Pension contributions - what is deemed a diversion of income ?
Dealing with the CMS is going to put me in an early grave.
After receiving the letter I referred to in the thread above, I wrote to the chap at the Financial Investigation Unit with a list of my counter arguments (including reference to the table in para 36020 etc.) and he replied to say that the decision hadn't been implmemented yet and that he would refer my comments to his senior leader for consideration to see if his provisional decision / assessment should be changed in any way before being implemented. So far so good.
Then today I received an official letter notifying me of my changed CM amount and it seemed that the provisional assessment had been implmented without any further changes. So I have today emailed the FIU contact again just to confirm if the senior leader review had actually occurred and that no changes were the result of that (as seemed to be evident by the official recalculation notice that I received today).
He has replied to say that the review with his senior leader hasn't in fact happened yet and that it is scheduled for this Thursday, but that the assessment has in the interim been applied.
So it is just so incredinly stressful - from my perspective not only are they not following their own guidance but they seem to want to increase the stress levels by implementing a decision that is still under internal review ! I presume this has now gone to my ex as well, and if the CMS on review decide (hopefully) that they got it wrong, then my ex will then be on their backs asking them why they have changed it - especially without an official mandatory reconsideration !
It seems such a poor process - unprofessional in my view and sure to increase the stress levels of all parties !
@Will99 Hi mate, really feel for you, why so they have to make it so bloody difficult, all we are trying to do is prepare for later life, we need to live. I have this fight coming up, exactly the same position as you. Its great that we have the freedom of information stuff available, imagine if this was not the case, what these people would be getting away with. Keep us updated mate, do not let them grind you down, I will let you know how I get on
OK I just want to highlight something and ask a question on here. I am still in conversation with the CMS / FIU so I may get answers that way.
Figures below are indicative :-
My current year assessable income for CM is about £39k. This comprises of :-
£32k gross taxable PAYE income
£7k rental profit from the property I let out.
Total = £39k
Due to the recent variation on notional income grounds, I made full financial disclosre to the Financial Investigations Unit, and they wrote to me with their decision to include the following :-
£7k notional income
£9k which are my additional pension contributions
Total additional assessable income = £16k
As per my posts above I wrote back with counter arguments, including that it seems that they have clearly not followed their own process vis a vis the pension contributions (discussed earlier in this thread). Also I am arguing that the notional income should also not be included either as it is calculated on ISA funds I have which are there to pay off the interest only mortgage on the property that I let out, and that I am already being assessed on the rental property profit as I state above.
Initally the FIU said they would consider my comments with his senior leader before implementing the assessment above. Anyway, it has been implemented before those discussions have taken place, and yesterday I got a notice of my new CM amount. My current year CM payments are to rise as there has been more than a 25% increase on my income. Also as I am close to the end of the CM year, I have a lot of catching up to do in the few remaining payments. In short my CM payments are going up from 300 and something to 900 and something.
My angst is centered on the following
1. I received the notice yesterday, giving me three days notice of an almost trebling of my CM amount (the next payment is due on Friday 1st October)
2, Regardless of the notional income, if the penskion contributions had not been originally included and this assessment that has been implemented, then I would not have breached the 25% threshold and I would not have had a current year recalculation. However that assessment has now been implemented and current year contributions changed. However if on review these pension contributions are removed from my assessible total, that by itself will not then be >25% of my new higher total assessible income, so I fear I will not then get a recalculation back down again ! So I fear I will have lost out materially (nearly £2k) on current year contributions just because they implemented an assessment that they later agreed was incorrect ! Is this how it really works anyone ?
Update - I just spoke to the CMS and they tell me that :-
1. The advised figure included back pay for the year to date. Considering the short notice and the fact that this is still under review they have agreed that, as a temporary measure, I should only pay the new monthly amount going forward until the review / challenge is settled. (Not sure if this relates just to the internal review - i.e. the discussion my FIU chap is having with his senior manager - or also to a MR as well).
