dpg50000 Posted February 3 Share Posted February 3 23 minutes ago, kzb said: I think that would work. Also if he pays by salary sacrifice, he'll save on the national insurance too. One thing, I was told employers are unwilling to pay you less than minimum wage and also under the national insurance threshold. Not unwilling, but not allowed. You can't legally salary sacrifice beyond the point where you get paid less than minimum wage. Quote Link to comment Share on other sites More sharing options...
clarkey Posted February 3 Share Posted February 3 1 hour ago, Sackboii said: Perhaps. But what’s to stop someone who is working, who also has a sizeable cash reserve (like 2+ years of living costs), who is nearing the end game of packing it all in and retiring early, from just ploughing large sums for a few years (perhaps the £60k annual allowance) into their pension pot to ‘get rid’ of cash reserves but leaving everything else paid for, then giving up work and living on full UC for a while (6/12/18 months..) before then actually drawing from their pension pots ? On paper, they have no savings (well, less than £16/6k). They’ve also reaped sizeable tax relief from their previous few years contributions particularly if they’re a higher rate tax payer. Anything in any ‘rules’ to prevent this ? Perhaps @Unmoderated might have insight ? Asking for a friend.. They wouldn’t have any kids. That’s where the real money is . They would get 84 per week as a single person, would probably have to be looking for work constantly with job centre on at them. I think there are rules if they have made them selves intentionally unemployed as well ie you don’t get no money for 3 months. Quote Link to comment Share on other sites More sharing options...
kzb Posted February 3 Share Posted February 3 13 minutes ago, dpg50000 said: Not unwilling, but not allowed. You can't legally salary sacrifice beyond the point where you get paid less than minimum wage. It's another rule that favours the well-off ! Also I am now wondering about the benefits angle. If you can't salary sacrifice to less than minimum wage, you might not get UC because you earn too much ? Unless you have dependent children of course. Quote Link to comment Share on other sites More sharing options...
kzb Posted February 3 Share Posted February 3 1 minute ago, clarkey said: They wouldn’t have any kids. That’s where the real money is . They would get 84 per week as a single person, would probably have to be looking for work constantly with job centre on at them. I think there are rules if they have made them selves intentionally unemployed as well ie you don’t get no money for 3 months. They're not intentionally making themselves unemployed though. They are fully employed, but earn so little (because most of it is being paid into the pension) they are entitled to benefits on top. The rules seem to make this possible, but I don't know anyone who has done it. Quote Link to comment Share on other sites More sharing options...
clarkey Posted February 3 Share Posted February 3 Just now, kzb said: They're not intentionally making themselves unemployed though. They are fully employed, but earn so little (because most of it is being paid into the pension) they are entitled to benefits on top. The rules seem to make this possible, but I don't know anyone who has done it. Again would they be entitled to much tax credits etc without the kids. I hadn’t thought of that though if I sacrifice soo much into pension that I make myself eligible for tax credits. I suspect computer would say no Quote Link to comment Share on other sites More sharing options...
clarkey Posted February 3 Share Posted February 3 1 hour ago, sta100 said: used to have one next door. got the house after divorce sometime in the 80s. stayed on the sick (and clearly wasn't) till they sold a few years ago. drove a car, had a huge extension done with inhertiance. 750k house. Other side, same value house, husband fake moved out and pretended they were separated to claim child benefits on several kids. Rented that out and bought another worth around a million. Could tell you all sorts of other stories of people on this affluent street claiming things. Had a family member that used to work for DSS who would tell me all sorts of stories. You wouldn't believe what goes on. I guess there are edge cases where this could happen but if they are not really on the sick they should have been caught and made to pay back and to sell house to raise funds in that case then so be it. Of course no one expected the house to be worth 750k and probably wasn’t for much of the time. I suspect you wouldn’t care if the house was worth 25k and they had lost money buying it😀 Quote Link to comment Share on other sites More sharing options...
