Tuesday 27 March 2018
Work and Pensions
Child maintenance payments
The petition of residents of East Renfrewshire,
Declares that it is currently lawful for an individual to reduce the level of child maintenance payments which they are liable to pay, by diversion of income into a personal pension; further that it is unfair that a non-resident parent with a higher income than a resident parent can reduce their liability in this way.
The petitioners therefore request that the House of Commons reviews the rules which govern child maintenance and pension payments and to ensure that rules which allow for pension payments cannot be exploited to allow non-resident parents to reduce liability for child maintenance payments.
And the petitioners remain, etc.—[Presented by Paul Masterton, Official Report, 20 March 2018; Vol. 638, c. 5P.]
Observations from the Secretary of State for Work and Pensions (Ms Esther McVey):
The Child Maintenance Service calculates maintenance based on the paying parent’s gross annual income information provided by HM Revenue and Customs for the latest available tax year.
Contributions made by a paying parent to a registered occupational or personal pension scheme are deducted from the historic income figure before it is used in the maintenance calculation. This is because either the contributions themselves or the earnings from which they are paid qualify for income tax relief. It is also reasonable to make allowance for parents to plan for their future by making pension contributions.
The petition is concerned that paying parents are able to influence the amount of child maintenance due to be paid by excessively increasing their pension contributions and asks for changes to legislation to prevent this. There is already existing child maintenance legislation to prevent such diversion of income and diversion in other manners, such as into a business or to another person. Where it is considered by a receiving parent that excessive pension contributions are being made then the Child Maintenance Service can be requested under this legislation to look into the circumstances of the case. Where such a case is upheld then the amount determined to have been diverted from income will be added to the paying parent’s income for the purpose of calculating the maintenance liability.
Each application for a variation on these grounds will be considered on a case by case basis case, taking into account all the information available.
Where circumstances are potentially complex and a need for specialist investigation is needed any caseworker can refer such cases to the Child Maintenance Service’s Financial Investigation Unit to look into the case further.
As existing legislation exists to deal with pension diversion affecting a child maintenance liability the Government have no plans to change the law in this area.