Universal Credit and Pension Draw Down

NedS

RobinHill said:

Hi NedS, 

Yes, not sure what the UC definition of regular would be. In my case any such draw down would from the TFLS element, and I understand would be irregular as essentially random, for eg. holiday, house works, repairs, sofa etc. Basically anything that I may require but perhaps not able to afford through regular income. Much to my surprise the DWP confirmed that this is allowed.

I think that I understand the mechanics of the crystallisation process ... eg. if I wished to draw down £4k then £16k would be crystalised, with the 25% TFLS being taken as capital. This process would be repeated as required, remaining TFLS amount permitting. However what I don't really understand is what is the status of the remaining £12k crystalised. I believe that as you are not expected to generate an income via draw down until SPA this is ring fenced as far as UC are concerned, but it is this bit that I not totally sure about.

But if you repeatedly crystallised £16K, taking £4K as the 25% TFLS amount of the crystallised funds, a decision maker may view that as regular and treat those withdraws as income rather than capital. It's subjective, but once the decision maker has made that decision you have little recourse other than a tribunal appeal to argue your POV. Clearly if you are making 2 or more such withdraws per year it's difficult to argue that is not regular? The other consideration the decision maker will have to make is if you are deliberately trying to take money out of your pension whilst not exceeding the capital limits in order to facilitate or increase a claim for UC. For example, if you have a small DC pot of £16K which you crystallise in full and take £4K as the 25% TFLS, that is very different to having a larger £200K pot from which you repeatedly (more than once) crystallise small amounts and take TFLS' less than the £6K UC capital limits in order not to fall foul of UC capital limits. So a decision maker will also be making a judgement of your intentions. Like I said, don't expect to be able to make repeated small withdraws as I suspect a DM will take a view these are regular and will treat them as income, not capital.

NedS

RobinHill said:

So even though crystallised the £12k is still in a pension fund and will be disregarded for UC purposes.
The reference to SPA was with regards to UC ... even though you could generate an income from it, you are not expected to do so until SPA.

Almost - any money within a pension wrapper is disregarded for UC purposes until the scheme NRA. If, for example, you have a DB pension that pays out at 65, but your State Retirement Age is not until 67, you would be expected (for UC purposes) to take the DB pension at 65 and if you chose to defer until 67 you would be treated as having that notional income.

But yes, in your example, any money in the DC pension wrapper is disregarded until SPA regardless of whether it is crystallised or not.

RobinHill

Cheers NedS. I did provide specific examples, and they confirmed that it is allowed. The Capital Disregards document makes no reference to the term regular. In any event I understand that it is irrelevant how regular or frequent the lump sum draw downs are since they are treated as capital and not income, and so the UC capital rules apply, not those for income.

NedS

RobinHill said:

Cheers NedS. I did provide specific examples, and they confirmed that it is allowed. The Capital Disregards document makes no reference to the term regular. In any event I understand that it is irrelevant how regular or frequent the lump sum draw downs are since they are treated as capital and not income, and so the UC capital rules apply, not those for income.

I was referring to UC regulation 46(3):

https://www.legislation.gov.uk/ukdsi/2013/9780111531938/regulation/46

(3) Subject to paragraph (4), any sums that are paid regularly and by reference to a period, for example payments under an annuity, are to be treated as income even if they would, apart from this provision, be regarded as capital or as having a capital element.

However, reading Reg 46(3) more closely I think the fact that any such TFLS withdraw makes no reference to "a period" could allow you to argue Reg 46(3) does not apply. I.e, it makes no reference to nor does it apply to a monthly, 6 monthly or yearly period, even if such withdraws are taken at such regular intervals. But like I said before, you may find yourself arguing this in front of a tribunal judge as it's ultimately a matter of interpretation for the DM in lands in front of, and I have seen far stranger (and blatantly incorrect) interpretations of the UC regulations by decision makers. If they think you are taking small lump sum withdraws to evade/avoid hitting the capital limits, they will very likely find against you based on Reg 46(3). First withdraw, no problem, second withdraw, by definition becomes regular.

RobinHill

It was the DWP UC that said that this was allowed. Having read the directive I called to check as it seemed to good to be true ... I still find it so, but nether the less they confirmed it, and it does seem to meet with the guidelines that you refer to. If so it is very fortunate for me since it would allow the funding of essentials / luxuries eg. new boiler / holidays that I probably wouldn't be able to afford otherwise.

Further more; definition of regular;

i). arranged in or constituting a constant or definite pattern, especially with the same space between individual instances
ii). recurring at uniform intervals