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pension lump sum and tax credits.
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# 1
smokybabe
Old 09-12-2006, 7:30 AM
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Cool pension lump sum and tax credits.

My husband is considering taking the lump sum option from his pension and we would use it to put some double glazing in, pay 10% off our mortgage and finish off our garden. We envisage that out of this sum we would have little or no change left.
We recieve child tax credits and the childcare element as we both work full time and earlier this year my husband was on incapacity benefit for 6 months.
I know that if we take this sum we will have to declare this as unearned income, but in which way will this affect our claim?
The sum would be about 15k. We have no savings and are just about coping on our income,and trying to get the double glazing done without a loan is impossible as we don't have any surplus income that we can save, we also could not afford to take on a loan to do this.
Given that we currently owe them 1,800.00 would they want this paying back?
Would this only affect this year's claim in that we would owe them back what we have received so far?
We know the claim would be affected, we would just like some guidance as to how it would be affected please.
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# 2
fatblokexl
Old 09-12-2006, 4:42 PM
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any increase in declarable income come the end of the tax year could affect the award you have been receiving.
look at your latest award notice.
if it says we have have based your award on an income of £x you must tell us if you expect your income to go above £y... if with this pension payout you go above £y then your award will be reduced and depending on how much by and depending on how much you have already been paid may mean another overpayment.

e.g.
current income £10k = award £4000 you must tell us if inc goes above £20k

new income including pension £25k = award £2000. by the time the udate takes place you have been paid £3000 means £1k overpayment ontop of original overpayment.
(figures used for effect only and may not reflect current rates)

if there is no upper limit on the award notice, then for every £1 you earn above the income used in the award calcualtion, will mean a 37p reduction in what you are due.

e.g
original award of £1000 award based on £7k and no upper limit on award notice
you actually end up earning £8500 means a £1500 difference in income.
divide this by 100 = 15 x 37 = £555, which needs to come of the original award.
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