Does a pension lump sum affect student finance?

scottyh56

I'll be taking my pension in September and have two children at University. I have just received a "Financial Information Confirmation Form" from Student Finance England and was a little surprised to see that there's a question that asks about Pension Lump Sums received. Now I know that just because they ask about it does not mean that it counts but what is the factual position? How will taking a Pension Lump Sum affect the calculation of student grants?

In choosing the amount of a pension lump sum I don't want any nasty surprises down the road.

If anyone can tell me where to find chapter and verse on this (even the basic legislation) I'd be grateful - the information available from Student Finance is quite useless.

Thanks!

Scott

blair7412

Briefly, if it's taxable income, then yes it may be counted in asessing student loans and grants.

You can find the 'basic' legislation and amendments here, although the infromation is far from basic:

legislation.gov.uk/uksi/2009/1555/contents/made

In terms of Student Finance England's info, you might find page 19 of their guide here useful - direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/documents/digitalasset/dg_194536.pdf


Clearly I don't know which cohort your your children are in, and whether your pension lump sum qualifies for certain tax relief conditions, but it looks likely that it may well have the potential to make a difference.

One option is to ignore the form, as income is only assessed (in terms of evidence being asked for) on the tax year prior to the students' course start. So, although you may be being asked to compelte a form to confirm your income hasn't changed you may not need to provide any evidence, unless asked.

Otherwise, can you defer the lump sum untill after they have applied for their finance in the final year (thereby negating it's affect on their student support)? Thismight avoid any negative impact.

Hope that's useful.

RichandJ

Pension Commencement Lump Sums are not taxable income. They are, as one the old names of Tax-free Cash implies, tax free.

Afraid I don't know the position on whether they are then taken into account re student finance OP.

scottyh56

Thanks for those links!

The lump sum is absolutely not taxable.

In the student Finance regulations, Sch 4:

"5.—(1) For the purposes of determining the taxable income of an eligible student’s parent, (“A” in this paragraph) any deductions which fall to be made or exemptions which are permitted—(a)by way of personal reliefs provided for in Chapter 1 of Part VII of the Income and Corporation Taxes Act 1988(7) or, where the income is computed for the purposes of the income tax legislation of another Member State, any comparable personal reliefs;(b)pursuant to any enactment or rule of law under which payments which would otherwise under United Kingdom law form part of a person’s income are not treated as such; or(c)under sub-paragraph (2),must not be made or permitted."

Contracting elements of this:

"any deductions which fall to be made or exemptions which are permitted..... pursuant to any enactment or rule of law under which payments which would otherwise under United Kingdom law form part of a person’s income are not treated as such..... must not be made or permitted."

Nightmare as to what this means!

I called Student Finance England after originally posting this. I got the message from someone who did not know the answer (but then put me on hold) that only taxable income is taken into account. Pinch of salt taken but that is what their line is. He could not say why the question was asked.

Thanks for the useful reminder that income is only assessed (in terms of evidence being asked for) on the tax year prior to the students' course start.

dicewright100

Has anyone cleared this up yet?I am in the process of filling in the same form,if I knew I was going to get hammered on my Tax free lump some which I'll receive in Jan 2013 then I will try delay taking my pension !I can't understand the jargon they use in their notes of guidance,so in a nutshell do I just include my monthly taxable income from my pension for last few months of financial year i.e. January to March or do I also have to include the Lump sum (tax free) that I will receive in January,my hunch is 'yes' as the form asks you to include all income ?

scottyh56

Have just reread my post. To clarify:

1) I called Student Finance England
2) They said only taxable income is taken into account

"He could not say why the question was asked." - the question I refer to there is the question about lump sums on the student loans form.

But I am always wary of this sort of thing because the answer often depends on who you speak to. So give them a call yourself and post back if you get the same answer because then it probably is right.

Cheers, Scott

dicewright100

Section B
Question 1
''do you expect to receive any income from salary,wages,taxable state benefits or from occupational or private pensions ?''

C.Total income from occupational pension (s)

I'll ring them and post reply!

dicewright100

Just spoke to a guy called Nick at Student Finance and he agrees with your answer Scott, in that they're only interested in Annual Taxable Pension income and not Lump sum !
Dice

Bob_at__home

I have the form in front of me. It says :
Do you expect to recieve any income from a state pension?
a Total expected non lump sum amount.....
b Total expected lump sum amount.........

They refer to your state pension not to private or occupational pensions where lump sums are tax free.
If you defer your state pension you may choose a lump some when you decide to take your pension. That lump sum would be taxable and would have to be declared. All other regular pension payments are potentially taxable and should be declared as income.
Hope this answers your query.

nergelag

dicewright100 wrote: »

Just spoke to a guy called Nick at Student Finance and he agrees with your answer Scott, in that they're only interested in Annual Taxable Pension income and not Lump sum !
Dice

I've received a tax free redundancy payment and a tax free lump sum as part of my pension, in this tax year. The Student Finance documentation is extremely vague on whether each should count. I rang student finance and they said each should count as income, because both came from a 'Taxable Source'. I know you don't have to declare ISA income because it doesn't come from a taxable source, but it seems an odd explanation that despite neither lump sum appearing on a tax return, they consider them taxable??? Don't know whether to believe the guy on their call centre or not - does anyone have an authoritative answer on this?

Kathyrose_2

Joining this late but...
I need help ?
We received a cash gift from my mum £17,000 In 2013, this money was used to pay for building work at our home in the same year.
I'm now filling in my daughters uni finance for sept 2015 and I'm confused. We have not included this as I don't believe it is classed as taxable income because it isn't from wages/ pensions etc
Have I done the right thing??
Can anyone put my mind at rest??