2022/12/16

Private Pensions & CMS




Private Pensions and Child Maintenance

Everyone should consider paying into a Pension to supplement the State Pension which at the time of writing is worth, £134.25p per week.  However the difficulty is that if you are making maintenance payments you may struggle to do so.

However there is the possibility of some relief to help you out.  In a nutshell, paying into a pension reduces your taxable income, and therefore less CMS is payable when that income year is taken into consideration, the following year.

For example if you earn £20K per year, you pay CMS on 20K.

If you pay £2K per year into a pension, that is subtracted from your income, meaning that you only pay CMS on £18K.

Note.  You have to provide CMS evidence of contributions if you pay into a private pension, not through salary.  I.e,  Send them your pension statement showing your contributions for the tax year, after the tax year has ended.

Regulation 40 of The Child Support Maintenance Calculations Act 2012 enshrines in law that child maintenance payments can be reduced to take into account pension contributions, but a past tribunal case, confirmed that CMS can consider a limit on the transactions.

Despiter the fact, that since April 2023, the government have allowed people to contribute £60,000 per year into a Pension, the CMS have their own view.  CMS Policy and Procedures advise staff to consider if pension contributions are excessive.  They do this by using two tests.

Whats Best?  A Work or Private Pension.

This is a blog concerning Child Maintenance and the Child maintenance Service policies.  Its not an investment blog, nor does it provide financial advice.  You should do your own research and consider independent financial advice. 

From a non investment view, we would suggest that your work pension is the easist to manage when it comes to the Child Maintenance Service.  This is because normally your income reported to HMRC is after pension deductions.  As a result CMS will not know how much of your salary has been reduced by the pension as they only see the gross income after the pension has been removed.

However some employers take the pension after deduction of tax and National Insurance.  This means CMS see the whole income.

Where someone pays into a private pension, CMS see the whole income, and have to make a deduction for the private pension, once evidence (in the form of the annual pension statement), is provided.

This means that each year the CMS produce a calculation based on a tax year, and then you have to send the pension statement into claim the reduction.  Do not send it in before the calciulation as CMS staff wont be able to adjust until the Annual Review is complete.  The Annual Review is automatic, and done by computer and this prevents staff from adjusting the calculation, before it is produced.

Test One:  Are the contributions appropriate for the age of the person contributing?

They test this by looking at the pension contributions being made and compare it to defunct Financial Services Agency (FSA) guidelines try to establish if someone is trying to avoid maintenance by paying into a pension.

The starting point is that by paying 12% of a salary to a pension, its not excessive.

Above 12% they make an age based comparison using the old FSA guidelines:

Age contributions started

Required % of income

30 12 - 18%
35 16 - 22%
40 18 - 25%
45 25 - 30%
50 30 - 45%
55 45 - 70%

So in theory, someone who is 50 years old can start making pension contributions of 45% of their salary.

The important thing to remember is that legally you can put £60,000 per year into a pension, where as CMS use the percentages above as a guide.  Whats more, in recent months CMS have been telling people at the top end of the age range, 40 plus for example, that because their pension started 20 years ago they can only put in the 12-18%.

We do not think that is fair and that should be argued.  Someone may have opened a pension when under 30, but may not have put enough contributuions in, or made some bad investment decisions, therefore we feel that CMS have no grounds to stand on regarding this, and the only bar on pension contributions should be the 60K annual contribution allowance.  Please get in touch if CMS are telling you otherwise.

Test Two:  Do the Pension Contributions provide a pension benefit greater than current income?

In short they look at the pension benefit statement.  If that shows that the pension benefit is going to produce an income greater than the current income, contributions are probably excessive.

For example, someone earning £20,000 should not be contributing so much that they will have a likely pension income of £30,000.

Remember, pension contributions, must not be done in order to avoid paying child maintenance.  They must be made to provide a pension.

Tip:  Pay a regular amount, avoid making single contributions at the end of the tax year, to lower future liability as this might be considered to be due to avoid paying maintenance.  

If you dont understand pensions, I have made a video to try to explain how they affect CMS liability.  Neither this blog, or the video, should be considered to be financial advice.  

One thing to note, is that where pension contributions are made to a private pension, ie from someones bank account and not from by salary, the pension relief needs to be claimed.

To claim, the pension statement which shows the contributions, and the tax relief applied  needs to be sent to the Child Maintenance Service.  The most efficient way to do this is to upload the full statement to the portal.  In quiet times of the year, the calculation will then normally be lowered from the next payment.

Higher rate tax payers can normally claim back higher pension tax relief via their tax return.  In order for that contribution to be taken into account, the HMRC tax calculation should be sent to the CMS.

Further Information:

Child Maintenance - Book available from Amazon.co.uk

   Buy Now

Child Maintenance Regulations Concerning Pension Contributions

   Regulation 40 Legislation


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    2022/12/14

    CMS Telephone Number

    How to Call the Child Maintenance Service

    These are the contact details you need when dealing with the Child Maintenance Service (CMS) and other organisations in connnection with CMS cases.


    For Current Child Maintenance Service Cases

    Child Maintenance Telephone Number 0800 171 2345

    Child maintenance Email Address UK  use correspondence@dwp.gov.uk 

    Note the email address does not go direct to CMS, but via the DWP.


    Alternative Child Maintenance Telephone Number:  0800 232 1956

    The alternative telephone number is the Northern Ireland Phone Number.  Some people have found it easier to contact the CMS via the alternative number. 