Unmoderated Posted February 3 Share Posted February 3 1 hour ago, Sackboii said: Perhaps. But what’s to stop someone who is working, who also has a sizeable cash reserve (like 2+ years of living costs), who is nearing the end game of packing it all in and retiring early, from just ploughing large sums for a few years (perhaps the £60k annual allowance) into their pension pot to ‘get rid’ of cash reserves but leaving everything else paid for, then giving up work and living on full UC for a while (6/12/18 months..) before then actually drawing from their pension pots ? On paper, they have no savings (well, less than £16/6k). They’ve also reaped sizeable tax relief from their previous few years contributions particularly if they’re a higher rate tax payer. Anything in any ‘rules’ to prevent this ? Perhaps @Unmoderated might have insight ? Asking for a friend.. 1 hour ago, kzb said: I don't think you will get tax relief on pension contributions unless paid out of earnings ? I though someone would beat me to it This is pretty much true. You can make, though, £3,600 gross contributions to people with zero earnings per year. So I could set up a stakeholder pension for my wife and kids (if I had them) and it would only cost me £2,880. I benefit from basic rate tax relief (not necessary my marginal rate). It's also less efficient than salary sacrifice since you do not benefit from NI. @Sackboii in your example - say I inherit £100K and that's enough for three years living life expense I could sacrifice 100% of my pension but would only benefit from tax relief on the first £60K. You can catch up with the last three years unused too. However, you'd be better off still taking the PA limit as income tax free. 31 minutes ago, dpg50000 said: Not unwilling, but not allowed. You can't legally salary sacrifice beyond the point where you get paid less than minimum wage. Some employers believe they have to give you at least minimum wage AFTER deductions. This isn't true of course - minimum wage employees still are auto enrolled and sacrifice a portion of their income... ergo you can legally sacrifice this. Getting HR or outsourced payroll with a matrixed rule pamphlet to understand this is another thing entirely. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted February 3 Share Posted February 3 18 hours ago, Social Justice League said: If voters had any brains at all they would never vote for either Tory or Nulabour. Both parties are establishment puppets and not fit to govern. There is no democracy while a small group of ugly wierdos are desperate for control over everyone else. But like it or not, and I personally don't, it is almost a certainty that one of those parties will be in charge after the next election and I, a lifelong (until recently) Conservative voter, want it to be Starmer's Labour rather than Sunak's "Tories". To that end, I will be voting tactically against the "Tories" which I believe is the most positive thing I can do to prevent the "Tories" winning. Quote Link to comment Share on other sites More sharing options...
The Angry Capitalist Posted February 3 Share Posted February 3 2 minutes ago, Bruce Banner said: But like it or not, and I personally don't, it is almost a certainty that one of those parties will be in charge after the next election and I, a lifelong (until recently) Conservative voter, want it to be Starmer's Labour rather than Sunak's "Tories". To that end, I will be voting tactically against the "Tories" which I believe is the most positive thing I can do to prevent the "Tories" winning. They are both the same. No difference. No doubt both get donations from the same corporations. Leaders from both parties will be hand selected by the movers and shakers. If you really want to stick two fingers up to the establishment vote for the most unknown small party. They expect the masses to vote either Labour or Tories with a few going for reform part or Lib Dems. Will really get their knickers in a twist if the public vote in reform or some other as they believe they know how the stupid public thinks. However, like the establishment I know too that it will either be Labour or Tories that get in. Unfortunately, they will planning accordingly for that outcome. Quote Link to comment Share on other sites More sharing options...
nothernsoul Posted February 3 Share Posted February 3 Clarkey is correct about unemployment benefit in the UK, I have only ever claimed it for three months after college decades ago and wouldn't want to again. An unlivable amount of money with the highest level of scrutiny for those collecting it. For those who have had enough of work in their 50s and want to play the system,( unfortunately I have seen someone do this first hand, I am not unsympathetic to those genuinely ill, but this person was a particularly unpleasant individual) they go on the sick. First it is a long period off work with an unprovable illness ( mental health, back problems, fibromyalgia). They will then claim money from the state or if they are lucky claim an early pension. If most people legitimately wanted to give up work a year before retirement, had a decent pension coming, everything paid for( including house), it doesn't make sense to claim unemployment benefit. You could easily get more than the 84 pound a week benefit, by doing a day or two of cash in hand work. Most people would probably rather do that if they could than the hassle of visiting the job centre, pretending to apply for jobs, going for interviews, being sanctioned for not trying hard enough etc. Of course working cash in hand and not paying tax is a crime, but most people feel better about that than fraudulently claiming benefits. Quote Link to comment Share on other sites More sharing options...
