Benefits and taking a pension lump sum

Swanseajack

Hi, does anyone know how taking a lump sum out of a pension pot would affect benefits if the entire pot is used to purchase a house? Basically, my partner will be entitled to take her £35k pension next year and we wanted to put the money into buying a mobile home. Our rent has just gone up and it seems to make sense to use the money to essentially make us rent-free for the future, and not need to claim housing benefit. Obviously if the money was going to be put into either savings or spent on cars/holidays etc it would be right to deduct from benefits etc. But, if we wanted to use the whole amount to purchase the house, would I still get my Pension Credits and help with Council tax? If anybody knows I'd be grateful. Thanks, Jack

sammyjammy

I believe this would be seen as deprivation of captial for means tested benefits.

Swanseajack

Well, just found this which may help our case...

"Long standing legal authorities mean the test for deprivation is whether the monies were disposed of with “...a significant operative purpose…” i.e. to obtain, or increase, benefit.

Hopefully, as we are looking to stop claiming one benefit entirely and retain two others they may look favourably on us, I understand it to be a 'judgement' decision by relevant authority. Time shall tell, I guess.

TELLIT01

I would actually be very surprised if using the money to purchase a property for you to live in was considered to be deprivation of capital. From the wording of the question I assume you are currently in receipt of Pension Credits. If that is the case I would call them and ask for clarification.

[Deleted User]

the new laws for pension changes have yet to become law and i doubt if anyone yet knows how the changes might effect benefits in cases like this

Studebacher_Hoch

With deprivation of capital they have to show that one of your main motivations for spending the money is to increase your entitlement to benefits. I imagine this is unlikely to apply here.

What I would be wary of is that the money would be your capital so if you spend it it may be seen as 'notional capital' and you could be treated as having it, even though it's spent.

One useful thing I've found from a Detailed Pension Credit Guide for Advisers on the government website says:

(I can't post links yet, but if you google "PC10s" it comes out top - pgs 31-32)

"Notional Capital

We may treat your customer as having notional capital if they got rid of capital to get Pension Credit or more Pension Credit – for example, if they knew they had too much money to get Pension Credit so gave some to a grandchild.

We will not treat your customer as having notional capital if they used capital to repay or reduce a debt (for example, a mortgage) or to buy something which was reasonable in the circumstances (for example, replacing a car might be considered reasonable, buying a luxury car is probably not)."

I definitely agree you should speak to the Pension Service (bear in mind the above is from a government guide, it's not the law) about it and get their advice, but if they agree it's a reasonable purchase I reckon you should be fine.

EDIT: If you do speak to them basically say you don't want to be seen as depriving yourself as capital and ask if it would be a reasonable purchase. They'll probably need to get a decision maker's opinion and they may want you to write in about it. If they say it would be a reasonable purchase, ask them to send you that decision in writing!