Pension Credit and Notional Income Advice

colin1951uk

I'm a 61 year old male and have an occupational pension that will be accessible when I reach my 65th birthday. There has been an option to take a reduced income by making a claim from 55 years and onwards but this has never interested me.

I've been on on Jobseekers allowance (for about eigth months now) and the Jobcentre recently advised me that I will be able to claim pension credit from this coming November and would be much better off by doing so.

I spoke to a PS adviser last Wednesday about getting pension credit and was told that I could indeed claim from the 6th November and could also start the process off there and then. So I answered a lot of questions about my financial situation and everything was fine until I mentioned my occupational pension which the adviser immediately (and seemingly gleefully) jumped on saying words to the effect that we need to check on that because if you take it early your savings may go over the £10,000 limit. I was asked who the provider was and I gave all the necessary details and was told nothing more would happen until the PS had gotten more details of the scheme.

I've kept thinking about that advisers attitude and over the past couple of days started Googling around over pension credit and private/personal pension schemes and keep coming across something called the 'notional income' rule which seems to be applied if someone defers taking their pension entitlement at retirement age. I'm nowhere near that stage yet however this rule may be relevant to me because of the 'take it early option' my pension scheme allows.

Now I'm beginning to wonder if the PS could force me into taking my pension early by using this 'notional income' rule and I'm hoping someone here can clarify exactly what this rule covers and whether it might be used in a situation like mine.

Can anyone comment please so that I can get my head fully around just how the PS use 'notional income' when assessing a pension credit application.

Thanks...Colin

xylophone

Your scheme's normal retirement age is 65 - I do not see how you could be forced to act to your detriment by bringing your pension into payment early, ie before your scheme's NRA.

As far as I can see, your occupational pension is a deferred pension, but you have not deferred claiming it- it is deferred because you left your company before normal retirement age.
http://www.dwp.gov.uk/publications/specialist-guides/technical-guidance/pc10s-guide-to-pension-credit/income-rules/

The situation would be different if you had reached your scheme's NRA and were still not claiming your pension.

anmarj

but he can have access to it now, before he is 65. It can be taken into account as income, whether he claims it or not,

xylophone

He could only have access if the scheme adminisitrator agreed - in addition, if he brought it into payment before the scheme's NRA, he would suffer an actuarial reduction that would affect his income for the rest of his life.
There is no indication from the OP that the Scheme in question allows a full pension to be drawn before NRA without actuarial reduction.

The standard pensions legislation sets the earliest age at which people can access their pension at 55 - there is no compulsion or requirement to do so because of the lifetime disadvantage such a choice can bring.

sleepless_saver

According to this http://www.dwp.gov.uk/publications/specialist-guides/technical-guidance/pc10s-guide-to-pension-credit/income-rules/#counts , people can be treated as having notional income where they have deferred benefits from an occupational pension scheme.

As xylophone points out, deferred can mean where you leave a scheme before you reach normal retirement age. It obviously doesn't have that meaning here. The other meaning is deferring payment of a pension after you have reached the normal retirement age for the scheme. DWP decision makers guide quotes an example (para 85453) which makes it clear what they mean by "defer":

"Asif belongs to an occupational pension scheme. The retirement age for the scheme is 60. However, it is possible to defer drawing the pension for four years after this age in return for receiving a larger income. It is also possible to apply for the occupational pension from the age of 55 but payments would be made at a reduced rate.
Asif decides to take his payments at the age of 60. The DM decides that Asif has not deferred payment of his occupational pension because he has taken the pension at the retirement age for the scheme."

So in the OP's case as he hasn't deferred the benefits from the scheme, he shouldn't be treated as deriving notional income from it.

anmarj

colin1951uk wrote: »

There has been an option to take a reduced income by making a claim from 55 years and onwards but this has never interested me.

