Question Time: Can salary sacrifice cut student loan & savings tax cost? A Bridesmaid refund! And, state pension tax?

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1:31I do wonder what that's going to be about. This is our Question Time edition, in which I answer your questions about absolutely anything and everything, within reason. This week, you asked me, can boosting your pension contributions cut the cost of student loans and savings tax? Then an inspiring tale of a successful refund on a bridesmaid. Well, a bridesmaid's dress, anyway. How will not paying tax if you only get the state pension work in practice? with a man who's hitting 50 who wants to know what he should be looking at financially. And we finish by you asking me what I prefer to do. Who wants to be a millionaire or celebrity traitors?

2:11Play the theme tune. I got bills. I got pay. So I'm going to work for the world. I got a house. I got a fee. So I'm going to make sure everybody eats. Right, I've got podcast producer Matt, now better known as the curator of the questions. Hello, sir. What questions do you have for me today? Hello, I've got a really nice mix of questions and a really good success story. I hope I have a nice mix of answers for you. I hope so too. That's the difficult bit. Right, what have you got? We'll start with one from Colin, if that works for you. Yeah, well, I have no idea what the question is. Colin sounds perfectly legitimate.

2:54Depends what he's going to ask me. He's emailed in to martinlewispodcast.bbc.co.uk. Hi, Martin and Matt. Thanks for including me, Colin. He says, thanks for some really great advice. I feel like I've benefited from it. If I heard you correctly, you've told us you can increase pension payments in your workplace pension to reduce your tax rate by taking gross pay below the higher tax level. The question I have is, could you do the same to reduce your income to below that that generates a student loan repayment? It seems that if you can, you can gain in both ways. improve your pension part and avoid the repayment to student loans?

3:28What an interesting question, Colin. And I think it's actually really worth talking through this, not just in the student loan scenario, but lots of other scenarios. Now, let's start with the higher rate tax threshold for paying tax. If you earn just over£50 ,000,£50 ,270, I think it is, then you start to pay tax at the 40 % rate, which means all income above that you will pay income tax of 40 % on. But also the fact that you're now a higher rate taxpayer excludes you from a couple of things. The first one is your personal savings allowance is reduced. The personal savings allowance is the amount of interest you can earn each year outside of an ISA and not pay tax on it.

4:12For a basic 20 % rate taxpayer, you get£1 ,000. For a higher rate taxpayer, you get£500. So if you were to increase your pension contribution so that your gross income after pension contribution was below the high rate tax threshold, you know, let's say you earn£50 ,500 a year and you increase your pension by£1 ,000 so you now earn£49 ,500 a year, you become a basic rate taxpayer and therefore you get your£1 ,000 of interest from savings tax free. Similar is for the marriage tax allowance. The marriage tax allowance is for basic rate taxpayers married to a non-taxpayer. So similar, increasing your pension contributions could enable you to get the marriage tax allowance.

5:01Again, a slightly different one at a different level. But currently, if you get child benefit, that is clawed back in the high income child benefit charge once you start earning£60 ,000 and it goes completely once you start earning£80 ,000. But again, increasing your pension contributions lowers your gross income that counts for that figure and could mean you are eligible to get more child benefit if your earnings are between £60 ,000 and£80 ,000. So, having done all that preamble, Colin, and kept you hanging on tenterhorts, how does it work on student loans? And the answer, I'm afraid, is not as well.

5:39So, if we take the scenario that the current Plan 2 student loan threshold, and Plan 2 is the student loan that people in England who started university between 2012 and 2022 get, the current Plan 2 student loan threshold is£28 ,470, I think. So if you earn£29 ,000, you're asking me if I put£1 ,000 in my pension so I earn£28 ,000, does that mean I wouldn't have to pay towards a student loan? I'm afraid not. I'm afraid your pension contributions do not reduce your eligible income in the context of student loans. There is one way it would work, though, and that's if you were to make pension contributions via your employer through a specific salary sacrifice scheme.

