Student Loan Repayment and Pension Contributions

I’m self-employed and a basic rate tax payer. For 2022-2023 plan 1 student loans are paid at 9% on earnings over £20,195.00. I can’t seem to find any information anywhere online stating that if you put money away into a pension it will reduce your student loan repayments. However - when I fill in the pension contributions section, my student loan repayment decreases. It seems to have raised the student loan repayment threshold by my gross pension contribution total (filled in under the relief at source section). Calculations below. I’d have thought if this is supposed to happen, it would be widely publicised - “Don’t forget to fill in your pension contributions to reduce your student loan repayments!!!!” Since it’s not, I’m assuming I’m doing something wrong? CALCULATIONS I’ve simplified the figures just as an example as to what’s happening: CALCULATION 1 - Student Loan Repayment £432.45 I expected the calculation to be as follows: Net earnings (after expenses deducted): £25,0000 Earnings, minus student loan repayment threshold: £25,000 - £20,195.00 = £4,805.00 Student Loan Repayment: 9% of £4,805.00 = £432.45 CALCULATION 2 - Student loan repayment £432.45 But, the student loan repayment threshold seems to have increased by my gross pension contributions: Gross pension contributions (relief-at-source): £3000.00 Student loan repayment threshold + gross pension contributions: £20,195.00 + £3000.00 = £23,195.00 Earnings, minus the increased £23,195.00 threshold: £25,000 - £23,195 = £1,805.00 Student Loan Repayment: 9% of £1,805.00 = £162.45

Hi,

If you pay in to a personal pension, whether monthly through your company payroll or directly as a lump sum, student loan contributions are worked out using your gross pay, unless you pay in to your pension by salary sacrifice.

You can complete a Self Assessment tax return to have the pension contributions taken into account. For each £1,000 you pay in to your pension, £800 net, each year you could pay around £90 extra in student loan repayments.

Thank you.
 

I am experiencing the exact same thing, that my student loan repayment amount is being reduced as if my income does not include my pension contributions. The response above sounds inattentive to the question, as it mentions company payroll, and then merely tells us that the way it works is contrary to what the original poster (and myself) are seeing in the calculation. So there's a mistake in the calculation, is there? What are we supposed to do about that?

Hi,

You would need to make sure that the pensions contributions are in fact correctly declared. If you  make these under the net pay arrangement, then full relief has already been given and should not be on the return.

If this is not the case, please contact the student loans team as the contributions should not affect your payments.

Thank you.

 

Hi HMRC Admins, My employer has stated that my SLC repayment is calculated on my (gross - salary sacrifice) * 0.09%. This means that my repayment to SLC is below what i expected the 9% value to be. I have challenged them on this and they have pointed me to this thread. It seems this means that if I choose to pay more into my pension I can reduce my SLC repayment level as a by product as that further reduces the gross amount they calculate the 9% on. This doesn't feel right to me, and means that I will take longer to pay back the remainder of my loan if I increase my pension etc. I consulted with the SLC and they said it should be monthly gross @ 9% above threshold however my employer asserts its (gross - salary sacrifice) to arrive at a reduced gross for the 9%. Clearly there are conflicting perspectives here so would you please concretely confirm what the correct situation is here please. If my employer is correct then fine, on the flip side I wouldn't mind as it would mean the loan is paid off quicker and less interest is accrued. Thanks

Hi hardcorejunglist

In this case, your employer is correct - your student loan repayments are based on your gross salary, after any salary sacrifice.
If you would like to make extra payments towards your student loan, though, you can find out more here -  Repaying your student loan

Thank you

Hi HMRC Admin, I currently live abroad in the EU and contribute 5% of my gross salary to the national pension system there through my employer. Should I expect the student loan repayment to reflect this reduction, as per the above messages, or is this a UK only system? i.e., my tax card shows, my gross salary, what I contribute to my pension + other deductions before, showing my then total taxable income. Thank you, 

Name removed admin .

Hi,
How much you repay depends on your income - the amount you earn (including things like bonuses and overtime) before tax and other deductions.  
This means, using your earnings figure before you contribute to your pension through your employer.  
Please have a look at Repaying your student loan  
Please have a look at the Student Loans Company website at Student Loans Company.  
For more information, please contact the Student Loans Company on +44 141 243 3660 (Open 8.00am to 8.00pm Monday to Friday 9.00am to 4.00pm Saturday).
Thank you.

From what HMRC Admin 5 says above it sounds like it's possible to reduce the income from which your student loan is caluclated by making some pension contributions. If I pay into a Teacher's pension AVC through my employer each month will this reduced the income from which my student loan repayments are calculated? It says on their info sheet 'AVC payments are deduceted from your salary before tax'.

Hi becausebe,
Please refer to Repaying your student loan
Thank you.