State Pension & Inheritance

[Deleted User]

1st September 2021

Good evening and Thank you for taking the time to read this.

I have a question that relates specifically to a Pensioner in receipt of State Pension, Pension Credit, PIP, Housing Benefit and Council Tax Benefit. I have reviewed three older discussions covering similar topics on inheritance and benefits but they are either over eight years old or don’t relate specifically to someone on State Pension and PCGC. I would greatly appreciate some more current and accurate information and possibly advice to point me in the correct direction to establish the facts via links.

The person I am asking on behalf of is 73 (state pension age in 2008) and has been in receipt of both SP and PCGC since this date. They have been registered mentally disabled for most of their life.

To date he is in receipt of State Pension, Pension Credit Guarantee Credit, PIP and Housing Benefit & Council Tax Benefit. On reviewing his most recent DWP paperwork dated February 2021 this year, I cannot find any mention of an ‘assessment period’ for his finances as some older discussions have mentioned to look for this. Meaning that within such an assessment period, a persons income would not be assessed or considered. He has Savings of less than £1500 which drops to zero at Christmas and has no other income other than the above stated. He annually declares income and savings to Housing benefit for change in rent but not to DWP for state pension as their is no change. He is registered disabled.

I am trying to get an understanding of which of his benefits will absolutely be affected and which will not in the event that he may receive a lump sum of money from a share in a house his siblings live in abroad (that he has never lived in) and may be considered for sale next year by them. He is aware he would have to pay Foreign Capital Gains Tax but where can he (or I) find accurate information for 2021 on which benefits he may or may not loose from the above list in the event that he receives any monies greater than state limits. 

Some discussion advisers have suggested that Pension Credit Guarantee is linked to Housing Benefit and Council tax and therefore all three will be affected if PCGC is affected.  Some have suggested that if you win the lottery it makes no difference at all to PCGC as it is ‘one of those oddities’.

I am of the belief that what ever the sum of money a person may receive, their DLA/PIP would remain absolutely unaffected as it is not means tested. Is this correct?

I have also considered that he is a Pensioner. Does this make any difference at all? I can understand someone’s ESA or Income support allowance being ‘potentially’ affected at working age but does Pensionable age make any or no difference at all? 

Thank you in advance for your help and advice and please forgive my lack of knowledge in this area if my questions seem silly or uneducated.

calcotti

State Pension and PIP are not means tested and are unaffected by any capital.

For Pension Credit Guarantee there is a deduction of £1/week for every £500, or part thereof, of capital above £10,000. There is no upper savings limit but obviously the deductions may reduce the award to nil.

If any Pension Credit Guarantee remains payable entitlement to maximum Housing Benefit & Council Tax Benefit is retained (and capital is ignored).

If Pension Credit Guarantee is no longer payable Housing Benefit & Council Tax Benefit will have to be calculated with a reduction for capital in excess of £10,000. There will be no Housing Benefit or Council Tax Support payable if capital exceeds £16,000.

The difference being a pensioner makes is in the higher lower capital limit, the absence of an upper limit for PC and the fact that the deduction rate is halve that for working age people.

[Deleted User]

Good morning. Thank you so much Calcotti. That seems very useful information and certainly in line with what I have been hearing from others. I’m confident now that the gentleman’s State Pension and PIP will remain completely unaffected. Thank you for this advice. In relation to the Pension Credit Guarantee Credit this would also seem to make logical sense as it’s a ‘top up’ if you don’t have enough income to bring you up to a set limit.

My only concern is that I’ve read a number of quiet old posts where members have suggested PCGC remains unaffected in the same way a means tested benefit would be unaffected by a financial gain. They have also suggested (as you have) that PCGC has a knock on effect to HB and CTB. Could there be the slightest truth in the first half of their statement, that PCGC may be unaffected by a financial windfall? Perhaps a caveat or clause somewhere that only applies under certain circumstances? I have read about one pensioner m, that her SP and PCGC became set in stone due to her circumstances and that the money she inherited made no difference at all. I don’t doubt you as what you have written makes logical sense, I’m just a stickler for facts when making decisions and sometimes find there can be two truths.  Thank you again for taking the time to reply and for your knowledge and kindness.

calcotti

Deleted_User said: My only concern is that I’ve read a number of quiet old posts where members have suggested PCGC remains unaffected in the same way a means tested benefit would be unaffected by a financial gain. 

As outlined in my post any capital above £10,000 reduces PCGC entitlement (unless an AIP is in place which you have said is not).

Deleted_User said:.. in the same way a means tested benefit would be unaffected by a financial gain. 

A means tested benefit is (by definition) affected by a financial gain (within the relevant rules) so i don't know what you mean by this.

Deleted_User said: Could there be the slightest truth in the first half of their statement, that PCGC may be unaffected by a financial windfall? 

If total capital is below £10,000 it would not be affected (or if an AIP applies).

Deleted_User said: I have read about one pensioner m, that her SP and PCGC became set in stone due to her circumstances and that the money she inherited made no difference at all. 

That would be if an AIP was in place.

[Deleted User]

Apologies Calcotti… I meant to say “in the same way a ‘Non’ means tested benefit would” …like PIP or SP. my mistake.

Could you help me understand what an AIP is and why it may be issued? Is it something optional (at the request of the individual) or is it placed upon the individual by the DWP for some reason? 