Social Justice League Posted February 3 Share Posted February 3 37 minutes ago, Bruce Banner said: But like it or not, and I personally don't, it is almost a certainty that one of those parties will be in charge after the next election and I, a lifelong (until recently) Conservative voter, want it to be Starmer's Labour rather than Sunak's "Tories". To that end, I will be voting tactically against the "Tories" which I believe is the most positive thing I can do to prevent the "Tories" winning. I totally get this, but imo Starmers 'labour' isn't labour in 2024. It's a centre tory party which I refuse to vote for again after the Blair years. I'm also sickened by the way Starmer has treated Corbyn and anyone in the party with any left leaning of any kind. 100% agree with you that Sunak's 'tory' party is a disgrace and not tory either, but both parties are treating voters like idiots, when the reality is everyone can see right through them. It's tragic that British politics has come to this lose/lose choice. Quote Link to comment Share on other sites More sharing options...
kzb Posted February 3 Share Posted February 3 3 hours ago, clarkey said: Other side, same value house, husband fake moved out and pretended they were separated to claim child benefits on several kids. Child Support Agency ? Quote Link to comment Share on other sites More sharing options...
kzb Posted February 3 Share Posted February 3 3 hours ago, clarkey said: Again would they be entitled to much tax credits etc without the kids. Probably not. 3 hours ago, clarkey said: I hadn’t thought of that though if I sacrifice soo much into pension that I make myself eligible for tax credits. I suspect computer would say no The biggest barrier I suspect is that not too many people are willing to do it, faced with the reality of it. You actually have to live at a benefits standard of living for x years until the date you plan to access your pension. With only £16k in the bank as back-up in case anything happens. For someone used to living on a generous income, this is like cutting off your nose to spite your face. You would have to be like some really tight Yorkshireman to think you'd won something worthwhile. Quote Link to comment Share on other sites More sharing options...
kzb Posted February 3 Share Posted February 3 3 hours ago, Unmoderated said: This is pretty much true. You can make, though, £3,600 gross contributions to people with zero earnings per year. So I could set up a stakeholder pension for my wife and kids (if I had them) and it would only cost me £2,880. I didn't know that, and maybe it is useful info for some. I think they are hoping to gain more than £720 for their efforts on here. £720 isn't worth getting out of bed for. 3 hours ago, Unmoderated said: Some employers believe they have to give you at least minimum wage AFTER deductions. This isn't true of course - minimum wage employees still are auto enrolled and sacrifice a portion of their income... ergo you can legally sacrifice this. Getting HR or outsourced payroll with a matrixed rule pamphlet to understand this is another thing entirely. Good point, but I still think there might be an issue with "salary sacrifice" taking you below minimum wage. This is because it isn't a deduction from already-earned salary like a pension contribution. You are pretending, for tax reasons, that this is your actual salary. The pension contribution is said to be an employer contribution. But the employer can never claim, "look, including my employer pension contribution, they are earning the minimum wage", when the the headline wage on their salary slip is less than minimum wage. I don't think they can do that. Quote Link to comment Share on other sites More sharing options...
Maghull Mike Posted February 3 Share Posted February 3 Interesting BBC ramping Hookers Quote Link to comment Share on other sites More sharing options...
Unmoderated Posted February 4 Share Posted February 4 On 03/02/2024 at 16:39, kzb said: I didn't know that, and maybe it is useful info for some. I think they are hoping to gain more than £720 for their efforts on here. £720 isn't worth getting out of bed for. Good point, but I still think there might be an issue with "salary sacrifice" taking you below minimum wage. This is because it isn't a deduction from already-earned salary like a pension contribution. You are pretending, for tax reasons, that this is your actual salary. The pension contribution is said to be an employer contribution. But the employer can never claim, "look, including my employer pension contribution, they are earning the minimum wage", when the the headline wage on their salary slip is less than minimum wage. I don't think they can do that. Actually the £720 tax saving is pretty good and most HNW will take advantage of it. You make these contributions each year for your kids and by the time they're 21 they will have a significant pot that could be six figures with the minimal of compounded returns. I also think (might be wrong) you get the remaining tax relief on your tax return. Might not be right there. If you have three kids and a non-working partner to do this for it can form a nice segment of your tax planning. They can do that. If you are in a minimum wage job you are auto enrolled and your take-home salary is lower. You can increase you contributions beyond. you can also make private contributions after tax and gain the tax benefits in arrears. It's not pretending. Your salary is set out in a contract of employment. You're deferring an element of that salary. It ranks differently to the salary sacrifice schemes for things like an EV lease or cycle to work etc where you are saying to your employer you wish to swap £X in return for a car or a bike. Even then you would still have a contract setting out the total £value of your package. Quote Link to comment Share on other sites More sharing options...
kzb Posted February 4 Share Posted February 4 1 hour ago, Unmoderated said: They can do that. If you are in a minimum wage job you are auto enrolled and your take-home salary is lower. You can increase you contributions beyond. you can also make private contributions after tax and gain the tax benefits in arrears. It's not pretending. Your salary is set out in a contract of employment. You're deferring an element of that salary. It ranks differently to the salary sacrifice schemes for things like an EV lease or cycle to work etc where you are saying to your employer you wish to swap £X in return for a car or a bike. Even then you would still have a contract setting out the total £value of your package. OK if you are sure. As you said before, payroll/HR departments may not realise this, so it could be an uphill struggle to get them to do it. Quote Link to comment Share on other sites More sharing options...
