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Hi, dad has a shared ownership agreement and mortgage. He also has a work pension. He pays child maintenance for his children and works full time.
The question is if he takes out a private pension does monthly payments need to be 25% of his income (say £250 monthly) for the CSA to take it into account or can it be less?
If not does/will the whole amount be taken into account or is the limit restricted to a certain percentage?
basically what are the rules surrounding this please?
thanks
Hi,
in their booklet it states:
If a paying parent makes payments into a private pension scheme, we will usually reduce the income figure we use by the full amount they pay, including the value of any tax relief.
Deduction for pension contributions relievable at source
40. Where the non-resident parent—
(a)has current income from self-employment or as an employee or office-holder at the effective date of the relevant calculation decision; and
(b)makes relievable pension contributions which are not taken into account under regulation 38(5),
"there is to be deducted from the sum of any amounts calculated in accordance with regulation 38 or 39 (current income as an employee, current income from self-employment) an amount determined by the Secretary of State as representing the weekly average of those contributions".
Reg. 40 wholly in force; reg. 40 not in force at made date; reg. 40 in force at 29.7.2013 for certain purposes and reg. 40 in force at 25.11.2013 in so far as not already in force, see reg. 1, SI 2013/1860 and S.I. 2013/2947
That is direct from the legislation.
The bottom line states how it is caculated. (I made it bold).....
The CMS like to use people pention statment to make the determination. Because the employers genrally dont pass the contribution to the Pension scheme as they make the contributions. Plus there can be a % of under over payment at the end and begining of a tax year, comparing employer payments and contributions made.
Then you have to account for over time, bonuses. It all effects contributions. As an avrage the figure is no that far off.
I agree that they should take the entire amount into account...... however, what the CMS put out as infomation compared to what they do. Is 2 diffrent thing. Then you have whats in the legislation.
"It is why pensions are such a desputed part of the maintance system".
The passage as it reads:
"Remember that contributions to an occupational or employer pension scheme by deductions from pay are usually made by an employer. If this is the case, we will have already taken these into account in Step 1 and the paying parent does not need to tell us about them.
But a paying parent can tell us if they pay their contributions in another way – for example, direct to a private pension provider.
If a paying parent makes payments into a private pension scheme, we will usually reduce the income figure we use by the full amount they pay, including the value of any tax relief".
Paragraph 1. "Deductions from pay are usually made by an employer......already taken these into account...does not need to tell us.....".
It is assumed by the paragraph, that if the decuctions comes from your wages. That the CMS have accounted for it. Not the two diffrent ways an employers scheme can work, regarding the tax relife and the reporting to HMRC.
If it was designed to be informative, they would name the two diffrent types. Then define the diffrence. Its misleading. Most people know nothing about pensions, so assume its all under control, and accounted for.
The CMS wants people to belive they can see everything, all the time. (Thats not true).
Paragraph 2. "But a paying parent can tell us if they pay their contributions in another way – for example, direct to a private pension provider."
Again it is infered that the only 2 diffrences in pension, is determined by where the contribution come from, your employer or your bank. (Not true).
The word "can" is used instead of something like "Must" or "Has to". Its a choice, and softening the point of the paragraph. To appear approchable and friendly. Its not saying "if you do not tell us, we do not know and we will not take it into account".
Paragraph 3.
"If a paying parent" who decides 'if' it is a contribution? By what critira? Where can I veiw that critira?
"We will usually" everyone at one time or another has said this. They use this statment alot.
"I usally do that, I dont know what happened".
"I will usally do that, I don't know why I did'nt".
"I would normally".
Its to give you confidence and not have you ask questions. After all how many people under the CMS, could caculate the diffrene? Or would even know?
It also provides an excuse if you do ask questions. "I don't know why". "The system caculated it, not me". "I see, you must have made a mistake".
"including the value of any tax relief".
Hum.....
ALWAYS CONSIDER THE WORDING.
They use an average because the law says they have to.
The same way the caculation of gross income they use, is a weekly avrage.
