HELP: Neurodegenerative disease, pension and benefits

LunaC

Hi, just wondering if anyone can help with advice. My friend has Huntington’s Disease and as such has been unable to work for the past 6 years. He lives on benefits and has no savings. He does however have a very modest pension which he wanted to cash in, to pay for his funeral in advance and to improve the quality of his life over the next few years. He is worried that if he does so he will lose his income related ESA and Council Tax benefit. Should he take it out in portions to avoid this? Is there a specified amount which if you have in savings means your benefits are reduced? He knows he will be taxed on 75% of any amount he takes out and at an emergency tax code.  It seems harsh that someone living with such an awful, incurable, life limiting disease, living  so humbly should have these additional worries to address at this stage in his life.  Any suggestions/information would be  very much appreciated. 

xylophone

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

You could try the Benefits Board for informed comment.

elsien

With regards to the savings limit for his council tax he needs to check with his local council as it's administered locally and the rules vary between areas. 
Savings of £6000 or more will impact on his income related ESA.
Is there a particular reason he wants to pay for a funeral up front rather than spending the money to improve his quality of life? If he has no money at the time he passes, there is no obligation on friends/family to pay for him, the council would arrange a public health funeral. It will be basic but still dignified. 

LunaC

Thanks for that info. He knows his family would want to pay for a funeral and it’s the one thing he wants to make sure isn’t a burden for them. So if he took £6000 out a year he  could  be ok? Thanks again

Malthusian

There is no need to withdraw money from the pension to pay for a funeral. He could either nominate as his beneficiary someone he trusted to pay for the funeral, or he could tell the trustees to pay the money into his estate. (This is normally inadvisable but not in this case, as Inheritance Tax won't be an issue.) The funeral could then be billed to his estate.

He should not draw money from the pension just to make money available for a funeral, that can be done without risking his benefits.

Silvertabby

What kind of pension is it and how much are we talking about?

Dox

Malthusian said:

There is no need to withdraw money from the pension to pay for a funeral. He could either nominate as his beneficiary someone he trusted to pay for the funeral, or he could tell the trustees to pay the money into his estate. (This is normally inadvisable but not in this case, as Inheritance Tax won't be an issue.) 

He can't 'tell' the trustees - he can only ask them to do so. IHT wouldn't be an issue even if the cash is paid to the estate, provided it is paid at the discretion of the trustees.

Nikkster

I'm sorry to hear of your friend's situation.
I'll start this off by saying I am very far from an expert on pensions. I do however have a life-limiting disease.
Has your friend considered a funeral plan? Quite a few people I know in my situation have signed up for eg Promislife (disclaimer - I've not looked into them myself (yet), and though I know people who have policies with them I don't know what the experience was for those whose families have had cause to claim). Pays out for accidental death only until the initial period (12 or 24 months) has passed.

Regarding the pension, has your friend looked into taking ill health retirement? I've now done this with two schemes I was a deferred member of and one I where I was still an active member.  From what you say, I would think ill health retirement would be granted. Unfortunately my disease is such that it would not be a surprise if I died in the next 12 months, so I also met the rules for 'serious ill health retirement' - this allows the whole pension to be paid as a tax-free lump sum, rather than just the standard 25%.
Hope that helps.

LunaC

I am so sorry to hear of your situation. Thanks so much for your advice, unfortunately he has not been able to work for about 6 years. And he doesn’t have the cash to pay into a funeral plan as his sole income is benefits. Wishing you all the very best and thanks again.

Alice_Holt

1)  Taking an income from his pension will reduce his Income-Based ESA £ for £.  It will also reduce the Council Tax Support (CTs).

2) Taking an Ad-Hoc capital sum from his pension is not counted as income for ESA & CTs.   Rather it is counted as capital by the DWP, however, if his total savings are then more than £6k, then a tariff income is calculated and will reduce his ESA.  He should check his council's rules for CTs, many councils have a capital limit of £6k.  Above £16k of savings and means tested IBESA stops.  

3) Regular Ad-hoc capital withdraws may be seen as income by a DWP decision-maker, so care is needed to avoid this possibility.

4) If he is not in receipt of PIP, he should consider a claim.  This could be a way to increase income, without the complexities of drawing on a pension.
https://www.citizensadvice.org.uk/benefits/sick-or-disabled-people-and-carers/pip/
It would be sensible to get accredited advice from his local advice charity with all of the above. 

jamesd

Many banks and building societies will send a check for up to the remaining balance in accounts to an undertaker when provided with a death certificate and undertaker's invoice. NatWest is one I have personal experience with.