Pension Drawdown and denied SEISS

belgarum

I’m yet another person denied access to the SEISS.

During the last (qualifying) financial year I took a pension drawdown which took my “non trading” income to greater than my trading profits (which, incidentally, were well under half of the £50k limit).

That pension drawdown (fully declared and taxed etc) is sitting in the bricks & mortar of my house - I have no access to that money.

It seems totally wrong to me that a furloughed worker could have taken a pension drawdown (or, indeed, have any other form of income) yet not be penalised.

And it is seems also wrong that anyone should be denied assistance even it their trading profits were greater than £50k - The scheme was capped at £2500 - It would had been easy to calculate the Governments’ “exposure” to allow access.  At the end of the day, no income is no income - period; regardless of what it may have been under normal circumstances.

It’s personally very upsetting for me, at the age of 63, for the first time in my life to reply upon a pitifully small state handout in the form of Universal Credit.

dunstonh

That pension drawdown (fully declared and taxed etc) is sitting in the bricks & mortar of my house - I have no access to that money.

How you spend your income is not a concern to HMRC.  However, pension drawdown (the 75% element, not the 25%) is treated as income.

It seems totally wrong to me that a furloughed worker could have taken a pension drawdown (or, indeed, have any other form of income) yet not be penalised.

It is correct.  You had a pension income and that needs to be taken income account.     This is known issue when it comes to benefits and your adviser should have made you aware of this, if you used one.  If you didn't use one, then it is your job to know what you are doing.

Grumpy_chap

belgarum said:

And it is seems also wrong that anyone should be denied assistance even it their trading profits were greater than £50k - 

This was put in for SEISS as a 'lesson learned' by the Government following the slightly earlier introduction of furlough which immediately had premier league football clubs claiming for their multi-million pound staff to get the £2,5k monthly contribution to wages, which had never been assumed it would be.  For SEISS, this stops multi-million pound TV presenters claiming the grant.

Jeremy535897

I confess I am rather more sympathetic than dunstonh and Grumpy. Not that it matters one jot. No doubt you were aware of the tax implications of the lump sum you took to put into your house, but nobody knew then that coronavirus existed, never mind SEISS. Grumpy, I don't know whether many premier league footballers were furloughed to get £2,500 a month towards their wages, or that the government really learned anything on the subject between 20 and 26 March. Remember CJRS is for the benefit of the club, not the footballer, which is the reason why there isn't a cap. A furloughed footballer doesn't gain from CJRS, like a self employed person gains from SEISS. My recollection is that the criticism levelled against football clubs was rather that when they furloughed ground staff and others paid modest amounts, they reduced their pay to 80%, while continuing to pay the footballers their full salaries.

dunstonh

I am not unsympathetic.   However, I am aware of the risk warnings that are given when people do this.   And how regulated advice warns people about using their pension money in ways that may hurt them in future.      So, if you ignore those risk warnings and ignore advice (or bypass advice in some cases where the person chooses to DIY), then there has to be some consequences to choices made.
You cannot bail everyone out for making the wrong decision.   Otherwise, there would be no need to do things right.   You could just go through life making mistake after mistake without caring knowing that someone will bail you out.
Pensions are often the biggest or second biggest asset someone owns.   Yet some people spend more time deciding which mobile phone or utility provider is best for them than they do on their pension.

belgarum

I was well aware of the potential implications but, as Jeremy said, no one predicted a situation that the world found/finds itself in.   Not an individual situation - a global one.
My principle point was the unfairness in excluding those who have been assumed that they have money just "lying around" to survive on because their earnings are £50001 or greater.  What makes such people vastly different to the person who earns £50000 or less?  The limit set was somewhat arbitrarily and, with a cap in place, those high-earning TV presenters would be limited to the £2500 cap, just like everyone else.  
I say again, no income is no income.
And here is Wales, our ability to return to work is being extended due to slower lockdown relaxations.
I would also point out that the help (or not) for the self employed was very delayed.  I, for one, was put in a position of making financial designs in the belief that I would receive assistance.  Decisions that may have been very different had the knowledge been available sooner, rather than just days before it might have been available.
But, rest assured, I will be paying the increased taxes and suffering the reduction in services to pay back this money from which I have not benefitted - other than to keep the country running.

Semple

belgarum said:

I was well aware of the potential implications but, as Jeremy said, no one predicted a situation that the world found/finds itself in.   Not an individual situation - a global one.
My principle point was the unfairness in excluding those who have been assumed that they have money just "lying around" to survive on because their earnings are £50001 or greater.  What makes such people vastly different to the person who earns £50000 or less?  The limit set was somewhat arbitrarily and, with a cap in place, those high-earning TV presenters would be limited to the £2500 cap, just like everyone else.  
I say again, no income is no income.
And here is Wales, our ability to return to work is being extended due to slower lockdown relaxations.
I would also point out that the help (or not) for the self employed was very delayed.  I, for one, was put in a position of making financial designs in the belief that I would receive assistance.  Decisions that may have been very different had the knowledge been available sooner, rather than just days before it might have been available.
But, rest assured, I will be paying the increased taxes and suffering the reduction in services to pay back this money from which I have not benefitted - other than to keep the country running.

The logic behind it is that those who would have had profits over 50k should have a buffer to support themselves when income runs dry, or a backup plan (income protection insurance) that they can fall back on. The scheme was never intended to be fair or catch every persons circumstances. It was just unfortunate that a small percentage of people have and will fall through the gaps.

Galloglass

The limit set was somewhat arbitrarily

and 

The logic behind it is that those who would have had profits over 50k should have a buffer to support themselves when income runs dry, or a backup plan (income protection insurance) that they can fall back on

Which is correct? Can either position be proven?

As regards IPI there is a [v large] class action started against Aviva who when asked for a payout (according to terms) they have suddenly found some small print. More fun to come.

dunstonh

As regards IPI there is a [v large] class action started against Aviva who when asked for a payout (according to terms) they have suddenly found some small print. More fun to come.

As income protection (PHI) covers you if you are off work due to illness, there is no reason for them to pay out.    The FCA are not looking at income protection policies.     It is business interruption policies that are being focused on.

Grumpy_chap

Jeremy535897 said:

I confess I am rather more sympathetic than dunstonh and Grumpy. 

I am not being unsympathetic (certainly not intentionally) and there are people you fall through the gaps in an unfortunate manner.
BUT, overall, these schemes are very generous overall and were put together extremely quickly.  The alternative would be that the schemes were developed following the normal Government / Civil Service processes and would just about be in place for implementation from the start of tax year in about 50 years' time.