2. The 25% theshold relates only to earned income. So if any element of additional assessible income changes (such as a decision taken not to assess my pension contributions) then this will trigger a fresh recalculation regardless of amount. There is no 25% threshold required here.
ok I have two queries for you learned folk :-
1. I’ve received the swathe of documentation in response to my access request. It is divided in to two groups - ‘Letters’ and ‘Reports’. I have been through the ‘letters’ documents and they are a collection of letters sent between myself and CMS, so not really anything new. The ‘reports’ section I have yet to go through properly but it seems to be a lot of notes made by CMS during the course of my CM case and discussions therein. I know that the CMS made an enquiry to my mortgage provider and also to the company I have some ISA assets with, and probably some other companies to verify the information I gave the CMS as part of my financial disclosure. Should details of these conversations also be included in the material I have received ? They do not seem to be there in the ‘letters’ section but perhaps these details will be embedded in the ‘reports’ section...?
2. Mention has been made in this thread to para 36020 of the CMS guidance document re variations (refer earlier posts for a link). This para talks about ‘projected retirement income’. In an effort to argue my case I have actually received some quotations of this figure, but they tend to give two figures - one if no tax free lump sum is taken and another lower figure if the full 25% lump sum is taken. Would anyone know which applies in this para ? (I would expect it is the higher income figure, I.e. without any tax free lump sum taken)
thanks folks ...
@Will99 2. I would think it is the higher income. I think you could argue the case for excluding the 25% tax-free lump sum but that will complicate things even more.
The lump-sum can be withdrawn at any time after you reach 55. It is tax-free so it is not declared as income for HMRC and is not included in your CMS calculations.
OK so I have made my representations to the chap from the FIU and received a reply. This is now at Mandatory Reconsideration stage so I will now make my arguments to that.
Trying to summarise, the FIU decision is that I should now be assessed on (figures illustrative) :-
1. PAYE income. - no problem there
2. Profit from my property that I let out of £7k. - I do have an argument here because most of that taxable profit is actually mortgage interest costs that are no longer deductible so is not real income at all. Without those costs the 'actual' profit is under the £2,500 threshold for inclusion. Anyway that is another matter that I am already taking to appeal with HMCTS.
3. Notional Income of about £7k - This is calculated on ISA funds that I have accumulated as a repayment vehicle for the interest only mortgage on my property that I let out (and on which my taxable profit is also being assessed) - however I cannot prove that is what they are for. So I am being assessed on this also despite my arguments that these funds should be excluded on the basis of para 34005 bullet 2 in the guidance doc (link below)
4. Pension Contributions of about £10k. - This is despite my arguments that under para 36020 they should be allowed. In response to this argument of mine the FIU are quoting para 36007 which states that 'when considering whether a NRP's pension contributions are excessive, the CMS will consider each case individually taking all relevant information in to account'. I.e. he is using this to override 36020. He is saying that he has looked at the impact on the welfare of my children of my decision to increase my pension contributions by this level, and therefore decided to assess all of these contributions. However he also seems to be under the impression that I have made these contributions of £10k in addition to ploughing all my rental profit of £7k into my pension - this is materially incorrect as this £10k of contributions from my PAYE is how I am ploughing the rental profit in to my pension - it is offsetting that profit and not in addition to it. (I accept that it is more than the rental profit).
So in actual fact for the year in question I have received £7k of additional income from bullet 2, and made £10k of additional pension contributions. The net impact being a reduction in my assessable income for CM of £3k. However the FIU say that because of this my whole £10k pension contributions should be assessed.
This is so clearly biased towards my ex (who worked for the CMS) that I am almost tempted to suspect that she has leaned on her ex-colleagues to favour her !
Also in respect of bullet 3 above - I understand that I cannot actually prove that the ISAs are a repayment vehicle for my property (profit of which I am also assessed on) - but where does the burden of proof lie ? They obviously don't believe me. From their angle they should at least be able to see that if it is indeed true that this is money to repay my mortgage then it would be grossly unfair to assess me on it - because had I chosen a repayment mortgage instead of an interest only mortgage then these funds wouldn't even exist !
