Withdrawing some pension while on universal credit

kangoora

I'd also post on the Benefits board to see if there are any other benefits you could be claiming (or an increase on the UC amount) - £317/month seems a ridiculously low sum if relying solely on benefits

another_casualty

Thanks folks !
I won't say too much as this is not the right forum for that
However, I have 3 debt free diaries . The debt free wannabes helped me make important decisions . I wasn't into an overdraft until the last couple of months . The only good thing is I'm mortgage free after buying a small flat . The downside is service charges every 6 months
When I paid up my debts I put some money into a pension , and most of that but that I put in has hopefully been taken out .

Regarding the benefits board , I have been on there.
I'm recovering from a health condition and have been living on my savings for 3 years while trying to rebuild my life .
I relocated from London to Poole to start again.
I have only been on u c since jan this year. First payment in March
I'm going to court for final appeal as I think I have ltd capability for work . If I get that, then I get paid more. I'm trying to get a part time job in the mornings ,and have been put on a work related programme
I'm complying , but £317 pm is extracting the urine.
So you see my predicament hopefully .
Thanks

ermine

Good luck, sounds like you are on it. Sadly today's result means that the foul and unkind UC regime will continue. WTAF Iain Duncan-Smith got away with saying that people on UC, who are on UC because they don't have enough coming in, are rich enough to be able to carry a float of five weeks' expenses before they get anything beats me. There's enough people in work that don't have that in hand.



It is possible to conceive of a decent benefits system that strikes the balance between dignity in adversity and the very small number of chancers. It would probably look like what we had 40 years ago.


I wish you the very best on your journey!

another_casualty

Thanks very much ermine:)
Believe it or not , I walked past Boris while he was cycling about his business in the pouring rain. I was just delivering a copy of the evening standard to the spectator offices. " Tony Bloody Blair " he shouts :rotfl:
Not everyone can say the future pm spoke to me. I trust no one and expect nothing . You have to make your own way in life , or at least try
The best news of all though is the patronising actors , silly Allen & co can go and choke on their champagne crispies:D:D

jamesd

NedS wrote: »

There is an alternative for you - to crystallise a portion of your pension and only take the 25% tax free lump sum. ... But as others have said, any drawdown income you draw from the remaining £18K will be treated as income and your UC will be reduced pound for pound in that month

Neither that nor the assertion by others is true. And what you just suggested would be considered benefit fraud if the 24k wasn't declared.

Once you take benefits from part of a pension the whole of that part of the pension counts towards capital limits. If withdrawn regularly like income it will be treated as income. The solution is to take the whole portion being touched in a lump sum.

Say someone starts with 50k of uncrysallised pension.

1. If they take 6k tax free lump sum the rest of the crystallised 24k starts out counting as 18k of capital. The uncrystallised 26k part remains not counted until pension credit age is reached..
1b. If the person starts to withdraw 1k of the 18k each month, those regular withdrawals have the character of income and will be treated as income for benefits calculation.
1c. Separately, for income tax purposes, the 75% is subject to income tax, whether it has the nature of income or not for benefits purposes.

2. If the person crystallises 6k and takes it all, 25% is tax free. All is considered as capital for benefits. The remaining 44k of pension hasn't been touched.

another_casualty wrote: »

I need to take out a chunk of my pension to clear my overdraft, get rid of credit card debt and buy a new boiler .

The specifics depend on the benefit but all of those could be regarded as acceptable. Tell the UC people what you want to do and they can tell you what they will accept.

A person who uses UFPLS go get a 25% tax free, 75% taxable pension lump sum will have their annual allowance for future pension contributions reduced to 4k for life. To avoid that a person can use the small pot rule. This can be used up to three times to take all of a pot up to 10k, 25% tax free, 75% taxable. HL will take care of moving the up to 10k behind the scenes for you if your pot is over 10k.

another_casualty wrote: »

I relocated from London to Poole to start again.

It isn't just a boiler and debt that could be regarded as acceptable. A wide range of dilapidated furnishings and appliances can be. Just discus purposes and amounts first. Many tens of thousands have sometimes been OK when much needed replacing.

Alice_Holt

jamesd wrote: »

Neither that nor the assertion by others is true. And what you just suggested would be considered benefit fraud if the 24k wasn't declared.
Once you take benefits from part of a pension the whole of that part of the pension counts towards capital limits...

My clear understanding is this depends on the age of the claimant.
As the OP is under SPA, I do not think this applies to him.
Since UC is a working age benefit the scenario you describe would not apply to UC (which is the subject of this thread).

