Do pension lump sums (25% tax free) count as 'income' for benefits?

teddysmum

If a regular pension payment is taken, can you actually cancel it ? (I would imagine that you couldn't.)

Sillychuckie

Alice is correct, in that thy are ONLY starting to qualify for benefits as their savings amount has fallen below the 15k (or is it 16k?) threshold. They targeted Housing Benefit and Council Tax first, as these seemed to have the biggest initial payoffs (and the least scary looking forms).
Thankfully they have been approved for both, so are now starting to look at ESA, or failing that, Income Support, or failing that, JSA.

The £74 per week is made up of 2 private pensions from previous employment.

It is interesting to think that their ESA/Income Support/JSA payments might mean they no longer qualify for Housing Benefit/Council Tax Support, if it pushes them over the threshold. It seems odd that one benefit they get later might undo all the hard work they have put in to get the first 2 benefits. I thought that these would be 'protected' or treated differently, but was waiting until they applied/qualified before looking into it further.

Obviously I'll review the SIPP withdrawal question then also, but, if withdrawing and having a great 'income' risks their benefit payments, then the answer is simple and obvious.
Simply withdraw a lump sum instead, on an ad-hoc basis, when they need to.
This would count as 'capital', so not conisdered income, although, it may affect their calculated income based on the 'savings' element (if over 6k).

I think the answer is to just use it to top up their savings back to 6k, when they need to.
i.e. When they are down to 3k, take out 3 from the SIPP.
This shouldn't then impact the benefits.

SC.

xylophone

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS48_Pension_Credit_fcs.pdf?dtrk=true

Alice_Holt

Once ESA (or JSa) is in payment (I'm assuming that it is Income-Based) the calculation is likely to look something like this (to nearest £):

Applicable Amount - £115
Less - Existing Pensions (£74)
- Tariff Income (£16) - see below
= ESA payable of £25 pw.

Because income based ESA / JSA is payable, then this should passport them to maximum HB .
(Note this will depend on the local housing allowance and how bedroom entitlement)


If they draw £40pw from the SIPP, then the calculation will look like:
Applicable Amount - £115
Less - Existing Pensions (£74)
- SIPP (£40)
- Tariff Income (£16) - see below
Total Income of £130 exceeds the applicable amount - so no ESA / JSA payable.

HB will reduce as it is now calculated using a weekly income of £130.

Note: Tariff Income - I've made an assumption of savings income of £10k.
Between £6k and £16k tariff income of £1pw is assumed for every £250 of savings over £6k.

So, drawing the £40pw of income from the SIPP would impact on benefits as shown above.

For an exact calculation they could use:
http://www.entitledto.co.uk/benefits-calculator/startcalc.aspx
https://benefits-calculator.turn2us.org.uk/AboutYou
Or return to the CAB with their documentation for a benefits check.

To claim ESA would require their GP to issue a fit note.
Do they have caring responsibilities to qualify for IS?

If their savings have only just fallen below the £16k level, have they declared these savings to the LA HB dept? I cannot see any mention of tariff income on the HB notice you have quoted.
See: https://england.shelter.org.uk/housing_advice/housing_benefit/how_housing_benefit_is_calculated

Xbigman

If they have nearly 16k in savings being counted as Capital and money in a sipp that is disregarded then the correct choice is to spend the savings. I don't mean blow it in one go, I mean take out £40 a week from the 16k savings to improve their lives a bit.




Darren

Sillychuckie

Hi Alice.
Thanks for the info about how things might look in the future once ESA/JSA (you are correct in assuming 'income-based') are approved.
I see that with these in place also, drawing any money from their SIPP *AS INCOME* will decrease their benefit entitlement.

RE: ESA - They got the necessary 'fit note' a few days ago, and the application is in the post
RE: Caring Responsibilities - None
Re: Declared savings - Yes, they have declared the savings they have below the 16k mark, and this has been considered as 'tariff income'.

I lazily described their £74 as 'other pensions' income, but if I drill down to the detail, it is:
- £47 (pension)
- £27 (tariff income from savings).


I think things would have been easier and made more sense if they had applied for ESA/IncomeSupport/JSA first, then done HB/Ccl Tax - but such is life.

In response to Xbigman/Darren, I have concluded something similar.

Their best bet is to just ignore their SIPP funds and leave them where they are, whilst they draw down on their savings.
When their savings get sufficiently low (e.g. 2k), they can savely withdraw an ad-hoc, (NON REGULAR) payment frmo their SIPP (e.g. 4k).
This would NOT count as income, and nor would it even impact their 'tariff income' calc, as this would still keep them below the 6k threshold.

I posted this question really to ascertain whether they should draw down now (in small amounts, as income), or defer until later, with ad-hoc lump sums...
and I think in their case, the latter is the best choice.

Thank you all for your help.
SC.