6:26Now, many people make contributions not through salary sacrifice and some make through salary sacrifice. In salary sacrifice, instead of you putting money into your pension and your employer matching it, what happens is you say to your employer, and the employer has to offer this, I would like to reduce my income by£1 ,000 and I would like you, my employer, to put that£1 ,000 into my pension for me. Now, the reason this is done is because that means that you don't have to pay national insurance contributions on your pension, which is a basic rate taxpayer is 8 percent and as a high rate taxpayer is 2 percent.

7:04And your employer doesn't have to pay its national insurance contributions. And some good employers will actually give you those national insurance contributions. This has been much in the news recently because from April 2029, the government in the budget just announced that they will be reducing the amount you can salary sacrifice. they'll be capping it to£2 ,000 a year on pension contributions. But going to your question, if you were to do your pension contribution via your employer through salary sacrifice, and that reduced you from£29 ,000 to£28 ,000, rather than you making the pension contribution, then that does work in the event of student loans.

7:44It's a brilliant question. I hope you understood my answer. It's a bit complicated, but it is one worth thinking about in that particular scenario. OK, producer Matt, second question in your format structure is a caller. I feel like doing a little drum roll or something, but you're wrong. What? Match-breaking format? We have a caller, but she doesn't have a question. She has a success story. How lovely. Sarah's in Halifax. Hi, Sarah. Hello, are you all right? Hello. Hello, Sarah. Tell me your success. I'm delighted to hear it. um it's a success story that's totally down to what i've learned through listening to the podcast and reading the weekly emails um so we got married in september this year and in preparation for that i bought a bridesmaid dress back in november 2024 so it was a large online retailer stroke department store and got the dress um person tried it on, fitted fine.

8:47So then we got it out in August, went away, got it out in August to have the final try-ons and the beads on the dress started to fall off due to faulty threads. So I contacted the store and asked for a refund, a replacement, and they said, no, it's outside the six months returns policy. So I cited sad fart at them and they still declined. So just to interrupt for those people who aren't sad farts like we are, sad Sad fart is my mnemonic for remembering your rights. When you buy an item, it must be of satisfactory quality. That's your S. As described, that's your AD. So you've now got sad. Fit for purpose.

9:27And so that's F.A. Last a reasonable length of time. Clearly, you've not worn it. The beads are coming off. It was not of satisfactory quality and did not last a reasonable length of time. Therefore, under the sad fart rules, it is faulty. You carry on with your story. OK, thank you. So they said, no, we're not doing a refund. So then I went to the credit card company to complain under Section 75. And I can see why he married you. So they declined saying as I'd bought the dress for a bridesmaid, it wasn't covered. So I thought, right, that money's written off. I've done what I can. But then on a recent podcast, you mentioned, Martin, going to the ombudsman.

10:11so I went online, filled in their form, attached the receipts and the emails and the proof of what I'd complained about which was very easy and they came back fairly quickly saying I needed a final decision from the card company so I went back to the card company, asked for a final decision saying that I need that so I can go into the ombudsman and I also put in that if I'd bought a present for someone and went to wrap it and it was faulty I should be covered under section 75 which essentially is what's happened with the dress. So then I got a full refund and a goodwill payment on top. Well done you.

10:48And even more bizarrely, Martin, it's your fault that me and my chap actually met. Really? How? Yeah. So 10 years ago or more, there was on one of your weekly emails, there was a mention of this fun online game you could play. so I signed up for it started playing and some of the people who I met on there became friends on Facebook and through that I met my husband well it wasn't my husband at the time but he is now where was my invite to the wedding after all that oh how lovely sorry a bit late I'll tell you what's very interesting I'm go go I'm I'm delighted to hear and hopefully you'll live happily ever after.

11:35Thank you. What is interesting for me is you are in a grey area if we're being really honest because the grey area on section 75 and for those who don't know, section 75 says that if you even part pay on a credit card for an item that costs between£100 and£30 ,000 the card company is jointly liable with the retailer and that means just as you did you can choose to go to the credit card company rather than the retailer Now, I would say the retailer was wrong to say you're not within our six months returns. This was a faulty item. You had legal rights at the retailer. But as you probably know, the difficulty is the only way you can then take the retailer on if they refuse is to go to court.

