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  • FIRST POST
    • Anneemai
    • By Anneemai 30th Nov 17, 5:22 PM
    • 22Posts
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    Anneemai
    Question
    • #1
    • 30th Nov 17, 5:22 PM
    Question 30th Nov 17 at 5:22 PM
    I have been retired early due to ill health and are due a lump sum and a pension just over £4000 a year. If I take the lump sum it will clear some debts and decorate our home as we have not long moved in. We will then be able to live on the rest for 1yr.We are currently in receipt of Universal Credit and so would not be claiming this, but does anyone know if this will affect us applying once our year has past. Any advice please would be gratefully received.
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    • Anneemai
    • By Anneemai 30th Nov 17, 5:25 PM
    • 22 Posts
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    Anneemai
    • #2
    • 30th Nov 17, 5:25 PM
    • #2
    • 30th Nov 17, 5:25 PM
    I forgot to say am in my late 40's and my partner is late 50's with a life limiting illness.
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    • molerat
    • By molerat 30th Nov 17, 8:27 PM
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    • #3
    • 30th Nov 17, 8:27 PM
    • #3
    • 30th Nov 17, 8:27 PM
    How much is the lump sum ? Paying off the debts could be construed as deprivation of capital.
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    • AnotherJoe
    • By AnotherJoe 1st Dec 17, 9:25 AM
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    • #4
    • 1st Dec 17, 9:25 AM
    • #4
    • 1st Dec 17, 9:25 AM
    Probably best to post in the benefits forum.

    IANAL but how can paying of debts be regarded as deprivation of capital ?

    Let’s say I have £10k in savings and owe £8k. My actual net worth is £2k. If I pay off the debt, my net worth is still £2k. Nothing has changed. No “deprivation” has occurred. Indeed if I just had £2k net worth, should I borrow £10k so as not to be depriving myself of capital ?
    • GunJack
    • By GunJack 1st Dec 17, 9:41 AM
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    • #5
    • 1st Dec 17, 9:41 AM
    • #5
    • 1st Dec 17, 9:41 AM
    Is there a definitive definition of deprivation of capital? There seems to be varying views on it...
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    • Silvertabby
    • By Silvertabby 1st Dec 17, 12:11 PM
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    • #6
    • 1st Dec 17, 12:11 PM
    • #6
    • 1st Dec 17, 12:11 PM
    DWP issued a deprivation of assets warning when the pension freedoms were first announced, probably aimed at those who wanted to spend all their pension assets on cars and cruises and then throw themselves on the public purse. However, looks like each case may be treated on its own merits:

    7 Deprivation For both working-age benefits and pension-age benefits, there are rules governing what happens if you drawdown some, or all, of your pension pot as income or capital. If Department for Work and Pensions (DWP) or HM Revenue and Customs (HMRC) decide you spent money deliberately to allow you to claim benefit, or to increase how much you can claim, or you have not taken up an income available to you, then you may be treated as if you still have that resource available. This is called ‘notional capital’ or ‘notional income’. An important issue to be aware of is that DWP or HMRC have to establish that a ‘significant operative purpose’ in depriving yourself of the money was to establish entitlement to means-tested benefits or tax credits. This is not always easy to decide and depends very much on your individual circumstances. You should always keep evidence and receipts about any capital assets such as savings that you dispose of. You can seek guidance from DWP and HMRC but they are often reluctant to give a definitive response until the money has gone. The following examples show what may happen in different situations.

    Case study - deprivation may not have occurred - John decides to draw down the whole £30,000 pension pot. He has two unsecured loans of £10,000 each. He uses the ££26,414.16 he receives after tax to clear these debts and keeps evidence to show this. DWP decide this is a reasonable decision as debts have been repaid and his Pension Credit and Housing Benefit continue being paid.

    Note Repaying debts does not automatically mean you are not treated as having deprived yourself of capital for working age benefits, unlike for Pension Credit. The rules are complex so seek advice if you are unsure.

    Case study - deprivation may have occurred - John decides to draw down the whole £30,000 pension pot. He receives £26,414.16 after tax. John and Nora decide to go on holiday and spend £20,000 on a luxury cruise. When they return, John pays a credit card bill of £5,000. DWP decide he has deprived himself of £20,000 as their holiday was extravagant. The first £10,000 is ignored as this is the lower capital limit. This means they apply notional income of £20 a week to John’s Pension Credit. Assuming he had been receiving £81.90 a week on top of State Pension of £155.65 a week, his Pension Credit payment is reduced to £61.90 a week.

    Age UK factsheet 91 June 2016 Pension Freedom and benefits Page 13 of 20
    Note These examples are for illustration only and do not necessarily reflect how you will be treated in real life.

    Consider calling Age UK Advice or visiting the Citizens Advice Bureau
    Last edited by Silvertabby; 01-12-2017 at 12:24 PM.
    • capital0ne
    • By capital0ne 2nd Dec 17, 5:13 PM
    • 148 Posts
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    • #7
    • 2nd Dec 17, 5:13 PM
    • #7
    • 2nd Dec 17, 5:13 PM
    How can you live on £4k / year?
    • Silvertabby
    • By Silvertabby 2nd Dec 17, 5:27 PM
    • 1,939 Posts
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    Silvertabby
    • #8
    • 2nd Dec 17, 5:27 PM
    • #8
    • 2nd Dec 17, 5:27 PM
    How can you live on £4k / year?
    I think the idea is to claim UC.

    I don't know if the same rules apply to UC as they did to JSA - but with JSA any pension income was certainly taken into account.
    Last edited by Silvertabby; 02-12-2017 at 5:29 PM.
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