Pensions considered for benefits assessment

Mistermeaner

No specific question as genuinely hypothetical but is it correct that monies held in pensions are NOT considered when looking at any means tested benefits (ie most of them like universal credit etc)?

Does anyone know if life time isas are in the same bracket?

Does this exclusion still apply post crystallisation age if the pension wasn’t accessed (eg could one still claim universal credit at age 60 with 500k in a dc pension providing they only put 6k into draw down at a time )

I had a look at entitledto. Co UK but it isn’t specific on these points

Thanks

Keep_pedalling

Whether an undrawn pension is taken into account or not depends on whether you have reached pension credit qualifying age or not.

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

eskbanker

Mistermeaner wrote: »

No specific question as genuinely hypothetical but is it correct that monies held in pensions are NOT considered when looking at any means tested benefits (ie most of them like universal credit etc)?

Does anyone know if life time isas are in the same bracket?

Lifetime ISAs aren't in the same bracket as pensions in this regard, so money in LISAs is lumped in with any other savings.

NedS

Mistermeaner wrote: »

Does this exclusion still apply post crystallisation age if the pension wasn’t accessed (eg could one still claim universal credit at age 60 with 500k in a dc pension providing they only put 6k into draw down at a time )

If you take a TFLS then it will be treated as a lump sum (capital) by Universal Credit. However, if you regularly take small lump sums by crystallising parts of your pot, then these regular lump sums may be treated as income. For example, if you regularly take £6K every 6 months, that could be treated as income rather than capital.

As clearly the intent would be to withdraw money from a pension whilst still claiming Universal Credit, this would almost certainly be viewed as taking income and would be treated as such and deducted from any UC award. I think you'd have a hard time arguing otherwise at an appeal.

Further, if you crystallised £24K into drawdown and took £6K as a TFLS, a decision maker may even decide there is notional income due on the remaining £18K as this is now available to you. If DWP argue that you have chosen to crystallise these funds and then not draw the income available to you in order to claim UC then you might have a job convincing a magistrate otherwise.

I think the key word in your question is "accessed" and how DWP choose to interpret that - whether they view it as crystallising a portion of a DC pot, or actually drawing income from it (e.g, triggering the MPAA). Also, you may be viewing this from the viewpoint of pensions tax legislation which is the domain of HMRC whereas DWP will have their own set of (very different) rules.

jazzy

NedS wrote: »

If you take a TFLS

What is a TFLS?

fifeken

Tax Free Lump Sum.

Mistermeaner

Thanks all

I think I now understand that DWP can take a view on what is 'income' and 'capital' separate from HMRC so that any crystalisation or drawdown of pot could impact UC assessment

What about the scenario of someone who is say 55, qits work with a 500K DC pot but does not crystalise any of it?

They would technically have alot of capital and could access it penalty free (and 25% of it tax free) but could decide not to and instead claim UC while unemployed

Ad they are well below State pension age they wouldn;t be due pension credits so could I assume claim UC to whatever level their circumstances allow?

Malthusian

Mistermeaner wrote: »

They would technically have alot of capital and could access it penalty free (and 25% of it tax free) but could decide not to and instead claim UC while unemployed

Yes, and this is how the system is supposed to work.

Pensions are for retirement, you're not required to drain your retirement fund when you're looking for a new job. This applies at 55 just as much as it applies at 25. It only stops applying when you reach State Pension age.

If people with pension funds weren't eligible for unemployment benefits, a lot of people on low incomes wouldn't bother saving into pensions as it would effectively be taxed away during their periods of unemployment.

A 55 year old can of course decide to effectively semi retire and use their pension fund to live in the manner to which they are accustomed, rather than tighten their belt and live off state benefits in order to preserve their pension fund for later. But they can't be forced to.

xylophone

https://www.thisismoney.co.uk/money/pensions/article-7689557/Can-claim-pension-credit-access-103k-pension-pot-age-70.html