Is drawdown classified as a pension or capital

retiredandskint

I'm fast getting to the point where I will need help looking after my husband. My husband has a drawdown pension which is paid monthly having already taken the 25% tax free lump sum. When assessing our income and savings would the value of the drawdown pot be classed as capital for funding purposes?

bostonerimus

The pot of money in your drawdown pension is capital....any withdrawals will be taxed as income.

Linton

Pensionwise says that the drawdown pension is assessed as income. The amount you are actually drawing down is compared with what an annuity would provide and the larger value is used.

Linton

bostonerimus wrote: »

The pot of money in your drawdown pension is capital....any withdrawals will be taxed as income.

Tax wasnt the question. The OP is talking about the rules for local council assistance with long term care costs. In any case the pot of money in a pension isnt regarded as your capital in the UK. It's held in trust for you. The income is what matters.

dunstonh

Whether you take the 75% as ad-hoc lump sums or a regular payment, it is still income.

It can create a double whammy of both income and capital. i.e. if you draw a money out, it is income in that year. However, if it then just sits in a bank account, then it is considered capital when they look at the balances of the bank account.

The value of the pension fund remaining does not fall into the means test directly. The amount of annuity that could generate (if higher than the drawdown rate) is what is considered.

retiredandskint

Thank you for the responses. I knew an annuity couldn't be classed as capital but wasn't sure about drawdown. I'm probably wrong but I thought after the relaxation of pension pot rules the monies in drawdown could be accessed.

xylophone

https://www.sheffield.ac.uk/polopoly_fs/1.531608!/file/pension_flexibilities_dwp_benefits.pdf

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS91_Pension_Freedom_and_benefits_fcs.pdf?dtrk=true

http://www.justadviser.com/documents/means-tested-benefits-and-pension-flexibility-1312231.pdf

Is your husband of Attendance Allowance age? AA is not means tested.

retiredandskint

xylophone wrote: »

https://www.sheffield.ac.uk/polopoly_fs/1.531608!/file/pension_flexibilities_dwp_benefits.pdf

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS91_Pension_Freedom_and_benefits_fcs.pdf?dtrk=true

http://www.justadviser.com/documents/means-tested-benefits-and-pension-flexibility-1312231.pdf

Is your husband of Attendance Allowance age? AA is not means tested.

Thank you, I'll have a read of the info you've provided.

He does get AA. So far I've managed without help but I'm finding it increasingly difficult to cope. The length of time I can leave him on his own is decreasing as well.

dunstonh

retiredandskint wrote: »

Thank you for the responses. I knew an annuity couldn't be classed as capital but wasn't sure about drawdown. I'm probably wrong but I thought after the relaxation of pension pot rules the monies in drawdown could be accessed.

They use a notional annuity rate against the value. Not an actual annuity. This is to prevent people drawing low rates when they could actually be getting more.

retiredandskint

dunstonh wrote: »

They use a notional annuity rate against the value. Not an actual annuity. This is to prevent people drawing low rates when they could actually be getting more.

At the time of drawing down we knew my husband was unwell hence drawdown as opposed to an annuity. He takes the recommended amount each month.

dunstonh

retiredandskint wrote: »

At the time of drawing down we knew my husband was unwell hence drawdown as opposed to an annuity. He takes the recommended amount each month.

Even if he was taking a recommended amount, they would still use a notional annuity rate if the drawdown rate is lower than an annuity.