April 2015

Your_Hero

Francesca7777 wrote: »

@PensionTech - It's not for debts, it's for buying a place to live. And my pension company doesn't do draw-downs.

@ dunstonh - Actually I got my figures wrong before. Total pension £40K, 25% tax-free lump sum takes us down to £30K, tax allowance takes us down to £20K, 20% tax on £20K is £4K. And the DWP told me that as long as I use the early pension funds AND house sale profit to buy a property within 6 months of receiving it, it will not be seen as income that I have to declare (there's a savings max of £16K otherwise).

When you claim your pension, your provider will declare this £30k as income to the HMRC, so it's not something you have to "declare" yourself. Therefore your benefits could be removed temporarily.

Francesca7777

Oh for God's sake! Why do I have to explain all this? Check the original post - I just wanted to know if the law had been enacted yet, that's it!!! I've spoken to the DWP Decision Maker, AND I have it in writing - my benefits will NOT be affected by the pension sum as long as I use it within 26 weeks of receipt towards purchasing a property. It's something one has to get individual dispensation for from the Decision Maker, which I have done, just as you have to do with regard to capital from property sales (assuming it's your main residence). Happy now? Do you want me to go to the corner shop, scan the latter, and post it on here too?

dunstonh

Oh for God's sake! Why do I have to explain all this?

Because you are making what could be a costly mistake.

I've spoken to the DWP Decision Maker, AND I have it in writing - my benefits will NOT be affected by the pension sum as long as I use it within 26 weeks of receipt towards purchasing a property. It's something one has to get individual dispensation for from the Decision Maker, which I have done, just as you have to do with regard to capital from property sales (assuming it's your main residence). Happy now?

It has nothing to do with my happiness. It has to do with facts. The 25% tax free lump sum is yours to do as you wish and it is a capital lump sum. you can spend it on the property as you have been told. However, the 75% is income and if you take that as an income all in one go, then it will increase your income in that year and means tested benefits based on income could be lost.

Do you want me to go to the corner shop, scan the latter, and post it on here too?

Do you think that some clerk at the benefits agency has been told how to deal with legislation that hasnt even been passed yet?

Under current rules, payments under triviality are treated as capital and can be disregarded at the discretion of the assessor. However, you are not exercising triviality. You are doing what is comparable to income drawdown under current legislation and the maximum GAD limit is used in the assessment for means tested benefits. That includes:
Income Support
Income Based Jobseekers Allowance
Pension Credit
Residential/Nursing Care
Working Tax Credit
Housing Benefit
Council Tax Benefit

As what you want to do hasnt been passed in law yet and the rules regarding how it should be treated have not been published and as the transaction does not occur until next year, the assessment will be made closer to the time. With what we know so far, your income will be increased by £30k for that year. That income will be recorded under your NI number and made available to the DWP. Current legislation suggests it will reduce your means tested benefits.

gterr

Dunstonh - what the OP proposes to do (use the money to purchase a house which will be her main residence within 6 months of selling the former house, without affecting her benefits) has been an option for a long time and has nothing to do with the new pension rules. There is also a dispensation to ring-fence cash required for 'essential repairs'. The OP has checked her facts with a Decision Maker (who is _not_ an ordinary clerk, but a senior officer within DWP) and has the decision in writing. If DWP were to take a different line later she would have a very strong case at appeal. I think she's OK. I am a volunteer Benefits Adviser with CAB and have some experience of this.

PensionTech

@PensionTech - It's not for debts, it's for buying a place to live. And my pension company doesn't do draw-downs.

I said "debts etc.". I wouldn't necessarily normally advocate raiding a pension to buy a place to live either. Depends on your circumstances though and, as I say, it's your decision. You don't need to get defensive. People on here will give you whatever information they can, but they'll also advise caution where necessary. That's no bad thing - we are genuinely trying to help.

Your pension company doesn't have to offer drawdown - you can transfer to one that does.

I'd also listen to what dunstonh says about benefits by the way. You may well be right in the end but the facts are that nobody knows the details of how this will operate yet so nobody can give you an assurance right now that your benefits won't be affected.

Francesca7777

I've got a special dispensation letter from the Decision Maker at the DWP, which says whatever funds I receive from cashing in my pension in April, whether it be the 25% tax-free cash lump sum OR the entire pension, will be not viewed as income as long as I purchase a property with it within 26 weeks from receiving it. The only period I may be deprived of benefits would be the short time from when I receive the pension to the time when I complete on the new property, which I expect will only be a matter of a few weeks. And it's not just "some clerk", it's the Decision Maker, who has the power to make rulings on individual situations, where there is a question over 'deprivation of income'. It's handled in a case-by-case fashion. I'm content with the number of conversations and correspondence that I have received from them that all will be fine. If in the absolute worst case scenario, where all the written information I have here turned out to be just plain ole "wrong", and there was no recourse for me, despite having this in writing, if I did without my benefit for a year or so it would not be a huge deal as I won't have a mortgage to pay anymore. But during several conversations with the Decision Maker they've insisted that it would not be treated as income. They also said that if for some unlikely reason someone at the time decided to make an issue of it, there is no way it would be upheld in a tribunal. Soooo... maybe what I'm saying here might actually help others in a similar situation! Just don't go out and buy that lamborghini or you will definitely be in some trouble! ;-)

Again, I didn't come here for advice on the subject, or salvation of any sort... I asked a simple question.... "Have the proposed changes in the law been enacted yet?" Yes, or no. The end. Last time I was on this forum it was the same, and it p'd me off to no end then too. Give advice by all means, but wait til someone asks for it, and don't always assume you know all the facts of their situation. It's terribly presumptuous and condescending.

Francesca7777

@PensionTech - So you wouldn't advocate someone using their pension to buy a place to live? Really? Would you put them in your spare room then?

Francesca7777

Thanks gterr.

dunstonh

gterr wrote: »

Dunstonh - what the OP proposes to do (use the money to purchase a house which will be her main residence within 6 months of selling the former house, without affecting her benefits) has been an option for a long time and has nothing to do with the new pension rules. There is also a dispensation to ring-fence cash required for 'essential repairs'. The OP has checked her facts with a Decision Maker (who is _not_ an ordinary clerk, but a senior officer within DWP) and has the decision in writing. If DWP were to take a different line later she would have a very strong case at appeal. I think she's OK. I am a volunteer Benefits Adviser with CAB and have some experience of this.

How can it have been an option for a long time when the changes are not yet in law?

Using a capital lump sum is one thing. The ability to disregard has been around for a long time but the payment of the pension under the legislation proposed means it is not a capital lump sum but a payment of income. It may become capital in her bank after it is paid and they may choose to disregard the capital because it is buying the property. However, the source of the capital has come through income. They would need to dismiss the £30,000 or so income she has earned that year.

People currently taking "lumps" from their pension under drawdown do get those lumps treated as income by the benefits agency. That is about the closest match you can get to the proposed legislation. Bulletins I have read have been consistent in saying that people on means tested benefits stand to lose those benefits for that year if they use full fund withdrawal. The fact is until the legislation comes and the Govt sorts out the various loopholes and issues guidance, no-one can tell for sure.

dunstonh

Again, I didn't come here for advice on the subject, or salvation of any sort... I asked a simple question.... "Have the proposed changes in the law been enacted yet?" Yes, or no. The end. Last time I was on this forum it was the same, and it p'd me off to no end then too. Give advice by all means, but wait til someone asks for it, and don't always assume you know all the facts of their situation. It's terribly presumptuous and condescending.

As a tax payer is paying your benefits, you could show a bit more respect to others and stop being so ungrateful.