A legislative loophole has reportedly allowed benefit cheats to claim hundreds of pounds a month by depositing their earnings into a pension fund. A woman earning an annual salary of £26,000 has received £925 a month in Universal Credit for the last 18 months after paying her earnings into a pension fund and claiming her leftover income as £80, The Telegraph reports. Government sources told the newspaper that a legal loophole, stipulating that money paid into pension funds isn’t counted as income, has allowed sneaky claimants to have the best of both worlds – receiving taxpayer-funded benefits and boosting their retirement pots.
The Department for Work and Pensions said “clear rules” were in place to prevent such deliberate deception and that a benefit seeker’s entitlement would be “adjusted accordingly” if they were found to have used the legal trick. But reports suggest some so-called “pension loopholers” have managed to slip through the cracks and receive substantial benefits while earning above the national living wage.
Labour has announced a raft of measures aimed at cutting the spiralling costs of health and disability benefits, which are set to increase by over £70 billion by the end of Parliament.
However, the government has not taken action on the pension loophole because of its legislative position and aim of encouraging people on Universal Credit to save for their pensions.
Helen Whatley, shadow work and pensions secretary, said: “Clearly, the British public should not be topping up privde pensions for those on benefits.
“This is symptomatic of a benefits system that is well-meaning, but leads to unfair outcomes for the taxpayer.”
After coming under fire for plans to cut government spending through the welfare bill, reports suggest Rachel Reeves could water down the planned benefit reforms – which she said would save £5 billion a year – following backbench opposition to the measures.
The Chancellor will also be under pressure to fund the Prime Minister’s winter fuel payment U-turn in next month’s spending review, as well as responding to calls for the two-child benefit cap to be axed – something that is expected to cost around £3.5 billion.
The partial retreat could see benefit claimaints given “transitional periods” to seek out other suitable benefits before losing out as a result of the reforms, The Times reported.
A spokesperson for the DWP said: “There are clear rules in Universal Credit to prevent a claimant deliberately depriving themselves of earnings in order to gain or increase their entitlement to benefit.
“If a claimant is found to have done this, their entitlement would be adjusted accordingly.”
