Are pensions capital?

r_i_c

Hi,

Just back from the Citizens Advice Bureau. I am due to be remembered in a Will. Can I transfer any monies resulting straight into a SIPP please?

The CAB said if I do, the amount will still be seen as capital, and if I am unfortunate enough to be without work (JSA) the 'capital savings' will count against me.

However, I thought pensions were only considered as capital if you are actively drawing on them, as a regular source of income, usually because you have retired?

There are many years to go until I retire btw.

So help please, little bit confused about all this. Why can't I boost a pension for later years - aren't we being encouraged to make provision for later years - and by the Government?

Thanks

Mojisola

r_i_c wrote: »

I am due to be remembered in a Will. Can I transfer any monies resulting straight into a SIPP please?

The CAB said if I do, the amount will still be seen as capital, and if I am unfortunate enough to be without work (JSA) the 'capital savings' will count against me.

It's the fact that you had the capital available before you locked it away in a pension that could count against you.

I think the DWP would have to prove that you knew it was likely that you would need means tested benefits and decided to put the money in the pension so that you would be under the capital limits - deliberate deprivation of capital.

missbiggles1

What means tested benefits are you claiming since your mother died?

r_i_c

Many thanks for these two replies Am still in receipt of Carer's Allowance. Although I'm actively looking, it's unlikely I'll pick up employment before the allowance expires which would oblige me to apply for JSA. The Will has not been read yet btw, nor is that likely for perhaps several months into the future. Currently, I have very little in my bank account at all, being on Carer's Allowance

1). Looking into the future though, what happens if you are over (not sure if I would be yet) the limit for JS allowance, can you still be credited with National Insurance contributions please?

2). If the monies from the Will are then to be capital whatever I do, how best can I make that money work for me, instead of just whittling it away on basics like heat and lighting. Possibly, I'd bite the bullet, accept that even amounts put into a SIPP are likely to debar me from a JS allowance, and try to ensure that I leave enough in my bank account to cover all the costs we all face, after topping up my pension?

3). Ideally, I am going to pick up employment eventually, but I have to look on the bleak side of finding no work, to begin with :-o

Thanks again

xylophone

You are currently 59 (according to an earlier post) so become eligible for state pension when you are 66 - you can apply for a new state pension statement for future planning. Do you already have 35 years of NI contributions, paid or credited?

https://www.gov.uk/state-pension-statement

You have a deferred TPS pension- will this become payable without actuarial reduction at 60? If so, would it be taken into account for means tested benefits, whether or not you drew it?

If you have no relevant earnings, the most you can pay into your SIPP is £2880 net (£3600 gross).

You indicated that you intended to take a PCLS from your SIPP - this would be capital but presumably would decrease fairly rapidly as you cover living expenses.

The Will has not been read yet btw, nor is that likely for perhaps several months into the future.

If you are referring to your late mother's will, you previously indicated that you were the executor - is there a reason for the will not being read?

r_i_c

xylophone wrote: »

If you are referring to your late mother's will, you previously indicated that you were the executor - is there a reason for the will not being read?

Thanks, I'll look at this question first please - the others I will need to research. The first thing on my mind is my mother's funeral at the end of this week. Then I am waiting for some final balances in from several of her late accounts, so there are loose strings waiting to be tied up before I can get down to the probate form-filling. I have roughed out IHT205 and anticipate a big effort here after the funeral, and my current funds are becoming stretched, that's why I went for drawdown, and this is taking 'forever' but it is at least in process now. Yes, I am 59 and the executor.

r_i_c

xylophone wrote: »

If you have no relevant earnings, the most you can pay into your SIPP is £2880 net (£3600 gross).

Will pay in whatever I can - it is obviously in my interest to keep my SIPP as buoyant as I possibly can. Please remember, I was my mother's 'long-term' carer we thought. The tragedy which occurred to her was completely unforeseen - I am still trying to come to terms with it myself - not even her GP had the faintest idea that she was about to become seriously, then terminally ill, sadly dying in little over a week. I thought she would live happily enough for at least another 10 years, she was in many ways 'fit as a fiddle'. Then one night she was rushed to A&E and never returned. I, her pet terrier, and her home - are in shock and mourning. But I promised her I'd cope, and this forum is helping and my thanks :A

r_i_c

xylophone wrote: »

You...can apply for a new state pension statement for future planning. Do you already have 35 years of NI contributions, paid or credited?

https://www.gov.uk/state-pension-statement

Thanks, will phone them. I don't know exactly how many years of NI contributions I have had, I have had a number of jobs over the years. I was a full-time teacher for 13 years, but I did several stints of full-time office work before this time.

r_i_c

xylophone wrote: »

You have a deferred TPS pension- will this become payable without actuarial reduction at 60? If so, would it be taken into account for means tested benefits, whether or not you drew it?

I don't know. I do know I contributed 'back years' to this pension while I was able. That was when teaching was a 'job for life', the teaching profession changed beyond recognition over the 13 years I worked full-time in schools.

Do you mean will the TPS pension become payable at 60 - that then would be some form of early retirement? There's a page on actuarial reduction here:

http://www.suffolknut.org.uk/actred.htm

What's the difference between retiring at 60 and 65 please? The age of 60 does not look like early retirement per se, but then there is retiring at 65, so it looks a bit confusing to me. I don't want early retirement but I will need some form of income. There is so much which is uncertain for me at the moment :undecided

For example, it says at that page about awaiting "age 60 for the full pension which would have been payable" so I guess I wouldn't necessarily lose anything by taking this pension but continuing to be available for employment - I would in a sense then be 'semi-retired' ?

mania112

in the TPS if you became a member of the scheme pre 2007 your normal retirement age is 60, after 2007 and its 65 (and for new joiners from 2015 it's the same as your state pension age)

jamesd

If the money is part of her estate then it will count as capital and you will be treated as still having it and able to obtain around 10% of it as income each year. This is called "notional income".

If instead the money is in a pension pot of hers and you are the beneficiary named for this pension then it is already in the pension and you do not have to take income from it. It also doesn't count as capital. Money in pension pots and from insurance is outside the estate and not governed by a will.

If you can tell us more about the amounts we can probably tell you how to generate a fair amount of income from it. For the time period until you reach state pension age it probably is possible to take 10% or more of the amount each year as income. That might make benefits unnecessary for you. Knowing how much your state pension will be and about any other pensions or savings and investments you have could let us put together a workable financial plan.

The TPS is particularly interesting as it seems likely that you are in the part of the scheme that has a normal retirement age of 60. That would provide very helpful extra income! Best to ask them to tell you what to expect and confirm that you're in the age 60 group. There's a lump sum option but this is one of the ones where it's a very bad deal to take the lump sum. It's usually cheaper to borrow and repay from higher income than take a lump sum from TPS.

The reason normal retirement age for the scheme matters is that people taking the pension before NRA have their pension significantly reduced. So a person in the age 65NRA group would get much less pension at age 60 than a person in the age 60 NRA group if they had the same original income level. This is called an actuarial reduction and it's done so that the cost to the pension scheme doesn't increase because of the extra years for which it will pay out beyond those originally planned for. The planning was for 60 or 65 depending on which group you're in.

Given your time in the TPS it's likely that you have accumulated no more than the basic state pension from the state pension. Maybe not that much, depends on work and child benefit history, if any. The good news there is that you can pay voluntary self-employed NI to increase the amount between April 2016 and your state pension age. It might also pay to buy extra older years before then if you don't have 30 years worth already.