Pension and tax credits help.

Whippetlady

Hi all. My partner is 50 years old and had to finish work 7 years ago due to disability. I am his carer. We have 2 children.
We have been struggling to pay our mortgage for a while now and although we have not missed a payment, we are almost up to our overdraft limit.
He has a small private pension that he's paid £30 a month since he was 18. There is enough in it to pay the balance of our mortgage. I know it is not ideal, but what would be the implications, benefit wise, of us doing this? We would like the stability of knowing we aren't going to lose our home, and it has been adapted for my partner, so to either rent or buy somewhere else would be hard.
We currently receive
ESA support group income related and child tax credits (I know the other stuff we get won't be affected)
We would be in receipt of approximately £38000 before tax from the pension.
Because we would be paying for our home and not frittering the money away would it affect our benefit entitlement? I understand we need a doctor to sign off on it as we have already made tentative enquiries.
Thanks for reading this.

poppy12345

It will be classed as deprivation of capital for your Income Related ESA.

calcotti

Deprivation of capital is a benefits rule which means that DWP can treat you as still having capital that you no longer have if you have disposed of it in order to receive benefits. It is down to a Decision Maker to decide whether a particular action is caught by this or not.

If you were on Universal Credit it would be clear that paying off your mortgage would make no difference as paying off debt is expressly permitted under UC and is not treated as deprivation of capital.

Under ESA there is a risk that it could be treated as a deprivation. In my opinion the risk is low because at the moment you do not have access to the capital and your pension pot falls to be ignored. It would be clear that you are only accessing the pot in order to pay off the mortgage. It would not be logical to argue that you have disposed of capital in order to continue to receive benefits if you were under no obligation to access the capital anyway. However there is no definite answer. It would also be very important that the money does not come into your account and sit there for a bit before being used.

You could ask the DWP to confirm to you how they would treat this before you access the pot and ask for a written decision.

Usually you can not access a pension before 55 so do make sure you fully understand what is being done. Please also make sure you understand the impact of any tax on the amount he will actually receive.

If there is any capital left over this would affect the amount of ESA if it is more than £6000 and would end your ESA entitlement if more than £16000.

There are no capital rules for a Tax Credits so these are not affected.

xylophone

My partner is 50 years old

I understand we need a doctor to sign off on it as we have already made tentative enquiries.

Your husband has contacted the pension provider and enquired about payment before age 55 on grounds of ill health (not serious ill health)?

See

https://www.aegon.co.uk/support/faq/pension-technical/ill-health-faq.html

See also

https://www.gov.uk/government/publications/pension-freedoms-and-dwp-benefits/pension-freedoms-and-dwp-benefits

Have you checked the tax situation?

It is likely that your husband would be able to take 25% tax free but the balance would be taxed as income in the year of receipt.

It is also likely the the tax deduction would not be correct so that your husband would need to contact HMRC.

https://adviser.royallondon.com/technical-central/pensions/benefit-options/emergency-tax-and-lump-sum-withdrawals/

He might seek an interview with Pension Wise.

https://www.pensionwise.gov.uk/en/ill-health

bigbill

calcotti wrote: »

There are no capital rules for a Tax Credits so these are not affected.

Not quite 100% correct.

Although capital is not counted as such, your Child Tax Credits will be overpaid this year and could be stopped or certainly reduced the following year due to the amount (Minimum 75%) of the pension pot this amount is treated as Taxable income by Tax Credits?

calcotti

bigbill wrote: »

Not quite 100% correct.

Although capital is not counted as such, your Child Tax Credits will be overpaid this year and could be stopped or certainly reduced the following year due to the amount (Minimum 75%) of the pension pot this amount is treated as Taxable income by Tax Credits?

I agree...

just_trying

Yeah, because pension payment lump sums you have to declare so aren't capital.

Think even the op knew this.