not count as capital.

Such a person could reduce savings to £6,000 and then salary sacrifice to minimum levels then maybe a use borrowing on 0% credit cards to eek out how long they can go without drawing more income or pension.

It was something I considered, but could never see how I could come close to making it work, and far too much trouble for little gain even if a way could be conceived. If wanting benefits, PIP and the disability route would be the better way forward, probably via the mental health route. That would be outright fraud for me however, so I didn't pursue that route either.

prowla

https://forums.moneysavingexpert.com/discussion/comment/82074946#Comment_82074946

Actually, I do know someone who does that, plus child care.

In the past my wife gave up working because it was costing us more in child care fees than she earned.

michaels

https://forums.moneysavingexpert.com/discussion/comment/82074807#Comment_82074807

Used to work beautifully in tax credit days when savings were treated differently but then if migrated to UC you get a one year window then excess savings make it difficult. However if retired you could use tfls to live off whilst keeping any taxable drawdown below the taper threshold.

Cobbler_tone

Although you will better off working in most situations, this highlights the need for benefits reform. At some point self respect comes into it too.

Being tax efficient is a different conversation.