The OP has quoted that he has an option to take it at a reduced income from the scheme, he is choosing not to take it

Notional income

[Legislation 4]
Notional income is income your customer does not actually get but is treated as getting. We may treat them as having notional income when they have:

• not taken income available to them under a personal pension plan or a retirement annuity contract

from what you have quoted.

He can take the pension early if he wishes too, he is choosing to wait until he is 65. He does not have to claim it now but it can be taken into account as notional income ie they will work out what he is entitled to under that scheme and use that as income.

sleepless_saver

anmarj wrote: »

The OP has quoted that he has an option to take it at a reduced income from the scheme, he is choosing not to take it

Notional income

[Legislation 4]
Notional income is income your customer does not actually get but is treated as getting. We may treat them as having notional income when they have:

• not taken income available to them under a personal pension plan or a retirement annuity contract

from what you have quoted.

He can take the pension early if he wishes too, he is choosing to wait until he is 65. He does not have to claim it now but it can be taken into account as notional income ie they will work out what he is entitled to under that scheme and use that as income.

But the OP has an occupational pension rather than a personal pension plan or retirement annuity contract. So my reading of this is that it's the deferred payments criterion that's relevant. And he hasn't deferred.

[Legislation 4]
Notional income is income your customer does not actually get but is treated as getting. We may treat them as having notional income when they have:

• not claimed State Pension but are entitled to it
• not taken income available to them under a personal pension plan or a retirement annuity contract
• deferred payments from an occupational pension,

colin1951uk

Many thanks for all your replies which has left my head reeling somewhat.

I've just been going over some of my policy documents and I got a bit of a shock in that what I thought was an occupational pension is now a Section 32 Unit Linked Transfer Plan or in other words a deferred annuity.

It would seem my employer at the time made the transfer (and I assume it must have been for all company employees) during September of 2006 but the actual terms of the scheme as it was does not appear to have changed so 65 years is still the earliest I can access it without taking an early reduced amount.

I don't remember having agreed to any transfer but guess I wouldn't have had a choice anyway.

I still have my policy number and other details on my past employers headed paper so I've given some wrong information to the PS anyway and I need to find out which insurance company is handling the policy. It would seem Windsor Insurance were initially involved but they don't exist anymore and it looks from Google that Reassure Ltd took their business over but nobodies ever told me anything and now I'm in a pickle.

I'll have to phone my ex employers tomorrow and get it sorted out.

I guess from what's been said that an annuity would be assessed as income then and I assume at the reduced rate. I wonder on what date the PS would assume I claim it?

Anyway I'm sorry for misleading you all and I'll have to post again when I know who's actually handling my affairs now and why they haven't contacted me in some six years! :mad:

xylophone

But can you still not access your pension until NRA (65) without actuarial reduction?
Is there a GMP consideration?

http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/sections-32s

sleepless_saver

colin1951uk wrote: »

Now I'm beginning to wonder if the PS could force me into taking my pension early by using this 'notional income' rule and I'm hoping someone here can clarify exactly what this rule covers and whether it might be used in a situation like mine.

Hmm. If it's not an occupational pension, then what anmarj says would apply, but it's worth seeking specialist welfare rights advice, and possible checking with the Pensions Advisory Service.

By the way, the Pension Service can't force you to take the pension, but they will assess you as if you had taken it. Main question is would you still be entitled to any pension credit if your pension was taken into account? You can check your position with the benefits calculator. http://www.turn2us.org.uk/benefits_search.aspx

grumpytoo

colin1951uk wrote: »

I'm a 61 year old male and have an occupational pension that will be accessible when I reach my 65th birthday. There has been an option to take a reduced income by making a claim from 55 years and onwards but this has never interested me.

I've been on on Jobseekers allowance (for about eigth months now) and the Jobcentre recently advised me that I will be able to claim pension credit from this coming November and would be much better off by doing so.