Unmoderated Posted February 5 Share Posted February 5 12 hours ago, kzb said: OK if you are sure. As you said before, payroll/HR departments may not realise this, so it could be an uphill struggle to get them to do it. Reading up on this I am NOT sure. Tagging @Sackboii too There's the ability to pay the minimum in to a work place pension which, although it is a cost to you, doesn't seem to matter for NMW. Salary sacrifice though seems to be a non start if you're earning min wage. **Caveat I'm a spoiled tech sector employee so this is right at the other end of my experience the last 10 years** You are still entirely able to make contributions privately. The general issue here is the loss of NI. It's avoidable with salary sacrifice but not after the fact. Only income tax relief is available. Seems like the lowest earners are the least likely to be able to avoid. However...... If the ability to do so is at the arrival of a large inheritance then they've already had a huge income with no tax applied. If I were earning NMW I would lower hours to earn only the threshold for tax and NI, top up living expenses with some of that inheritance and then I would make a private pension contribution worth 100% of my earnings. Since you get 20% tax relief at source you would - I think - win in this scenario. It seems the pension contribution rules allow tax relief on everything up to your annual earnings regardless of whether you've paid tax on that or not. As ever life is great if you have a large inheritance or a wealthy partner . As for me, I just stick the max into the pension and anything left over £100K gross goes into an EV/cycle to work just to mitigate the burn. If you are lucky enough to earn £150K you are paying an effective tax rate (inc NI) on that last £50k of around 55%. In other words if you work 9.00-18.00 each day with an hour for lunch you don't start earning for yourself until 14.30. Whereas if you chuck £50k into a pension it only costs you £23K a year and you can pull about £45K out at pension age if you're careful. Quote Link to comment Share on other sites More sharing options...
Sackboii Posted February 5 Share Posted February 5 (edited) 1 hour ago, Unmoderated said: Reading up on this I am NOT sure. Tagging @Sackboii too There's the ability to pay the minimum in to a work place pension which, although it is a cost to you, doesn't seem to matter for NMW. Salary sacrifice though seems to be a non start if you're earning min wage. **Caveat I'm a spoiled tech sector employee so this is right at the other end of my experience the last 10 years** You are still entirely able to make contributions privately. The general issue here is the loss of NI. It's avoidable with salary sacrifice but not after the fact. Only income tax relief is available. Seems like the lowest earners are the least likely to be able to avoid. However...... If the ability to do so is at the arrival of a large inheritance then they've already had a huge income with no tax applied. If I were earning NMW I would lower hours to earn only the threshold for tax and NI, top up living expenses with some of that inheritance and then I would make a private pension contribution worth 100% of my earnings. Since you get 20% tax relief at source you would - I think - win in this scenario. It seems the pension contribution rules allow tax relief on everything up to your annual earnings regardless of whether you've paid tax on that or not. As ever life is great if you have a large inheritance or a wealthy partner . As for me, I just stick the max into the pension and anything left over £100K gross goes into an EV/cycle to work just to mitigate the burn. If you are lucky enough to earn £150K you are paying an effective tax rate (inc NI) on that last £50k of around 55%. In other words if you work 9.00-18.00 each day with an hour for lunch you don't start earning for yourself until 14.30. Whereas if you chuck £50k into a pension it only costs you £23K a year and you can pull about £45K out at pension age if you're careful. Thanks for this and the previous post(s). I still have some planning to do and lots of details to look at, and will also be discussing with my pensions advisor/accountant in any case. Not sure my previous rambles were 100% clear, but I am just musing around the various traps that appear to exist. 'Normal' school of thought: 1. You earn a salary, and pay a nominal (say 10%) amount of that into a pension. You get tax relief at whatever your tax rate is. 2. Meanwhile, you're sat on say 2x your annual net salary in savings/ISA's etc, earning your 4-5% interest. 3. You potentially max out your pension contributions by using a bonus to bring you up to the £40k (now £60k) contribution level, or whatever amount you see fit to reduce your tax bill. 4. You get made redundant, or decide you've had enough of work. You're entitled to nothing since you've got more than £16k in savings. So you live off your savings until such a time as you find a job or until such a time as you drop below the £16k/£6k thresholds and then become eligible for UC. Menawhile, you don't draw any income or tax free cash from pensions, even though you're over 55. 