Lump Sum contribution

Seaburys

My disabled brother owns his own flat, but is becoming increasingly frail. We would like to sell his flat and move him into sheltered, rented accommodation. He lives on benefits, so we would like to place the proceeds of the sale into a pension, so that it doesn't impact his benefits - he is very poor and now quite ill. He has a small medical pension from the civil service, but no other pension provision. He is 54, so he would start to use the pension quite soon.

Can we pay a lump sum such as this into a new pension (given that he has virtually no income).

Is this a wise thing to do, or should we consider alternative financial arrangements?

Many Thanks

tanith

I am sure people will come with good advice but in the mean time does your brother claim all that he is entitled to ? If he is disabled he should be able to claim some benefits to enhance his income

Seaburys

We are pretty sure he is claiming the benefits he can ( but it's very complex). I'm just about to try and claim a higher rate of disabled Living Allowance for him (again).

Our main concern is how to move him from his owned flat, into rented sheltered acoomodation.

dunstonh

so we would like to place the proceeds of the sale into a pension, so that it doesn't impact his benefits

It may be seen as deprivation of assets. However, the larger problem is that if he isnt working, he can only pay £3600 a year into a pension. That isnt going to be enough really.

EdInvestor

Seaburys wrote: »

My disabled brother owns his own flat, but is becoming increasingly frail. We would like to sell his flat and move him into sheltered, rented accommodation.

Presumably he would need to invest this money and use the income to pay the rent at the new accommodation?

He lives on benefits, so we would like to place the proceeds of the sale into a pension, so that it doesn't impact his benefits - he is very poor and now quite ill.

What benefits apart from DLA? If he is very poor and quite ill would it not be nice if he could spend some of the money he has buried in his property to have a more pleasant life?Why should he live in penury if he has money and is likely to die young?

He is 54

He will be eligible for pension credit at 60 or a bit later, which would also include housing benefit if he had spent his lump sum.

Which is what I suggest he does over the next few years - give the guy a break, how long will he live?

Debt_Free_Chick

dunstonh wrote: »

It may be seen as deprivation of assets. However, the larger problem is that if he isnt working, he can only pay £3600 a year into a pension. That isnt going to be enough really.

He could pay the whole lot to a pension ..... but the tax relief would be limited to that arising on a contribution of £3600.

What about a purchased life annuity?

dunstonh

True. However, with benefits involved, would the purchases of what is an investment product be considered deprivation of assets in an attempt to get increased benefits?

I think it probably would be.

Debt_Free_Chick

Given that income seems to be his priority, I'd ignore the deprivation of assets angle. If they want his "assets" presumably they'll just take the income into account?

Seems like won't be giving his assets away - he'll still have them, but in a different form.

However, it's a complex issue and needs more research.

Seaburys

Thanks all for your comments. I know about the annual income limit - I was just wondering if we could put the balance of his house sale into the pension pot - not expecting any tax breaks, really to get it into a safe place. Then we can arrange some type of income drawdown mechanism if he needs it? We would liberate several thousand of it for his personal needs - just don't want to impact his application for housing benefit.

Debt_Free_Chick

Seaburys wrote: »

Thanks all for your comments. I know about the annual income limit - I was just wondering if we could put the balance of his house sale into the pension pot - not expecting any tax breaks, really to get it into a safe place. Then we can arrange some type of income drawdown mechanism if he needs it? We would liberate several thousand of it for his personal needs - just don't want to impact his application for housing benefit.

Yes - you can put it all into a pension. As you say, you will only get tax relief on a very small part (the first £3600).

Or .... look into a purchased life annuity. That has some tax advantages too, as part of the monthly income is a return of the capital and not taxable. You might find that provides better net income.

Either way, I suspect the resulting income might impact Housing Benefit and other benefits. See if you can get an appointment with a benefits adviser via CAB and play with some "what if" scenarios.

dunstonh

really to get it into a safe place. Then we can arrange some type of income drawdown mechanism if he needs it?

Income drawdown is not safe. Indeed, the FSA consider it high risk. In the last few weeks they have fined a firm over 1 million pounds for overusing drawdown and not taking risk into account.