12:15And court is not the easiest thing, even if you do the money claim online, which is the online court route. Whereas if you go via the credit card company, then you can go to the ombudsman and the ombudsman is easier than the retailer. So it's not that you didn't have rights with the retailer. it's that enforcing them can be trickier with the retailer if they're fighting it than it is with the credit card company if they're fighting it. Now, what's interesting for me is the rule on Section 75 is always difficult if the purchase is for somebody that is not directly for the credit card holder. But what I find fascinating about your case, and, you know, it's one that could be discussed.

12:49and if we did have juries for these type of things, it's a classic thing a jury would discuss, is of whose benefit is a bridesmaid's dress for your wedding? Is that for the bridesmaid's benefit because she's wearing it? Or actually, I think there's a perfectly arguable situation here that to have the bridesmaid dressed appropriately at your wedding is a direct benefit to you. And I think it's that grey area where the firm probably settled up going, it's a grey area. We don't know what the ombudsman will rule. It's going to cost us quite a bit to go through the ombudsman process. It's probably just easier to settle up than to have us go into that situation.

13:30Now, of course, I don't know any of that happened, but that's my intuitive interpretation of why they settled. Does that make sense? You see what I mean? Yeah. And I wonder if I hadn't cited the ombudsman, if they would have actually paid out or not. Well, I'll tell you something very interesting. I once spoke, and this person is going to be furious at me saying this, it was in a different industry, it wasn't financial, but it was the head of professional services at a regulated sector that has an ombudsman. And they said to me that once people say they're going to the ombudsman, because there is a fixed cost, for the firm if you go to the ombudsman they look at it again and in over 50 percent of the cases they settle so literally the threat of going to the ombudsman because of the increased cost so i would actually always before i go to the ombudsman i tell the firm i'd like you sort this in seven weeks in seven days or i'm going to the ombudsman so that's sort of a pre-emptive i'm going to go to the ombudsman when you go to the financial ombudsman they have to pay you know the firm has to pay because you've gone to the financial ombudsman so you can almost do it in a pre-emptive way and because it's a credit card even though it's a retail transaction this would be in the financial ombudsman that is all absolutely fascinating i'm so delighted you got in touch thank you so much and thank you so much for all you do because you've helped so much over the years and also helped us find each other hey matt can we put some romantic music on this please absolutely cheers thank you for calling all right thank you bye Bye bye.

15:01Cheers. Bye.

15:11Oh Matt, I absolutely love that one. It was. That made me very happy. The same. I feel good off the back of that. Quite right. So where are we going next? Got a question off the back of the budget. Yeah. Jinx has sent this one in. I have a tiny private pension,£100 a month. That on top of the state pension I get today puts me over the threshold for paying tax, so I pay tax and have£7 deducted each month. Is that the tiny amounts the Chancellor's talking about? Yeah, so let's just backtrack on this. I suspect this is someone who's seen my interview with the Chancellor that I was on my TV show and I put on social media.

15:47And it was a really interesting one because I asked the Chancellor, we know that from 2027 someone on the full new state pension will start to pay tax even with no other earnings and that's because from April 2026 the full new state pension is only about£25 below the personal allowance the amount that you can earn each year before you pay tax on it And as the state pension must rise by a minimum 2.5 % because of the triple lock and the personal allowance is frozen until 2031, by definition, from 2027, someone on the full new state pension will be earning more than the personal allowance. And certainly in 2028, 2029, that will continue to happen and be even more so.

16:35So my concern when I answered the Chancellor about this, she'd mentioned something in the budget about not having to do self-assessment. and I wanted to understand from an administrative basis how she was going to protect and I asked a question because I had 6 ,000 questions come in I asked a question from one of my viewers you know my father is an 85 year old with onset dementia is he going to have to do a self-assessment return in 20 and the Chancellor answered and then I caught something in her answer so I said sorry are you saying they won't have to do the self-assessment return or are you saying that people won't have to pay tax and she said no I'm saying that people who get the full new state pension and have no other earnings will not have to pay tax in the terms of this parliament.

