[Solved] CMS and Pensions

Policy, Law, and Decision Making Guidance: Diversion of income

Considering whether there are grounds for excessive pension contributions

If you are satisfied that the parent with care has sufficient grounds for the variation and you decide to accept the variation application, then the following guidance and considerations will need to be taken.

It is important when you are dealing with a diversion of income application to clearly explain that we are solely trying to confirm whether the maintenance calculation accurately reflects the non-resident parent’s ability to pay child maintenance.

You are not saying the non-resident parent cannot use their income in any manner that they choose, but where this affects their ability to support their children, we may need to take it into account.

If the parent with care has grounds and figures we can use the information below to assist in our decision on whether excessive pension contributions are being made or
not.

A percentage of a non-resident parent’s income which could be considered a
reasonable deduction could be estimated at around 12% of the gross income figure.

However, when considering whether a non-resident parent’s pension contributions are excessive we need to have a wider view than just this percentage figure.

Therefore, when we make these decisions we would consider each situation on a case by case basis, taking into account all the information available to us.

Some examples of information we should take into account are:

- are the pension contributions being paid into occupational or private?

- are there no employer pension contributions being paid?

- has occupational/private pension amounts already been taken into account in the gross income figure? (If private pension amounts have not been declared by the non-resident parent for their gross income figure, then the gross income figure has not been reduced)

- are the non-resident parent’s pension contributions over 12% of the non-
resident parent’s gross income?

- the age of the non-resident parent and how old was the non-resident parent
when they started contributing to their pension? For example, a non-resident
parent who began making pension contributions in their 40s could be paying a significantly higher amount of pension contributions than someone in their 20s

- have we checked the FSA table for comparison purposes?

- have lower than 12% pensions contributions been paid by the non-resident
parent in the past?

Below is the FSA table for use in your decision making. NOTE: The table is only to be used as a guide to aid your decision.

Remember: It is perfectly acceptable for a non-resident parent to make high pension contributions. The non-resident parent may not consider this to be unreasonable and it may not be intended to deliberately reduce their child maintenance.

Financial Services Authority Guidelines

The FSA previously provided the following guidelines: on adequate pension
contributions (depend on the age at which the individual started making their
contributions).

Private Pension: contributions not declared and taken into account

If the private pension contributions have not been declared then you should reject the application. The non-resident parent’s income has not been reduced and they are therefore not diverting income.

Age contributions started Required % of income
30 : 12 - 18%
35 : 16 - 22%
40 : 18 - 25%
45 : 25 - 30%
50 : 30 - 45%
55 : 45 - 70%

When taking the above considerations into account, pension contributions of
approximately 12% or when also considering the age of the non-resident parent, percentages appropriate to their age could be acceptable.

Where pension contributions relate to a mortgage on the non-resident parent’s home, we should consider ignoring around 25% of those contributions.

If the parent with care does not have any figures, then we should request the non-
resident parent to provide details of their pension and salary:

- annual benefit statement- Remember the Annual Benefit statement should be
relevant to the tax year in which the maintenance calculation is for;
 -occupational pension;

 -private pension not declared and taken into account?
 -private pension declared and taken into account?
 -amount of pension contributions being paid.
- If you do not consider the contributions to be excessive, then you should
reject the application on the basis that although a ground has been stated, the
facts do not support that ground or justify further enquiries.
 -If you do consider them to be excessive, then you should proceed with the
application and seek representations from the non-resident parent

https://www.whatdotheyknow.com/request/cms_maximum_pension_allowance_ca#incoming-1346846