I spoke to a PS adviser last Wednesday about getting pension credit and was told that I could indeed claim from the 6th November and could also start the process off there and then. So I answered a lot of questions about my financial situation and everything was fine until I mentioned my occupational pension which the adviser immediately (and seemingly gleefully) jumped on saying words to the effect that we need to check on that because if you take it early your savings may go over the £10,000 limit. I was asked who the provider was and I gave all the necessary details and was told nothing more would happen until the PS had gotten more details of the scheme.

I've kept thinking about that advisers attitude and over the past couple of days started Googling around over pension credit and private/personal pension schemes and keep coming across something called the 'notional income' rule which seems to be applied if someone defers taking their pension entitlement at retirement age. I'm nowhere near that stage yet however this rule may be relevant to me because of the 'take it early option' my pension scheme allows.

Now I'm beginning to wonder if the PS could force me into taking my pension early by using this 'notional income' rule and I'm hoping someone here can clarify exactly what this rule covers and whether it might be used in a situation like mine.

Can anyone comment please so that I can get my head fully around just how the PS use 'notional income' when assessing a pension credit application.

Thanks...Colin

**************************************************

Hi Colin,

Be very very careful about how you play this one as they seem to make up the rules as they go along.

I worked for an infamous employer that wound me up until I told them where to stuff their job (I was constructively dismissed but got nothing) The management were all Freemasons as far as I know and I think I was blacklisted. Anyhow it was a case of signing on the dole. I was so bitter about what had been done to me that I wanted to make a fresh start in a fresh country. The Jobcentre lied to me and said that I could only look for work abroad and receive benefits after I had been unemployed for six months. Once the six months were over they said "Oh sorry its the other way round". I feel sure that this deception was done deliberately as that particular Jobcentre was as bent as a nine bob note.

For example any worthwhile jobs would be circulated among friends and family before the job cards went on the boards! For example when I enquired about one job that was perfect for me a clerk one row behind the clerk I was speaking to said "Oh that ones gone, Fred's having that!" Presumably if the employer is desperate to fill the vacancy and if all the other would-be candidates are fobbed-off Fred will probably get the job. That's how things are in a rural area where a lot of the people are related to one another.

At the age of sixty I was offered "Early Retirement". This was more money than JSA and there was no need to sign on. Government rules state that a person over sixty needs almost £150 per week to live on so about £28 per week of pension credits were included. Receipt of PCs resulted in other benefits such as free NHS dentistry and not having to pay Council Tax, life was good!

At the age of 65 the Old Age Pension became payable. A torrent of letters and phone calls were received and it was quite evident that the DWP would have greatly preferred it if I'd got into a coffin and croaked.

"You've got a company pension that you've never claimed" the bunny boiler said, "YOU MUST CLAIM IT!" Several nagging phone calls about this were received and they said that they were going to cut-off my Pension Credit anyway which they did.

I had by then accumulated about £10,000 of credit card debt (much of this expenditure was caused by replacing items stolen in burglaries)

Now quite frankly I never really wanted to accept the pension from that execrable employer as in my eyes the money was unclean and tainted. Nevertheless paying off the credit cards seemed a good idea.

The pension was claimed and about six years of pension arrears were also paid. A pay statement just like a pay slip arrived. It read (in rounded figures) "Pay this month £31,000 Tax this month £13,000 so the £31K was now £18K. Next a letter from the DWP arrived. The gist of it was "We have overpaid you and you owe £17K". Council Tax of £750 to the end of this Council Tax year was then paid so my £31K was now down to a measly two hundred and fifty quid! (OK the maximum Lump Sum which I took did pay off the cards but the rest was pants)

The reason for the torrent of letters and phone calls was now clear. They wanted to embezzle my pension money and they have now done so. Incidentally six years at £28.30 per week is NOT £17K its about £9K The £17K is a Notional figure invented from the Notional Income from the unclaimed pension.

I am not an accountant but to me it smells of False Accounting and Embezzlement.

Probably I would have been better off financially if I had never worked and had never had that pension. Its an asinine state of affairs.

Good luck and do your best to avoid being cheated.