Can it be ‘open ended’ or in perpetuity (Without ending date)? More importantly…for the duration of the AIP,  does it mean that any monies above the threshold at the time, that the individual comes into, are in essence ignored or not taken into consideration for the calculations of their benefits? If the money is spent within this time frame does it mean that their benefits go ‘unchanged’ or ‘unaffected’ by the extra income or windfall and also thereafter the AIP expires (solely in relation to the money at the time the AIP was in effect)?

calcotti

AIP is assessed income period (which you referred to in your opening post). You said that no AIPs were shown on the letters you have seen. They were not at the choice of the claimant but were applied by DWP in accordance with rules applying at the time.

https://www.entitledto.co.uk/help/assessed-income-period

If an AIP existed then a change in capital would not affect PCGC entitlement - my comments took into account that your opening post says that, as far as you can tell, there isn't one in place.

Indeed, based on the information in the link above, at 73 he appears to be too young to have an indefinite AIP in place and all time limited AIPS have ended. The latter point is confirmed here
https://www.gov.uk/government/publications/pension-credit/pension-credit-extra-information#assessed-income-periods-aips

An AIP is a period when you do not have to tell us about changes to your pensions, savings or investments. Your Pension Credit award letter tells you if you have one.
From 6 April 2016, no new AIPs have been set.
If you had an AIP that was due to end on or after 1 April 2019, it will have ended on or before 28 March 2019 and will not have been renewed.
If you are aged over 75 and have an AIP with no end date, it will remain in place until your household circumstances change, for example if you move into a care home or if you become a member of a couple.
When your AIP ends you will need to tell us about any change to your circumstances, including pensions.

You can read more about Pension Credit here
https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs48_pension_credit_fcs.pdf

[Deleted User]

Thank you so much Calcotti. Really helpful advice. Also thanks for the links. 

[Deleted User]

Calcotti… May I ask:

Is there a window or ‘time frame’ within which an individuals benefits will be ‘unaffected’ or ‘untouched’ if that individual was to inherit a large sum of money but decided to purchase a property with the same amount they inherited?  

If they were inform the DWP the instant the money is put in their account (as legally required) and they clearly stated “I intend to purchase a property within the next 6 months (or reasonable time frame) for the same amount as I inherited…is there any such clause in law or the benefits system that allows for this legally?  

Logically this would unburden the state of paying HB and CTB but I do appreciate it may not be seen this way. I am lead to believe that clearing debt or buying car could be seen as deprivation of Capital.  Also to be clear, I do not mean the above to mean ‘deprivation of Capital’ in the ‘gifting’ ‘giving away’ ‘purchase of a holiday’ or intentional throwing it away. I mean clearly recorded and stated as the purchase of a property for the same amount of inheritance within a reasonable time frame after receipt of the Capital.

calcotti

Deleted_User said: Is there a window or ‘time frame’ within which an individuals benefits will be ‘unaffected’ or ‘untouched’ if that individual was to inherit a large sum of money but decided to purchase a property with the same amount they inherited?  

No. The capital rules apply as soon as the inheritance is received. If money is then spent purchasing a property so that capital is reduced they can reapply for Pension Credit and CTR. Housing Benefit would no longer be applicable (unless it was a shared ownership property).

There is a six month disregard for the proceeds of  the sale of a previous property but not for an inheritance.

Deleted_User said: I am lead to believe that clearing debt or buying car could be seen as deprivation of Capital.  

Deprivation of capital only applies if DWP believe part of the operative purpose of the expenditure was to retain or increase benefit entitlement and the expenditure was unreasonable in the circumstances. Paying off debt could be treated as deprivation of capital but, in my opinion, if an inheritance gives someone the opportunity to pay off debt and thereby avoid future interest charges that is not unreasonable nor is buying a car if it meets a need. Each case comes down to a Decision Maker making a decision.

[Deleted User]

Thanks Calcotti…. Very informative. I have been looking at this as a property left to an individual as inheritance but (you reminded me) that in effect it was left to this gentleman 15 years ago along with his two siblings and has already been declared at that time in 2005 as a shared ownership to DWP and as ‘he being non resident’ there. In this instance it would be the sale of a previously owned property and Capital Gains Tax would be paid to the foreign Government (not Uk) as there is apparently an agreement between the two countries to not charge the individual twice. I’m not sure how this would work but the money would be a one third share from the sale of the property he owns a third of and once it arrives in his UK account he intends to purchase a property with it and replace his 20 year old car as it is falling apart and although he does not drive he is driven due to disability. Hopefully if declared correctly and he is able to purchase a home in a suitable time there may not be a change in his benefits or at-least too much disruption to them. 

pmlindyloo

Paying off debt is not treated as deprivation of capital as regards Pension Credit.

The law 84781
People should be treated as having capital they do not have if they deprive themselves of their capital for the purpose of getting SPC or more SPC1 . People are not treated as having the amount by which notional capital is reduced under the diminishing notional capital rule2 .
 People have not deprived themselves of capital if they disposed of it
1. to reduce or pay a debt owed by themselves or
2. to buy goods or services and it was reasonable in their case to buy such goods or services4 . 1 SPC Regs, reg 21(1); 2 reg 21(1); 3 reg 21(2)(a); 4 reg 21(2)(b