17:21Now what was fascinating is and I think in the budget that's what she thought she had said but nobody picked up on it. Everybody thought she just meant they wouldn't administratively have to do a self-assessment but what she actually meant was they wouldn't have to pay tax. So I was a little bit gobsmacked at the time and the of you has gone everywhere on the back of it. And then I followed it up by saying, what about an edge case of someone who has the full new state pension and£50 a year, so nothing, private pension? And she said, no, the guarantee is only for those people who have the full new state pension.

17:58So, Jinx, I'm afraid to say that in your case, that you're a tiny bit over the threshold, because you have other income,£100 a month, you will have to pay tax. Now, where this gets really interesting, and I just, two things the Chancellor did say that I think is very important to reiterate. One, she was talking about from 2027 onwards, and two, she said, we are working through how we will do this. So, the exact way it will work has not been formulated. But in my head, this did bring up a few issues. The first is, and this might get a bit technical, and I think Jinx is potentially in this situation.

18:36You could have somebody who has the new state pension, but doesn't have the full new state pension, they're a few years short, has a private pension that tops it up a little bit, is earning over the threshold, but less than the full new state pension. But because it's a mix of state pension and private pension, would have to pay tax on it, that does feel a little bit unjust, that you could have a state pensioner who's put a tiny bit into private pension savings and therefore actually gets penalised and has to pay tax from it, even though they're earning less in total than a full new state pensioner.

19:12You equally have the problem that there are some people on the old state pension now who get the basic state pension and the second pension, the SERPs pension on top, who are already over, just on state pension income, over the personal allowance and what is going to happen to them. So I've had a lot of questions on this because obviously it was my interview with the Chancellor that then went everywhere and everybody realised exactly what the Chancellor was saying. But I need to be honest that I do not at the moment know exactly how this will be put into place and I don't think the Treasury knows at the moment exactly how it will be put into place.

19:49So there aren't any answers and I don't see anything coming in before April 2027 anyway. So my answer to you, Jinx, is based on what I know at the moment, yes, you will have to pay tax, but nothing is completely rock-solid certain on the way that this will work. OK, so we're at that point of the show. You've just asked me a technical one. I think this is where you ask me your silly question. Martin, you're always correct. Actually, you're not. This podcast, you haven't been. No, I got you wrong. Yes, I win. I beat Martin. A fun question. So actually, I'm going to do a little call out now. So you listening, send in a question for Martin.

20:31A fun one, one where we get to know him a little bit better. You know, we ask about food. You asked me about whether I prefer to fight 10 duck-sized men or one man-sized duck. I can't quite. And yes, this is the light relief section of the podcast that we want to throw in. So if you have ridiculous and silly questions you would like to put to me and challenge me so I have to try and come up with something on the spot that's a little bit outside of the money area. Do get them in. And those ones I'd definitely address to dear Matt. Yes, please do. Send it to martinlewispodcast.bbc.co.uk. So I've come up with my own one.

21:08OK. Would you rather... That means we're short. Can you tell that? That's a producer there, everybody listening. That's Matt going, no one's sent one in, so I've had to come up with one myself because I like doing this in the format point. So help him out. I do actually like to get to know you a bit more and ask you these weird questions as well. The weird thing is, we've not actually properly met. No. I mean, you came to my TV show when it was in Manchester, and I didn't get to say hello to you. No, did Rosie tell you? I didn't even know you were there. Yeah, so I was actually, I wasn't going to tell you this, but I will tell you this.

21:38I was sat next to your uncle. Yes. And you came up and had a little chat with them. And me, I was there with Lauren, who, Lauren does our socials. And we did a little wave and completely blanked. I didn't know it was you. Did you think I was a fan? Did you think I was a big fan? Well, you are, so it's fine. But Matt does this from Manchester and I do it from London. So we're not... Give me your question, Matt. We're going on too long. Who wants to be a millionaire or celebrity traitors? Which one would you rather do? I've already done Millionaire. I did it, I think, in 2008 or 2009 with Angela Rippon.