This is so stressful, unfair and so so draining....
@Will99 This is a crazy response from the FIU, they are quoting 36007, as the reason for refusing, but this is one part of the process, as detailed in the ways of working and should not be the reason for refusing. It is a factor, but so are all the other conditions, such as the FSA table and 36020. They appear to ignore these and use 36007 as a get out of jail card. There is no mention in this condition of the welfare of the children, it makes no reference to this and states, taking all information into account. If this is the case, they need to explain why they have apparently given little, or no consideration to the FSA table and 36020. Where is their consideration of 36013, you are not making the contributions to reduce payments to your child, you are making these contributions in line with this condition, where have they considered this condition in their response. There is also case law in this matter in the upper tribunal. They cannot simply use 36007, as a means to ignore all of the other parts of the process, or what is the point of having them. I expect the same argument and will want them to show each consideration for every condition and not rely on 36007 to simply refuse to allow the pension provisions. 36020 is a part of their process, they need to explain why they have refused, when you have clearly complied with this condition.
@Will99 My reading of 36007 is to allow the caseworker to justify pension contributions that seem excessive without context, not the other way around (e.g. consider the age of the NRP and the amount he will have to retire).
This determination does seem bizarre. All I’ve done is at the age of 57 is put my newly manifested rental profit plus approx £3k extra in to my pension. 36020 says this is ok, and other paras such as 36013 also support me in this action. As a result of my actions my assessable income is £3k lower than last year, yet somehow the FiU have determined that the full £10k of additional pension contributions should be assessed, quoting concerns about my children’s welfare and para 36007 which seems to have some kind of non-specific ‘override clause’ by mention of ‘all available information’.
This decision alone would increase my CM payments compared to last year, but the FIU have also decided that my ISA funds should also be included in a notional income calculation. And this decision also looks strange, because I had a phone conversation with the FIU chap shortly after I made my full financial disclosure and in that conversation he specifically told me that they weren’t interested in the ISA funds as they were for paying down my mortgage on the rental property, and that the only asset that they wanted more information about was another fund of mine. Then when they realised that was a pension fund they said that it couldn’t be included in the notional income variation, but that they now needed to look more closely at my ISA fund again. And now they have changed their view on that and decided to include that in a notional income calculation after all.
This decision was a result of a notional income variation request by my ex, so I have asked them why their decision has also included a decision on diversion of income (pension contributions) - especially as my ex had previously applied for a diversion of income variation re pension contributions and this was rejected. The FIU tell me that they are able to look at all previous variations, even failed requests.
it is almost as if their objective is to find a way to increase my CM liability rather than treat each asset in an objective, independent and fair manner according to their guidance / rules. The more I think about this the more paranoid I am getting that somehow my ex - who was in a senior management position within the CMS for decades - has used her contacts to somehow get a favour and have pressure applied to rule against me. How I deal with that suspicion I don’t know, maybe it is fantasy but I just can’t see that this decision is correct. I know that HMCTS are independent if the MR doesn’t change things. I am also concerned however that the MR will take influence from this FIU decision.
@Will99 Hi Will99, my experience of the MR process, is a box ticking exercise, current percentage of failed MR for the NRP are circa 85%, but this does improve considerably when you get to a formal hearing. Your ex aside, ( I know that is easy to say), and her previous position in this vile government sponsored extortion racket, they have clearly not followed the process in its entirety, the response that 36007 over rides all of this, is simply crazy, that condition is part of the process. Good luck with the fight mate and do not let them get you down. I have the same fight in 6 weeks, I am 55, paying circa 60% of my salary into a pension, in line with both FSA guidelines and percentage of final salary being allowed and can see they will probably try to use 36007 as a get out of jail card. Is there anything else in your MR that sits with the upper tribunal decision, they need to take into account, such as your health, when you expect to retire and professional advice given.