'Alternative' school of thought: 1. You earn a salary, and pay the vast majority of it into a pension, subject to not going over 100% of your income and not going over £60k total pension contributions. You get tax relief at whatever your tax rate is (which might be 20% or still 40%). 2. Meanwhile, you're sat on say 2x your annual net salary in savings/ISA's etc, earning your 4-5% interest. So you use that to 'make up' your lost net income if needed (because you're paying the max allowed into pensions from salary and your net income is now relatively low). So your savings will dwindle, and be drawn down month by month. 3. You top up your savings that have been dwindling by using a bonus, no tax relief here but it balances out because you're getting max tax relief on your massive contributions from income anyway. The savings top up will subsequently be used to continue to make up for lost net income due to large pension contributions. 4. You get made redundant, or decide you've had enough of work. The difference from the first scenario is that you now might not have as large a savings pot because you've been living off it, and depending on how much you have left, you might now be entitled to something since you've got less than £16k/£6k in savings and then become eligible to UC. Meanwhile, you've been getting the large amounts of tax relief on your pension contributions which, if you do this in the last years of working, can result in a significantly swollen pot. Net result is you've been on a much lower income and have much lower 'savings' than in the first scenario. Then when you do decide to pack it all in, tax free cash from pensions is even bigger than it would have been without maxing out. What am I missing ? Edited February 5 by Sackboii clarity Quote Link to comment Share on other sites More sharing options...
kzb Posted February 5 Share Posted February 5 6 hours ago, Unmoderated said: There's the ability to pay the minimum in to a work place pension which, although it is a cost to you, doesn't seem to matter for NMW. Salary sacrifice though seems to be a non start if you're earning min wage. We were told where I work that you can't salary sacrifice to below NMW, or to below the national insurance threshold. That's all I know, I've never actually attempted anything like this. 6 hours ago, Unmoderated said: As ever life is great if you have a large inheritance or a wealthy partner . I trust you realise that no politician is going to show any sympathy for defending these rights for well-off people. OK perhaps some gammon faced, old-school, Tories but that's it. They're more likely to get rid of these perks in the name of greater equality. Quote Link to comment Share on other sites More sharing options...
kzb Posted February 5 Share Posted February 5 6 hours ago, Sackboii said: . You get made redundant, or decide you've had enough of work. You're entitled to nothing since you've got more than £16k in savings. So you live off your savings until such a time as you find a job or until such a time as you drop below the £16k/£6k thresholds and then become eligible for UC. Menawhile, you don't draw any income or tax free cash from pensions, even though you're over 55. The whole problem is you have to live at a benefits standard of living for x years before you retire. With only £16k in the bank as a safety net. Perhaps you have the willpower to do this, perhaps to get one over on the system. But do you have a wife? Did she sign up for living off benefits when she married you ? Bear in mind she has to go along with it for several years to make it worthwhile. Persons who have got accustomed to living off high salaries are going to find it difficult. It's also possible you could not live to see the benefits. Quote Link to comment Share on other sites More sharing options...
Unmoderated Posted February 5 Share Posted February 5 20 minutes ago, kzb said: We were told where I work that you can't salary sacrifice to below NMW, or to below the national insurance threshold. That's all I know, I've never actually attempted anything like this. I trust you realise that no politician is going to show any sympathy for defending these rights for well-off people. OK perhaps some gammon faced, old-school, Tories but that's it. They're more likely to get rid of these perks in the name of greater equality. I have to admit this does seem to be correct. I realise this but the electorate are proving us both wrong. I would happily have all inheritance taxed as if it were earned income. No exceptions. Quote Link to comment Share on other sites More sharing options...
Social Justice League Posted February 5 Share Posted February 5 Consuming rubbish to keep up with the Jones, family, friends is for the people. Think clearly and with focus. Look after your health and your time. Consuming human produced material products will never make you a climate changer/warrior, if that's what you believe in. Give it up and then retiring early is much more straight forward. Quote Link to comment Share on other sites More sharing options...
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