Because it settles the payments and liability into a "center ponit of all the values". With the 25% +/- of that weekly avrage, as a defined threshold to triger a change. (Some times you might pay over, some times under).
Hello,
(Im a terrible speller im sorry for that, but here goes).
Much in the same way you do not pay tax on a "pension contribution" because the pension "payment is taxed". You have the right to have your pension contributions taken into account by the "Child Maintance Service". As paymentes recived from a pension are veiwed as income and subject to liability.
"The same as they cannot tax you twice on the same source, The CMS cannot charge you twice against the same soure". Its against the law.
(Hey its also incorages people to same for retirement!)
2 types of pension contributins are caculated diffrently by the CMS under the Child Maintance Caculation regulations 2012.
NET PAY ARRANGMENT - You employer subtracts your contribution from your gross prior to tax. (How you get the tax relife).
- This shows on your payslip and HMRC figures. So what the CMS get your infomation 30 days prior to Annual reveiw. It is already included.
RELEAVED AT SOURCE - Or a private pention, your make your contribution. The Scheme normally claims your tax relife directly for HMRC and adds to the pot.
NET pay or private pensions have to be reported to the CMS sepratly. With evidace:
- Pension Statment
- Bank statment (To prove contributions are being made).
- Wage slips if deducted from wages.
There is a caculation online that will give you the % for age. (Ages now, years worked ect). No it does not have to be £250 a month. (Most work based agreements are 8%. 5% employee and 3% employer). "See also infomation on diversion of income". If the contribution is to much, the CMS veiw it as a diversion of income to get out of paying.
Here is where it get tricky with "Relived at source" also know as "salary sacrifice". The CMS, being, the er;.... "disingenuos!" system we all know and love. Will often ignore the request, play it off as an income change, tell you to wait till reveiw then never deduct the amount. ec ect. There reprosentatives veiw it as a discount you should not be entitled to have.
In your case sounds like the golden oldie "Income change".
*They are saying that under Caculation regulation 2012, the weekly gross income figure you have provided, does not differ by 25% (As a weekly figure). So there will be no income chnage, or change to the liability caculation.
That part of the caculation, and that desision has nothing to do with Your pension contributions. It is to determin which type of income caculation to use. Or determin an income or liability caculation change.
(Also worth a note is that cannot carry out an income change caculation with out a justifiable reason to do so. Periodic income check, or request for recaculation ect. All that has to be documented with the required notice).
By the Regulations, Pension contributions are worked out as a weekly avrage payment, then deducted from the weekly Gross income figure caculated. Before the caculation of liability. (Where relived at source or salary sacrifice is concerned). Somewhere around reg. 38 to 40.
Now - To be clear! No where do the CMS give any guidance as to when, where, or how, Pension Contributions Relived at source are to be reported. There is no form, nothing on the portal. Other than 1 sentance, in "how we work out child maintance" (Blue book, terrible read). Page 12, line 11 to 14, "to report them".
Thus they can be reported at any time, to be incoparated into the caculation of maintance. (As liabilitys are caculated daily from an effective date to reveiw date - so the date your contributions began to reveiw).
You need to look at what type of pension he has now through work. Check the pay slips if in doubt. If it is a "net pay arrangment" The Gross for tax figure, will be exsactly the pension contribution less that the total Gross income figure. (Unless you have helth care paid for by your employer to).
**Make every request is writting sent sepcial delivery. Never send copies of original docuents, only ever copies.
**If you already made a request submit a Mandantory Reconsidaration.
**If that don't work take them to a first stange tribunal. Instructions can be found on the backs of there or online regarding how to do this.
I hope that was helpful to you!
Good Luck
Hi thank you for your reply. Dad was fully convinced due to the 25% rule and other people’s option that 25% of his income was the minimum he was required to pay in to a private pension. The rules around this seems so limited in explanation. Cheers
Thank you so much for your detailed response. It will be given in-depth consideration to fully understand all the information you have provide. Thank you
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