Pension Credits and Deprivation of Capital

moos3y

Hi,

My 68 year old mother is currently working as a shop assistant and is also receiving a state pension of about £135 per week. She has savings of about £15k. She has heard rumors of the shop being closed down and is thinking of what to do if this happens.

If she is made redundant, she wants to claim pension credits to bring her pension up to £163 per week. If she got redundancy pay from the shop, then she would have about £19k in savings (£15k + £4k), so this would put her well beyond the £10k threshold and also over the £16k maximum to receive any pension credits at all.

Assuming the redundancy scenario did play out in the near future, my main question is if she started withdrawing money from her savings now, would this still be classed as deprivation of capital as anybody looking at her bank account would clearly see 'unusual activity' in the run up to redundancy?

Would my mother be better off NOT claiming pension credit from the outset and leaving it for say 12 months after losing her job while she more sensibly spends down to £10k and then claiming pension credits?

I'd really appreciate any helpful thoughts on this subject as I am struggling to find any real information relating to this scenario.

Thanks,

Moosey.

calcotti

There is no maximum amount of savings for Pension Credit. Any savings above £10,000 are taken into account by deduction from the amount of Pension Credit payable at the rate of £1 for every £500 (or part thereof) above £10,000. So if she had £18,200 she can still claim Pension Credit but the amount payable would be reduced by £17.

Based on allowance of £163 less State Pension of £135 she has potential entitlement to £28/week. Provided her capital is less than £24,000 she will have some entitlement.


Importantly if she gets any guarantee Pension Credit she is entitled to Council Tax Reduction from her local authority (in these circumstances the normal £16,000 capital limit on CTR does not apply) - the gain from this can be more than the actual gain from PC.

'Abnormal' activity on savings accounts could be queried and may be treated as deprivation of capital depending on what the money has been spent on.

pmlindyloo

Guarantee Pension Credit has no fixed savings limit un like other means tested benefits.

Any amount of savings over £10000 are counted as income and deducted from the pension credit at the rate of £1 for every £500 (or part of) so she should be entitled to a little pension credit based on the figures you have given.

Deprivation of capital is all about using savings in order to obtain a benefit or more benefit. It is extremely difficult to prove the reason behind the spending so the general rule is you can spend of things you need as long as they aren't 'luxuries'. So a holiday would be OK but a round the world trip might be seen as excessive!

In your mum's case she can happily apply for guarantee pension credit even with the redundancy money and then, if needed, update them when her savings are lowered. Best to keep receipts for any large items (just in case it is queried)

Without seeming too depressing the cost of a funeral plan is disregarded. Giving money away, unless it the usual amount for birthdays and Christmas, is something that would definitely be questioned.

I will find the link about deprivation of capital for you.

pmlindyloo

Here's the link:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/747261/dmgch84.pdf

scroll down to 84801

Alice_Holt

Is she single or married / with a partner?

Do she pay rent or own her house?

Does she receive Council Tax support?

moos3y

Thanks guys for the advice. I'm not sure where I got the £16k figure from, so it's really good to know that she will benefit from saving on council tax, even up to £24 of savings.

Can I just ask again about the timing of gifting large amounts prior to knowing about redundancy? Presumably, any spending outside of knowledge of redundancy (and therefore knowledge of a claim for Pension Credits) would sit outside of DOC? I suppose it would have to be argued with the assessor, but do you think it's a reasonable argument if it came to it?

moos3y

Alice_Holt wrote: »

Is she single or married / with a partner?

Do she pay rent or own her house?

Does she receive Council Tax support?

Single.
Own (mortgage paid).
Don't think so as she's employed and receiving her state pension.

calcotti

moos3y wrote: »

Single.
Own (mortgage paid).
Don't think so as she's employed and receiving her state pension.

I had assumed single because of the rate for Pension Credit you referred to in opening post.


Getting State Pension does not prevent claiming Council Tax Reduction. It is means tested based on income and savings. However cannot normally claim if capital over £16,000.


See my earlier post about entitlement to Council Tax Reduction if she successfully claims Pension Credit which means the capital limit would be disregarded. Getting guarantee Pension Credit should result in having all Council Tax covered by Council Tax Reduction (assuming there are no non-dependant adults living in the house).

pmlindyloo

moos3y wrote: »

Thanks guys for the advice. I'm not sure where I got the £16k figure from, so it's really good to know that she will benefit from saving on council tax, even up to £24 of savings.

Can I just ask again about the timing of gifting large amounts prior to knowing about redundancy? Presumably, any spending outside of knowledge of redundancy (and therefore knowledge of a claim for Pension Credits) would sit outside of DOC? I suppose it would have to be argued with the assessor, but do you think it's a reasonable argument if it came to it?

Currently your mum has £15000 of savings. Not a huge amount if you own your home and need large repairs on the property, for example. Plus, once she stops working and lives on £160 per week she would doubtless have to dip into her savings for 'extras', replacement of household items, birthday gifts, holidays etc.

If she were to gift large amounts of money just before she claimed PC then I suspect this would be queried.

The question that the decision maker might be asking is why wasn't this money gifted before she was made redundant when she had more disposal income as she was working.

You have already said that there are rumours that the shop is closing so, in effect she already knows about possible redundancy so if she gifted large amounts now then she is (morally)depriving herself of capital.

Whether she could convince a decision maker that she wasn't is, of course, a different question!

calcotti

moos3y wrote: »

Thanks guys for the advice. I'm not sure where I got the £16k figure from, so it's really good to know that she will benefit from saving on council tax, even up to £24 of savings.
£16,000 applies to most benefits so quite understandable that you might think it applies to Pension Credit.

Can I just ask again about the timing of gifting large amounts prior to knowing about redundancy? Presumably, any spending outside of knowledge of redundancy (and therefore knowledge of a claim for Pension Credits) would sit outside of DOC? I suppose it would have to be argued with the assessor, but do you think it's a reasonable argument if it came to it?
Bearing in mid that for every £1000 she gives away she would only gain £104/year in Pension Credit I would argue (regardless of the possible deprivation of capital) that it makes more sense to retain the flexibility of having money available for the unexpected, occasional holiday etc.

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