Drawing part of a pension & benefits.

magic8

According to what I have read, you cannot have more than 6k in savings before it affects any means tested benefits. My dad is currently receiving UC & housing benefit. He is waiting for an hospital appointment has he has difficulty walking. He is waiting to move into sheltered housing. He is considering taking some of his pension to enable him to furnish the place he is moving into shortly.


He took some of his pension around 6 years ago & according to new rules that were brought in 2015 he can draw some more of it or the full amount. My questions is how long does this 6k limit last for? Is it annually as in he could draw 6k this year then 6k next year? Also, if he decided to draw say 15k & gift me 10k for a mortgage deposit would this affect his benefit entitlements? Would it be classed as savings?


Thank you.

dunstonh

He took some of his pension around 6 years ago & according to new rules that were brought in 2015 he can draw some more of it or the full amount.

How did he take the pension 6 years ago? (i.e. what method).

My questions is how long does this 6k limit last for?

Drawing money from the pension has two consequences.
1 - its treated as income. So, its the income side he has to worry about
2 - it can be classed as deprivation of assets in the means test.

Also, if he decided to draw say 15k & gift me 10k for a mortgage deposit would this affect his benefit entitlements?

Yes. That is an obvious deprivation of assets.

magic8

dunstonh wrote: »

How did he take the pension 6 years ago? (i.e. what method).



Drawing money from the pension has two consequences.
1 - its treated as income. So, its the income side he has to worry about
2 - it can be classed as deprivation of assets in the means test.



Yes. That is an obvious deprivation of assets.

All I know is that he took a lump sum 6 years ago which I think was 25% & the maximum allowable at that time. If he took 6k to help him furnish the sheltered housing would this affect anything especially his benefits?

molerat

The £6K would be treated as income and not capital so he needs to be aware of how income affects his benefits and not the effect of having over £6K in the bank. If he spends it on what is considered necessary then there is no deprivation problems.

magic8

molerat wrote: »

The £6K would be treated as income and not capital so he needs to be aware of how income affects his benefits and not the effect of having over £6K in the bank. If he spends it on what is considered necessary then there is no deprivation problems.

So, what ever he takes from his pension pot is classed as income even if it is used to buy essential items such as furniture? If he takes 6k this will be classed as 6k of income therefore his benefits will be reduced accordingly?

Silvertabby

If you’re judged to have deliberately spent or given away your pension pot to receive or increase benefits, the DWP or your local council may re-assess your eligibility and treat you as still having the money. If you’re able to take an income and have chosen not to do so, some or all of the income you could have taken may be taken into account.

How old is your dad? If he's over State pension age, then the bolded bit may apply to him.

magic8

Silvertabby wrote: »

How old is your dad? If he's over State pension age, then the bolded bit may apply to him.

My dad is 61. He would like to use some of the pot for essential items for his sheltered accommodation but he obviously doesn't want it to affect his benefits.

Silvertabby

magic8 wrote: »

My dad is 61. He would like to use some of the pot for essential items for his sheltered accommodation but he obviously doesn't want it to affect his benefits.

Then his pension savings won't be taken into account until he reaches 66. I'm not an expert on benefits (I'll leave that to others on these boards) but it may be that your father will have to withdraw slightly less than £6K in order to avoid triggering means tested benefits checks.

You mentioned that he drew out his tax free entitlement some time ago, leaving the rest invested. Are you sure that his pension fund will allow him to draw down the rest? If it's an older plan, then he may only be able to take an annuity - unless he transfers his benefits to a draw down scheme. Then he may have problems with his means tested benefits......

magic8

Silvertabby wrote: »

Then his pension savings won't be taken into account until he reaches 66. I'm not an expert on benefits (I'll leave that to others on these boards) but it may be that your father will have to withdraw slightly less than £6K in order to avoid triggering means tested benefits checks.

You mentioned that he drew out his tax free entitlement some time ago, leaving the rest invested. Are you sure that his pension fund will allow him to draw down the rest? If it's an older plan, then he may only be able to take an annuity - unless he transfers his benefits to a draw down scheme. Then he may have problems with his means tested benefits......

He has checked & he is able to draw down on it but it will be taxable. If he took say 4k for essential items would this be classed as capital or income?

Mnd

It's income, as though he was working and earning wages