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  • FIRST POST
    • Wickers
    • By Wickers 3rd Mar 18, 7:40 AM
    • 33Posts
    • 2Thanks
    Wickers
    Your mum paying into your pension?
    • #1
    • 3rd Mar 18, 7:40 AM
    Your mum paying into your pension? 3rd Mar 18 at 7:40 AM
    Hi,
    If a persons parent wants to gift their son by paying a lump sum into his personal pension would that amount be limited to no more than her son's earnings?

    Thanks
Page 1
    • MallyGirl
    • By MallyGirl 3rd Mar 18, 8:02 AM
    • 2,740 Posts
    • 7,746 Thanks
    MallyGirl
    • #2
    • 3rd Mar 18, 8:02 AM
    • #2
    • 3rd Mar 18, 8:02 AM
    The total going into his pension(s) would be limited to his earnings, including employer contributions, and capped at 40k.
    I think you can actually put more in but it would not qualify for any tax relief so there might be a chunk of tax to pay back which would be messy - not so confident on this bit
    • Wickers
    • By Wickers 3rd Mar 18, 8:13 AM
    • 33 Posts
    • 2 Thanks
    Wickers
    • #3
    • 3rd Mar 18, 8:13 AM
    • #3
    • 3rd Mar 18, 8:13 AM
    Thanks MallyGirl,

    His income is about 20,000 and on tax credits. So assuming his mum made a gift payment into his pension of 15,000 would this affect his tax credits?
    • Clifford_Pope
    • By Clifford_Pope 3rd Mar 18, 8:38 AM
    • 3,616 Posts
    • 3,771 Thanks
    Clifford_Pope
    • #4
    • 3rd Mar 18, 8:38 AM
    • #4
    • 3rd Mar 18, 8:38 AM
    The total going into his pension(s) would be limited to his earnings, including employer contributions, and capped at 40k.
    Originally posted by MallyGirl
    The earnings cap and the allowance cap are different things.

    Employer contributions are not limited to income, but both are limited in total by the contributions cap.
    • Wickers
    • By Wickers 3rd Mar 18, 8:57 AM
    • 33 Posts
    • 2 Thanks
    Wickers
    • #5
    • 3rd Mar 18, 8:57 AM
    • #5
    • 3rd Mar 18, 8:57 AM
    Thanks Clifford_Pope,
    Regarding 'employer contributions' he is self employed.so I take it the most that can be paid into his pension is up to his earnings of 20,000 (gross) ?
    • xylophone
    • By xylophone 3rd Mar 18, 2:19 PM
    • 25,585 Posts
    • 15,115 Thanks
    xylophone
    • #6
    • 3rd Mar 18, 2:19 PM
    • #6
    • 3rd Mar 18, 2:19 PM
    Regarding 'employer contributions' he is self employed.so I take it the most that can be paid into his pension is up to his earnings of 20,000 (gross) ?
    Tax relievable pension contributions and relevant earnings covered in post 10

    http://forums.moneysavingexpert.com/showthread.php?t=5803504


    Re other person paying into scheme see

    https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm041000

    Re post 2 above, http://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/pension-contributions-the-basics/

    Individuals can contribute to any number of pension plans.

    Personal contributions made by an individual are unlimited. However there is a limit on the amount of gross contributions that an individual can pay each year and benefit fully from tax relief.

    Tax relief is restricted to the higher of 3,600 or 100% of relevant UK earnings - subject to the annual allowance.


    His tax credits will not be affected by another person making contributions to his pension scheme.

    Were he himself making such contributions it could be that his pension credits would increase.

    https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

    If a person has relevant earnings of 20,000 per annum, he could pay up to 16,000 in a personal pension plan and receive tax relief of up to 4000.
    Last edited by xylophone; 03-03-2018 at 2:41 PM. Reason: add
    • Wickers
    • By Wickers 3rd Mar 18, 6:15 PM
    • 33 Posts
    • 2 Thanks
    Wickers
    • #7
    • 3rd Mar 18, 6:15 PM
    • #7
    • 3rd Mar 18, 6:15 PM
    Thanks for all that info xylophone. Very useful, I'll pass it on.

    I have just read that a persons pension will be taken into account for universal credits when they reach 55. If I've read it correctly the government will assume what an annuity will make and deduct that sum from the universal credits, so, if a 40,000 pension makes an annuity of 2,000/year then that amount will be deducted from the universal credits payment.
    • WillowCat
    • By WillowCat 3rd Mar 18, 8:34 PM
    • 808 Posts
    • 984 Thanks
    WillowCat
    • #8
    • 3rd Mar 18, 8:34 PM
    • #8
    • 3rd Mar 18, 8:34 PM
    Thanks for all that info xylophone. Very useful, I'll pass it on.

    I have just read that a persons pension will be taken into account for universal credits when they reach 55. If I've read it correctly the government will assume what an annuity will make and deduct that sum from the universal credits, so, if a 40,000 pension makes an annuity of 2,000/year then that amount will be deducted from the universal credits payment.
    Originally posted by Wickers
    Completely wrong.

    Only if you take the pension at 55 will it be taken into consideration, and even then if taken as a series of random capital amounts in drawdown, provided these are less than the 6k savings limit (including existing savings) then they will have no effect.

