Pension Credit and Inheritance

MorbidX

I think i have a good understanding on the implicaitons but i want to just run this past a few people to see if im missing anything.

Just to set the scene.

My Father's over 75 and on pension credit, he also receives housing benefits ( home is owned by local authority) and doesnt pay council tax etc. My grandmother died this year in her late 90's and left a small estate which was divided among all her children and means my father will be receiving about £32k.

Im aware this will nuke the housing benefit he gets and the council tax exemption and I had already pre warned him about this however what we are confused by is the impact on his pension credit.

My understanding is he can have savings upto £16k and then anything after that he loses the pension credit but im also reading that because hes on guaranteed pension credit anything upto £10k savings is fine but after that every £500 equates to £1 of income which should mean he would have £44 of income and would still get his pension credit but at a reduced rate?

He's aware of the whole depravation of assets issue and was hoping he could pass on £10k to myself to go towards a house deposit but obviously that seems a no go and as far as we are aware theres no way to pass some money to myself without falling foul of this.

He does intend to buy himself a little car as they currently dont have one but would this be seen as depravation of assets too or is this considered a reasonable purchase as it aids with their mobility?

calcotti

MorbidX said:
Im aware this will nuke the housing benefit he gets and the council tax exemption and I had already pre warned him about this 

Not necessarily, see below.

MorbidX said:
My understanding is he can have savings upto £16k and then anything after that he loses the pension credit

No.

There are no savings limits for Pension Credit.
There will be a deduction of £1/week for every £500 or part thereof over £10,000.

If any Guarantee Pension is still payable he will remain entitled to HB and CTR because in that case the capital will be ignored for HB and CTR.

Do you know how much his existing Guarantee Pension Credit is? (You must ignore any Savings Pension Credit.)

If he wishes to pass on money to you he is not prevented from doing so. Deprivation of capital simply means that he is likely to be treated as if he still has that £10,000 and his PC will be calculated accordingly.

Spoonie_Turtle

MorbidX said:

He does intend to buy himself a little car as they currently dont have one but would this be seen as depravation of assets too or is this considered a reasonable purchase as it aids with their mobility?

If he buys a car sufficient for their needs, not a ridiculously expensive one, but doesn't have to be the cheapest possible either, then it's likely to be fine.  It's a reasonable expense if it's a reasonable car for what they need

MorbidX

There are no savings limits for Pension Credit.
There will be a deduction of £1/week for every £500 or part thereof over £10,000.

If any Guarantee Pension is still payable he will remain entitled to HB and CTR because in that case the capital will be ignored for HB and CTR.

Do you know how much his existing Guarantee Pension Credit is? (You must ignore any Savings Pension Credit.)

If he wishes to pass on money to you he is not prevented from doing so. Deprivation of capital simply means that he is likely to be treated as if he still has that £10,000 and his PC will be calculated accordingly.

Cheers for the reply, He gets £961 a month pension and £128 a month pension guarantee credit i believe. His total savings ones the inheritancee clears will then be £35k approximately.

So based on what you've mentioned above it would mean he has £25000 thats would count as £1 of income for every 500 so he would have a reduction on his guaranteed credit of £50 per week or about £200-£220 a month which would wipe out the guaranteed pension credit and i assume his HB and CTR?

calcotti

If he gets £961 State Pension every 4 weeks that is £240.25/week. If he also gets a disability benefit the Pension Credit includes a Severe Disability Premium. However that level of pension would not result in Guarantee Pension Credit of £32/week - it would be less (£11.75/week). Because of his age he may be getting Savings Pension Credit too which would increase the total Pension Credit (but still not to £32/week).

Either way tariff income of £50/week will nil the PC which will mean that HB and CTR cannot continue.

MorbidX

calcotti said:

If he gets £961 State Pension every 4 weeks that is £240.25/week. If he also gets a disability benefit the Pension Credit includes a Severe Disability Premium. However that level of pension would not result in Guarantee Pension Credit of £32/week - it would be less (£11.75/week). Because of his age he may be getting Savings Pension Credit too which would increase the total Pension Credit (but still not to £32/week).

Either way tariff income of £50/week will nil the PC which will mean that HB and CTR cannot continue.

Cheers for the clarification, i assumed the HB and CTR would get canned. Meant to say he is married to my step mum so that might be why hes getting what hes getting.

Do you think it would be viable for him to buy a car and then get assessed or would they still class that as deprivation even though its a worthwhile expense?

poppy12345

MorbidX said:

calcotti said:

If he gets £961 State Pension every 4 weeks that is £240.25/week. If he also gets a disability benefit the Pension Credit includes a Severe Disability Premium. However that level of pension would not result in Guarantee Pension Credit of £32/week - it would be less (£11.75/week). Because of his age he may be getting Savings Pension Credit too which would increase the total Pension Credit (but still not to £32/week).

Either way tariff income of £50/week will nil the PC which will mean that HB and CTR cannot continue.

Do you think it would be viable for him to buy a car and then get assessed or would they still class that as deprivation even though its a worthwhile expense?

Not sure what you mean by “get assessed”
As advised by spoonie above buying a car wouldn’t be classed as deprivation of capital providing its not the most expensive one. 

andrewmp

There's an advice leaflet regarding depravation of capital on PC here:

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs91_pension_freedom_and_benefits_fcs.pdf

'If the Department for Work and Pensions (DWP) or HM Revenue and

Customs (HMRC) decide you spent money deliberately to allow you to

claim benefit, or to increase how much you receive, or you have not

taken up available income or capital, you may be treated as if that

resource is available to you. This is ‘notional capital’ or ‘notional income’.

DWP or HMRC must establish that a ‘significant operative purpose’ in

depriving yourself of the money is, or was, to establish entitlement to

means-tested benefits or tax credits. This is not always easy to decide

and depends very much on your individual circumstances.

DWP or HMRC must be able to show that you knew about the effects of

spending money or giving it away. They must be satisfied you had a

positive intention to secure benefit entitlement as a significant operative

purpose. On the other hand, the fact that securing benefit may have

been a foreseeable consequence of an action does not automatically

lead to the conclusion this was the intention behind the action. It all

depends on the particular circumstances of your case

Always keep evidence and receipts about any capital assets such as

savings you dispose of. You can seek guidance from DWP and HMRC

but they are often reluctant to give a definitive response until the money

is gone.'


Case study - deprivation may have occurred John draws down the whole £30,000 pension pot and receives £28,000 after tax. John and Nora decide to go on holiday and spend £20,000 on a luxury cruise. John also pays a credit card bill of £5,000. The DWP decide he has deprived himself of £20,000 as their holiday was extravagant. The first £10,000 is ignored as this is the lower capital limit. This means notional income of £20 a week is applied to their PC. Their PC payment is reduced to £80.30 a week, on top of his State Pension of £170 a week. Total overall weekly income is £250.30.