Pension withdrawal and universal credit

another_casualty

Howdy!
I have been on universal credit since jan. my first payment was in March .
I have a couple of small pensions, which I contributed to in my low paying jobs over the years.

I have a nightmare situation where I am in an overdraft and my credit card bill is increasing ..oh and I need a new boiler !

I have posted on pensions board as well .

What I'm trying to do, is withdraw a sum less than £10 k which would put me on the straight and narrow for some time. Say between £5-10k
Apparently 25% of pension lump sum is tax free

1) would universal credit act aggressively and stop my £317 pm?

2)after I withdraw the lump sum , if things were bad again say in about 7-8 months time ( fingers crossed they won't), I was thinking of maybe having a monthly amount paid into my account , say less than £300 per month . Is that allowed on universal credit ?

One other thing to note is that I'm awaiting a court appearance appealing for ltd capability for work and if (unlikely) I win then I may get paid more universal credit . I've just started a work related programme and they think it would be around 6 months when I coukld expect to start work again as I have disability .

What I don't want , it's to make a withdrawal before Xmas and the universal credit alarm bells are ringing .

Thanks in advance

calcotti

1) If you withdraw a lump sum you need to tell DWP if your savings go over £6,000. For every £250, or part thereof, over £6,000 your UC is reduced by £4.35/month. If you go over £16,000 your entitlement to UC ends.

The amount of capital taken into account is what is in your account at the end of your assessment period. Therefore if you get the pension money early in your assessment period and make the payments to your credit card before the end of the month you may well be below £6,000 by the end of the month in which case there will be no impact on your UC.

2) If you take a regular income from your pension that will be taken into account in full and your UC reduced by the amount of the pension so this would be a waste of your pension resource.

another_casualty

Thanks very much for your swift and great advice there calcotti .
It seems the logical thing by the sound of it , to make sure I withdraw less than £6k and not touch the rest .
I'll be getting the abacus out over the weekend

11krage

In addition to above. If you're seen as having reduced your capital in order to qualify for UC this can be taken as deprivation of capital.

This does include lump sum paying off credit cards or other debts when there is an option to be paying it off in lower regular monthly amounts. This would go to a decision maker who would decide whether to consider it deprivation of capital.

Any capital 6k or over at any time needs to be declared to UC.

calcotti

11krage wrote: »

.This does include lump sum paying off credit cards or other debts when there is an option to be paying it off in lower regular monthly amounts. This would go to a decision maker who would decide whether to consider it deprivation of capital..

This is incorrect. Paying off debt, regardless of when it falls due, is never deprivation of capital under UC. You are thinking of rules for legacy benefits

See UC Regulations 2013 regulation 50 (2)(a)

Notional capital

50.—(1) A person is to be treated as possessing capital of which the person has deprived themselves for the purpose of securing entitlement to universal credit or to an increased amount of universal credit.
(2) A person is not to be treated as depriving themselves of capital if the person disposes of it for the purposes of—
(a)reducing or paying a debt owed by the person; or
(b)purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case.

If OP withdrew, say, £8,000 and immediately paid off £2,000 of credit card debt such that only £6,000 was in the account at the end of the assessment period there UC entitlement would not be affected. I do agree they should keep DWP informed and they might be asked to provide statements to confirm the transactions.

I assume this change was because someone recognised that it makes no sense to penalise people on low incomes from paying off debt as carrying debt obviously incurs extra costs because of interest (and possibly penalty fees). Note that this regulation allows someone who comes into money to pay down their mortgage without losing UC entitlement.

11krage

I believe we've spoken about this before Calcotti. As mentioned previously if the debt can be seen as being able to be paid off in smaller amounts rather than a lump sum it can be taken into account as deprivation of capital.

The final decision will go to and be decided by a decision maker. I've had this conversation with quite a few decision makers in the past.

calcotti

11krage wrote: »

I believe we've spoken about this before Calcotti. As mentioned previously if the debt can be seen as being able to be paid off in smaller amounts rather than a lump sum it can be taken into account as deprivation of capital.

The final decision will go to and be decided by a decision maker. I've had this conversation with quite a few decision makers in the past.

Under UC this question should not arise. The regulations are, in my opinion, clear and unambiguous.

Guidance for legacy benefits is

DMG
Did claimants have a choice when they deprived themselves of capital
52832 The DM has to decide why claimants or partners chose to deprive themselves of capital when they did if they had a choice in the matter1. The fact that claimants had a choice does not mean their purpose was to get benefit or more benefit. It is a fact which the DM should take into account when deciding the claimant's or partner's purpose.

52833 Claimants or partners have no choice if they use their capital to pay
1. for the necessities of life, such as food and fuel or
2. debts which are
2.1 immediately repayable and
2.2 legal debts capable of enforcement1 or
3. the Department to repay an overpayment.
Claimants or partners who had no choice have not deprived themselves of capital to get benefit or more benefit.

52834 Claimants or partners have a choice if they
1. give their capital away.
2. spend their capital extravagantly or imprudently even if they say they have used it to pay for the necessities of life
3. pay back a debt before the agreed date, such as when they pay off their mortgage and the agreement says it is not due to be paid back for another 15 years
4. pay more than the amount due on a debt, such as when they pay more than the minimum payment on a credit card debt, unless the payment has been made to remove the threat of high interest payments and the DM decides it was reasonable for the claimant to act in the way that they did.
5. pay back a debt which is not a legal debt capable of enforcement
6. make payments to a flexible current account mortgage which reduce the
outstanding balance on the mortgage.

Had legislators intended the treatment of debt under UC to be the same as under legacy benefits they would have retained the reference to debts immediately repayable. They did not.

11krage

Not according to UC decision makers. It's never a good idea to read the regulations and expect it to be as simple as it might appear on first reading. Regulations can be overly simplified or not cover all eventualities. They are easy to misread.

I've noted you refer to them a lot in the past, which is fine, but they are easy to misinterpret.

11krage

Even parts of the actual UC guidance can get in trouble for appearing to mean one thing while actually meaning another. That is why we have SILs and additional guides to clarify.

calcotti

The regulations are the law on which decisions have to be based.

11krage

I'm going to stop arguing with you as you appear to have your mind set. However, the regulations are very easy to misinterpret as mentioned before. You will get into a lot of trouble if you expect them to be clear.

It is not a good idea to advise someone to pay a lump sum of any debt when they get extra income in (in the case I worked on most recently it was someone renting out a second property temporarily disregarded), and definitely not to suggest that if someone say gets an inheritance nothing will go array if they reduce the amount to under 6k by paying off their mortgage.

I haven't worked on legacy benefits, and only UC so I'm definitely not mixing them up.

It's fine if you wish to do this yourself and accept potential consequences, but you should not be blindly advising others to do it.