    The full rules are explained here:

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417473/pension-flexibilities-dwp-benefits.pdf
    • Wickers
    • By Wickers 4th Mar 18, 10:14 AM
    • 33 Posts
    • 2 Thanks
    Wickers
    • #9
    • 4th Mar 18, 10:14 AM
    • #9
    • 4th Mar 18, 10:14 AM
    Thanks WillowCat,

    That'll will be good news for my friend.

    There's always that fear the rules can change in future and whether or not to put into a pension when you can?
    • zagfles
    • By zagfles 4th Mar 18, 6:49 PM
    • 13,196 Posts
    • 11,203 Thanks
    zagfles
    Thanks MallyGirl,

    His income is about 20,000 and on tax credits. So assuming his mum made a gift payment into his pension of 15,000 would this affect his tax credits?
    Originally posted by Wickers
    If you make pension contributions they reduce your income for tax credits, and so likely increase your tax credits award. Not sure what would happen if someone else put money into your pension.

    Why not make things simple, get your Mum to gift you the money. Live off that money. Put your earnings into your own pension. Same end result, no complications about who paid into your pension.
    • Wickers
    • By Wickers 6th Mar 18, 3:02 PM
    • 33 Posts
    • 2 Thanks
    Wickers
    "Why not make things simple, get your Mum to gift you the money. Live off that money. Put your earnings into your own pension. Same end result, no complications about who paid into your pension".

    If my friends mum gifted him the money it would require everything to be paid by cash. Any gift paid into his account would reduce his tax credits. Thanks for the idea but not sure it would "make things simple"
    • zagfles
    • By zagfles 6th Mar 18, 4:37 PM
    • 13,196 Posts
    • 11,203 Thanks
    zagfles
    "Why not make things simple, get your Mum to gift you the money. Live off that money. Put your earnings into your own pension. Same end result, no complications about who paid into your pension".

    If my friends mum gifted him the money it would require everything to be paid by cash. Any gift paid into his account would reduce his tax credits. Thanks for the idea but not sure it would "make things simple"
    Originally posted by Wickers
    No it wouldn't - gifts don't affect tax credits. However paying into your own pension increases tax credits (subject to the income change disregard/max amounts etc).
    • Wickers
    • By Wickers 6th Mar 18, 5:15 PM
    • 33 Posts
    • 2 Thanks
    Wickers
    No it wouldn't - gifts don't affect tax credits. However paying into your own pension increases tax credits (subject to the income change disregard/max amounts etc).
    Originally posted by zagfles
    Thanks zagfles
    Sorry to doubt you
    If friends mum put 30,000 into his bank account;
    1. His tax credits would remain unchanged?
    2. In theory could he then put 30,000 into a pension and get 20% tax relief added ?
    3. Will the 'gifting rule' apply when they change over to universal credits?

    Thanks
    • Wickers
    • By Wickers 6th Mar 18, 5:23 PM
    • 33 Posts
    • 2 Thanks
    Wickers
    I take it that the 30,000 put into a pension would not be deducted from the income calculations, for tax credit purposes, because the money is not earned income ??
    • Wickers
    • By Wickers 6th Mar 18, 5:29 PM
    • 33 Posts
    • 2 Thanks
    Wickers
    Forgot that you can't have more than 16,000 in savings when U/C comes in
    • zagfles
    • By zagfles 6th Mar 18, 6:15 PM
    • 13,196 Posts
    • 11,203 Thanks
    zagfles
    Thanks zagfles
    Sorry to doubt you
    If friends mum put 30,000 into his bank account;
    1. His tax credits would remain unchanged?
    Originally posted by Wickers
    Yes. Interest earned may affect them but that presumably won't be much if anything if he moves it soon.
    2. In theory could he then put 30,000 into a pension and get 20% tax relief added ?
    Only if he earns at least 37500. You can only get tax relief on 100% of earnings, a 30k net contribution is 37500 gross.
    3. Will the 'gifting rule' apply when they change over to universal credits?

    Thanks
    Not sure, when I last looked at it don't think gifts counted but they keep changing the rules. Ask on the benefits board. But if he's not on UC now and not due to move soon it shouldn't be an issue.
    • zagfles
    • By zagfles 6th Mar 18, 6:17 PM
    • 13,196 Posts
    • 11,203 Thanks
    zagfles
    I take it that the 30,000 put into a pension would not be deducted from the income calculations, for tax credit purposes, because the money is not earned income ??
    Originally posted by Wickers
    That's why I suggested putting his earned income into the pension, which would reduce income for tax credits, and living off the gift. But be aware of the limits as above.
    • zagfles
    • By zagfles 6th Mar 18, 6:19 PM
    • 13,196 Posts
    • 11,203 Thanks
    zagfles
    Forgot that you can't have more than 16,000 in savings when U/C comes in
    Originally posted by Wickers
    Pension savings won't count, until he actually draws it or gets to pension credit age, as discussed above.

    Possibility of deprivation but unlikely if he's not moving to UC soon.
    • Wickers
    • By Wickers 6th Mar 18, 8:37 PM
    • 33 Posts
    • 2 Thanks
    Wickers
    Pension savings won't count, until he actually draws it or gets to pension credit age, as discussed above.

    Possibility of deprivation but unlikely if he's not moving to UC soon.
    Originally posted by zagfles
    Thanks zagfles
    That's possibly the issue regarding deprivation of capital. I think for certain items they can look back quite a few years to see what capital you had? Might be best for the mum to pay direct to the pension? Probably can't accuse a person of deprivation of capital if it's the parent depriving themselves??
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