Paying into pension when on benefits

Dorian1958

Hi,
Mrs Dorian and I look after our disabled adult son who gets Income Based ESA and PIP. He is in the Support Group. He has capital of less than £6000 (most of which has come from his parents). Inspired by the pensions board, and concerned for his financial welfare in the future, we thought we might start a private pension on his behalf (we have POA). As someone with no earned income he could contribute up to £2880. However, we have received some unexpected advice that doing this and him paying into the pension could be viewed as deliberately disposing of assets to retain a means tested benefit. What do you think? Can people on means tested benefits really not use what little they have to at least put something away to help protect against an uncertain future?
Thank you for your thoughts, Dorian

molerat

Disposing of an asset is different to not accumulating that asset in the first place. Would pension income be likely to affect his benefits later on ?

LocoLoco

Dorian1958 wrote: »

Hi,
Mrs Dorian and I look after our disabled adult son who gets Income Based ESA and PIP. He is in the Support Group. He has capital of less than £6000 (most of which has come from his parents). Inspired by the pensions board, and concerned for his financial welfare in the future, we thought we might start a private pension on his behalf (we have POA). As someone with no earned income he could contribute up to £2880. However, we have received some unexpected advice that doing this and him paying into the pension could be viewed as deliberately disposing of assets to retain a means tested benefit. What do you think? Can people on means tested benefits really not use what little they have to at least put something away to help protect against an uncertain future?
Thank you for your thoughts, Dorian

Hi Dorian, I do similar for my son although he's not quite sixteen yet so isn't receiving any means tested benefits (just DLA at the moment) but when I looked into it at the time I was told it was fine. I also pay into a small pension for myself from my benefits; I think the way it was explained to me at the time as because it's not something you will be dipping into day to day (the way you would a savings account) it isn't viewed in the same way. It was a few years ago so things may have changed; I'm sure someone will be along with some current facts for you soon so I'll be watching the thread in case I need to do something about this as well!

Dorian1958

Disposing of an asset is different to not accumulating that asset in the first place. Would pension income be likely to affect his benefits later on ? (by molerat)


So if I understand molerat correctly, if my son paid a lump sum into his pension from his existing savings that might be seen as disposing of an asset, however, if he paid into it on an ongoing basis from his benefits that would be different?


I am not sure as to how pension income might affect his benefits later on. He is only in his 20's and by the time he is able to drawdown the pension the benefits system could be completely different. I think also I would prefer he was able to live on his own means if possible rather than depending on the state.

Alice_Holt

My understanding is any pension funds do not count towards the means-tested capital limit (£6k / £16k), until it can be assessed by the claimant (i.e 10 yrs before SRA).

Note that any gifts from family can be disregarded as income, so you could make payments to a pension for him without it affecting his means tested benefits (ESA). PIP is not means tested so will be unaffected by capital.

If your son made regular payments into a pension from his benefits, I think it's unlikely that this would be regarded as deprivation as capital. One crucial test of D of C is that the intention of the payment is to maximise benefit receipts.
I would see building a pension as the opposite of this - his intention is to (eventually) provide for himself. This is (I think) an argument that could counter any DWP suggestion of D of C.

Assuming current rules apply when he draws his pension, then I think :-
a) His IB ESA could be reduced £ for £ by any pension income;
b) PIP would not be affected;
c) At retirement age his SRP (he is currently accruing NI credits through ESA) will replace ESA. He will then receive SRP, private pension, and PIP (if applicable).
But, as you say, who knows what the benefits system will look like in 40 yrs?

xylophone

It is accepted that making pension contributions may increase entitlement to benefits.

https://www.nidirect.gov.uk/articles/employer-and-government-payments-workplace-pensions

When you join a workplace pension scheme, your take home income is reduced. With a reduced income you might be:

entitled to tax credits or increased tax credits (but this might not change your tax credits until the next tax year)

entitled to an income-related benefit or an increased benefit amount

responsible for repaying lower student loan amounts

Of course having access to a pension may mean that means tested benefits are reduced to nil once the person reaches the age where he is required to utilise his pension savings.

Dorian1958

Alice_Holt wrote: »

If you son made regular payments into a pension from his benefits, I think it's unlikely that this would be regarded as deprivation as capital. One crucial test of D of C is that the intention of the payment is to maximise benefit receipts.
I would see building a pension as the opposite of this - his intention is to (eventually) provide for himself. This is (I think) an argument that could counter any DWP suggestion of D of C.

Thank you Alice your thinking ties in with my thinking. Contrary to the advice we had been given, I couldn't see how someone trying to secure a financial future for themselves off benefits through contributing to a pension would result in them being penalised by having the benefit stopped. I suppose, however, it might come down to interpretation by the official concerned.


In addition to Loco (thanks Loco), it would be good to hear from any adults who are in a similar situation who have experience of this.

Alice_Holt

Dorian1958 wrote: »

I suppose, however, it might come down to interpretation by the official concerned .

Yes, you are absolutely right.
But, that's a DWP decision that could be challenged in a tribunal hearing.
The tribunal decision would be governed by the D of C regulations and the evidence presented to them.

"The central question in deprivation cases is whether the claimant intended to deprive him or herself of capital so as to secure entitlement to benefit. The claimant must have had this in mind as a "significant operative purpose"."
https://www.gardencourtchambers.co.uk/socialwelfare/the-deprivation-of-capital-rule-in-welfare-benefits/