    If calling from overseas try dialing   00 44 800 171 2345 

                                                    Or    00 44 800 232 1956



    New Child Maintenance Cases


    You have to go via Child Maintenance Options first.

    www.gov.uk/child-maintenance


    Subject Access Request (SAR)


    To obtain your information that the CMS holds about you, a Subject Access Request or SAR needs to be made.  Never contact the CMS for a SAR.  Go direct to the DWP who handle the SARs.

    Fill in the application form at:

    https://secure.dwp.gov.uk/personal-information-request/name

    You can apply for your information by post but it will take a lot longer.

    Include a description of the information you want, and we suggest you give them a date from or to, to avoid being swamped with information.  

    Any request needs to include:

    ·           Full address

    ·           Date of birth

    ·           National Insurance number

    ·           Your telephone number if you’re requesting call recordings

    ·           Your full name


    If you want a copy of any call recordings they only keep them for around 14 months.  You must ask specifically for the call recordings.  If you dont ask, you will only get paper notes.


    Post your written request to:

    Right of Access Requests
    Mail Handling Site A
    Wolverhampton
    WV98 2EF

    Further Information

    https://www.gov.uk/guidance/request-your-personal-information-from-the-department-for-work-and-pensions

     

    Universal Credit

    If you lose your job, you should sign on immediatly.  Do not wait for the P45.  You should also tell the CMS at the same time.

    You will need to evidence the job loss to the Child Maintenance Service, by sending them a copy of the P45.

    Universal Credit Telephone Number: 0800 328 5644

    Welsh language: 0800 328 1744

    Textphone: 0800 328 1344

    Monday to Friday, 8am to 6pm

    Find out about call charges

     

    Department for Work and Pensions

    If you have a complaint, you need to clearly mark it as a "Complaint"

    Complaints and Correspondence Review Team

    Post Handling Site B

    WOLVERHAMPTON

    WV99 2GY

    DWP Complaint Email:  correspondence@dwp.gov.uk

     

    Report Benefit Fraud

    Receiving Parents:  If someone is claiming to not work, but also claiming universal credit you can report that to the DWP via the National Benefit Fraud Hotline.  This is not the telephone number for reporting child benefit fraud.  Thats via HMRC.

    Benefit Fraud Telephone Number   0800 854 440

    Textphone: 0800 328 0512

    Or write to them at: 
    National Benefit Fraud Hotline
    Mail Handling Site A
    Wolverhampton
    WV98 2BP

    https://www.gov.uk/report-benefit-fraud


    Report to HMRC that someone is avoiding tax to pay less maintenance

    Are they doing jobs cash in hand?  Not declaring income

    Report via this website:  https://www.gov.uk/report-an-unregistered-trader-or-business

     

    Our Suggestions to Help

    Expect calls to take some time.  Hold times for CMS are horrific. 2hrs is quite normal.  So before you dial the child maintenance telephone number, we suggest you do the following.


    1    Whenever we contact the CMS, the first thing I do is to put the kettle on, and boil some water to make a cup of tea / coffee.    

    2.    Make sure before you dial, you have a toilet break.

    3.   Have something to eat to calm your blood sugar down, and so you will less likely to be very annoyed with them.

    4.    Have paper, pen, CMS reference number to hand.

    There is much debate on social media about using the CMS portal. 


    We recommend you use the portal as it sends information direct to your caseworker.  We understand that some people like to send recorded delivery letters, however there is a flaw to this.  CMS post is handled by a mail company who receive the letters you send and then have to scan them to the CMS.  That just makes it easy for something to go wrong.

    If you use the portal it shows on your CMS file around 30 minutes later, and is visible to a caseworker.  With this in mind, I have in the past uploaded and then called the CMS, in the knowledge that my letter is with them at the point I speak to them an hour or so later.

    You have to call CMS to get initial access to the portal as they dont by default send you a password.

    #childmaintenanceservice
    #cms
    #childmaintenanceuk

    2020/09/10

    Temporary Care Changes




    The Child Maintenance Service only changes shared care if the change is considered established.  This does not mean forever but for the longer term.





    Around the 23rd March 2020, the CMS began classifying shared care changes due to Coronavirus as temporary.  This has meant that whilst some parents are accepting of that, some parents are using Coronavirus as an excuse to stop shared cares changes being processed, or to alter existing patterns of shared care.  

    For example "You cant have the children for the next few weeks because you work in a hospital"

    This would be a temporary change, but the receiving parent might be using the change to say its permanent, and hence get more money.  A paying parent would be in right to challenge this as it is a temporary arrangement and should not affect care.

    The trouble is that many are unsure of the rules on what exactly is a temporary change.

    So I thought I would write to the CMS and establish, what defines temporary, and what doesnt.  This is their comment.

    DWP Response

    "We have some information in relation to your request.

    You asked for the definition we have of temporary or permanent. We hold no information on this although we may consider a period of around 12 weeks. 
    However, you asked this with regard to where a shared care arrangement had changed temporarily due to Covid19. Should a paying parent advise they had  temporarily changed the arrangement, we would treat this as temporary hence the change would not be reflected on the assessment. Similarly, should a parent advise the change is permanent, we would look to treat this as a permanent change and seek the view of the other parent ahead of reflecting the permanent change to the assessment."


    So there you have it.  If a change to shared care has been refused on the basis of a temporary arrangement, you need to ring them 12 weeks later and ask for it to be applied to your case, as the change they have determined as temporary, is actually permanent.  That is assuming you have not done a mandatory reconsideration in the meantime.