However, for anyone above SPA - your statement is correct. So would apply to a mean-tested Pension Credit claimant. In that case, the DWP assume an income based on an annuity rate which is applied to all of the pension pot.

Here is Pension Wise guidance on this:
"Benefits
Any pension money you have may affect your entitlement to benefits. This applies if you take money out of your pension pot or leave it in.

Before Pension Credit qualifying age
Before you or your partner reach the qualifying age for Pension Credit any money you take out of your pot will be taken into account when you’re assessed for benefits.

After Pension Credit qualifying age
After you or your partner reach Pension Credit qualifying age any money you take out of or leave in your pot will be taken into account when your income is assessed.

The Pension Wise guidance refers to Benefits in general, and the UC regulations do contain some nasty changes compared to the legacy benefits, but I'm not aware this is one.

Alice_Holt

For further info, I have found this from the UC Decision Makers Guides:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/778262/admh5.pdf

“H5174 Whilst a claimant’s pension pot is held by the pension provider then the value of the right to that sum falls to be disregarded as capital for the purposes of UC1. Pension flexibilities allow people to withdraw money from their pension pot. This is known as a drawdown. If the claimant has withdrawn money from their pension pot then a determination has to be made as to how this is to be treated for the purposes of UC.

H5175 Where a claimant chooses to
1. take ad-hoc withdrawals or
2. take the whole sum
then the amount withdrawn falls to be treated as capital. (see ADM Chapter H1).

H5176 Where a claimant chooses to withdraw amounts on a regular basis then those amounts fall to be treated as income and taken into account as such.”

I, therefore, think NedS and Willowcat are correct.
Willowcat is also correct in telling the OP that capital sums used to repay debts do not constitute deprivation under UC.

jamesd

Alice_Holt wrote: »

My clear understanding is this depends on the age of the claimant.
As the OP is under SPA, I do not think this applies to him.
Since UC is a working age benefit the scenario you describe would not apply to UC (which is the subject of this thread). ...

Before Pension Credit qualifying age
Before you or your partner reach the qualifying age for Pension Credit any money you take out of your pot will be taken into account when you’re assessed for benefits.
...
The Pension Wise guidance refers to Benefits in general, and the UC regulations do contain some nasty changes compared to the legacy benefits, but I'm not aware this is one.

It applies as soon as the money is crystallised before pension credit age. Unless UC has been made more generous. An updated version of Pension freedoms and DWP benefits says the same thing:

"If you (or your partner) are under the qualifying age for Pension Credit, and you do not take any money from your pension pot, then it will not be taken into account when your benefit entitlement is worked out.

If you or your partner do take money from your pension pot, it will be treated as either income or capital, depending on, for example, how regularly you withdraw it."

Crystallise part of a pot and the whole crystallised portion counts whether it's been withdrawn yet or not , because money has been taken from the pot.

The portion of the UC Decision Makers Guide doesn't seem to distinguish between crystallised or not while the flexibility-specific guidance does. If solely small pot or UFPLS drawdown are being used they say the same thing.

The niceties of how "If you or your partner do take money from your pension pot, it will be treated as either income or capital, depending on, for example, how regularly you withdraw it" is parsed matter when determining whether it's the pot or just the withdrawn portion that is counted.

What I've described so far is how crystallisation has normally between viewed here.

So I looked for further documents. I suggest that you read this discussion involving AgeUK that does consider partial drawing. It references 5.2 of their Pension freedom and benefit document which says below SPA:

"5.2 Capital
If your pension pot remains untouched and you are below State Pension age, its value is ignored as a capital asset. However, if you take a lump sum from your pension pot, as partial drawdown or the whole amount, it is treated as capital in the means-test.
This may mean your entitlement is reduced or removed. Note, CTC and WTC entitlement is unaffected by any capital you possess.
5.2.1 Capital limits
The capital limits are as follows. The upper limit is £16,000 – if your capital assets exceed this amount, you are not entitled to the benefits, regardless of your income. The lower limit is £6,000. If you have more than £6,000 but less than £16,000, you are assumed to receive an income from your capital assets. This is calculated through ‘tariff income’. For every £250 above £6,000, you are assumed to receive £1 a week in tariff income."

That seems consistent with how it's normally been read here but the discussion may be of use.

jamesd

Alice_Holt wrote: »

Willowcat is also correct in telling the OP that capital sums used to repay debts do not constitute deprivation under UC.

Yes, that's my understanding as well.

another casualty doesn't seem to be planning to take more than the capital limit out so there should be no direct benefit impact.

However, using the small pot rule seems like the way to go because it allows taking a taxable 75% without triggering the MPAA, allowing more flexibility later.