Universal Credit account closed

FlyingOnMyOwn

Looking for a bit of advice please. I am retired and in receipt of a previous employment pension, my wife died in January and consequently my income reduced drastically as she was registered disabled. I applied for UC shortly after and did not qualify for any payment due to my pension. I do not keep good health myself and was sent for a medical assessment and was told I would not need to actively seek work, and was awarded a UC payment of £360 a month.
My wife had a work pension which transferred to me offering a small lifetime pension payment per month or a one off lump sum. Being the age I am (64) I opted for the lump sum. This was paid to me in July and income tax was deducted, needless to say this information was forwarded to UC which was taken to be income from employment. I did not receive a UC payment for August, and my account has been closed. My UC journal states that I would need to make a new claim before 14 Jan 2020, but the £1668 over the max amount will be treated as income and would be taken off any UC payment once they have worked out how much I could get (if anything).
What I am enquiring about is it worth my while putting in another claim to UC?
I am greatly disappointed in the UC system, having been in employment for most of my adult life, contributed tax and national insurance etc have been penalised for having a previous works pension, but still having to pay full rent, council tax and usual household bills, and still try to live.
Sorry for the rant and the end of this post, but I'm really not a happy bunny.
Thank you

sportsarb

How much was the lump sum?

FlyingOnMyOwn

Sorry the lump sum was £6283 of which £1256 was taken in Income Tax

calcotti

Assuming that you do not now have savings over £16,000 which would prevent you claiming - Yes it is worth claiming again. A sum of this size is only likely to affect your entitlement for a two months at most. You should be able to log into your journal and make a rapid reclaim. Unfortunately you may be required to go to the JobCentre to complete the reclaim.

This may happen more than once but you will become eligible for a UC payment again when it has worked through the system (the rules are very complex).

calcotti

Something is troubling me. In your post you say that this pension payment arising from your wife’s pension has been treated as income from employment. Could you double check that by looking at your UC statement. Does the payment (of £5,027?) appear as ‘earned income’ or ‘unearned income’?

I believe a pension payment should be treated as ‘unearned income’ not ‘earned income’. This makes a difference to how it is dealt with when calculating UC entitlement. For ‘earned income’ there are complex rules to do with ‘surplus earnings’ which mean that the payment could affect more than one month of UC. I think that if treated as ‘unearned income’ it will have no impact on any month other than the month in which it was paid.

FlyingOnMyOwn

According to my UC statement the sum of £5026 is stated as earnings reported by your employer, although it was not me who was employed but my late wife. I did receive a P45 from them with tax code and Income Tax paid on the full amount in my name. I did contact the tax office and according to them I should not have paid tax on it either. I can only assume that UC have taken the lump sum payment as income earned (strange)
Thank you for your reply

11krage

Hello. UC gets their earnings feed from HMRC who gets it from the employer reporting it to them. If you're sure it should not have been treated as earned income then you can contact UC for an RTI dispute. You'd need to gather evidence showing the issue and they can send it off to a team who can liase with HMRC if necessary to see what's happened.


Monthly pension payments are treated as unearned income, but lump sums are treated as capital. If this has taken your total capital (assets like property, savings, cash, investments) over 6k you'd need to report this to UC. There may be an option to do this during the reclaim.


As someone else has said don't worry too much about needing to claim again. Just log onto your account and click the reclaim button. Very easy to start it up again.

calcotti

It is clear that pensions should be treated as unearned income https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/778262/admh5.pdf

Although initially this means that initially they are taken into account in full (no 63% taper applied) it also means that the surplus earnings rules are not applicable.

11krage wrote: »

.... but lump sums are treated as capital.

Can you evidence this. I cannot find anything to suggest that a lump sum will not be treated as income for the assessment period in which it is received.

11krage

I can check guidance next week if you would like, but it would be quicker for op to phone UC tomorrow and ask them to check if he wishes to know. There is every chance I'm remembering it wrong. I haven't needed to use that part of the guidance for a while and it is always changing.


I'm actually really surprised they don't have the proper guidance up on google. Or at least I was unable to find it.

11krage

If you look at the one you provided under lump sums from pensions it says 'treat this as capital.' I do agree that version isn't very clear about the unearned income side of it though.

calcotti

11krage wrote: »

If you look at the one you provided under lump sums from pensions it says 'treat this as capital.' I do agree that version isn't very clear about the unearned income side of it though.

The only paragraph I can find is H5191 but this refers only to the 25% tax free sum payable At the start of an annuity or a personal pension. Not clear if it applies in this instance which is an occupational pension - even if it does it would presumably only be 25% of the gross amount that is excluded.

If there’s a different paragraph you've spotted Could you give the paragraph number.