22:15Wow. And we got to the£250 ,000 question. Okay. And do you want the question? Go on, if you can remember it. So the question was, which one of these comes from the Greek for pebble worm? Is it anaconda, conga eel, crocodile or iguana? There you go. This isn't a mastermind question. It's hard, isn't it? Well, we went through a long discussion. Angela, and the problem with you do something with Angela Rippon, and I've worked with Angela for many years, one of my first jobs was with Angela, is she's very authoritative, and she went straight away, it's anaconda. And I'm going, but isn't that a South American animal?

23:02I couldn't quite get there. And then I got towards later, and now in those days it wasn't time, so we did it for about an hour. No. This question, it felt like me, we were talking about this for about an hour. And then we got on, and my big thing was, I didn't think that an A was a Greek ending. I thought an A was a Latin ending, from my memory of that at school. So I wasn't sure. And then Chris, I think, said, because it was Chris Turb. Hey! So it was Chris Tarrant. And he said, final answer. And Angela went, final answer. And I went, no, no, no. I don't think it's right. Let's just take the money.

23:32It's for charity. Let's take the money. And we took the money. And the one I had suspected it was, it was. So give me your guess. What do you think it is? Iguana? It's Crocodile. Crocodile. And it was crocodile. So we got the, I think it was£125 ,000. So we did well. As for Celebrity Traitors, well, it's public that I was asked to do the first series and I wasn't really into it at the time. So I said, no, regretted it later. And I don't know if I'm allowed to tell you about the second series. But actually, you know what? I'm not doing it. So I'm not under contract. I'd love to do the second series.

24:07And I have been asked. But unfortunately, my schedule does not allow it because I've got my live telly show on at the time they're filming it. I'm gutted. I'd so love to be doing it. It's so good. I know, it's really gutting. I'm watching that whole first one knowing I could have been in there but wasn't. And I was like, oh, yeah, so I've done Millionaire and I would like to do Celebrity Traitors one day. Do you think you'll be good at Traitors? Do you think if you played it you'd spot the traitor? I'll tell you what, honestly, and do get in touch with your thoughts on this, my slight worry about it is if I was a traitor, because my whole reputation is about being trusted and trying to do the right thing, would it be damaging?

24:45Or would people know that it is just a TV show? Yeah, some would, some wouldn't. That has gone through my head, but I want to do it anyway. My daughter loves it, so there we go. Right, let's go on to our next question. Now, I suspect at this point, Matt, you have another caller for me. I do. We have Peter in Ludlow here. Hi, Peter. Hi, Matt. Hello, Martin. Hello, Peter. What's your question? So my question is, it was my birthday last week. Happy birthday. Thank you. Thank you. I turned 49 and it's got me wondering about what are the things I should have done or should be doing by the time I'm 50 in regards to my finances.

25:28Have you done a bungee jump yet? Parachute jump? No. Okay. Add them to the list. Right. But your financial, I think, is probably what you're asking me about, yeah? It is. Yes. Yes. Oh, what an interesting question. So I'm 53, so I'm in a relatively similar boat to a few years older. There's nothing hard that is happening at 50. But there are starters to the time that, you know, was now working up towards your 17 years away from state retirement age. I don't know when you would like to retire in itself, whether you will stop working, whether you won't stop working. And we start to get into the perspective, sorry, this is going to sound really depressing, where things that rely on being cheaper because you're going to live a long time or be a long time with a good health span start to get more expensive, if that makes sense.

26:21So now there are some easier ones to look at here. Term assurance. I don't know if you know what term assurance is. No, I don't. It's a life insurance product that you would get to protect your loved ones or perhaps to protect your loved ones in the event that you were to die. Now, the simple one to explain is level term insurance. That's when you get a fixed amount of protection that will pay out if you die within a set time. So, for example, I don't know. Do you have children? I do. How old are they? So one's at university. He's just started this year and the other is 16. OK, so actually, what's quite interesting there is your dependents, they're nearly not dependents anymore.