Are pension contributions and mortgage overpayments classed as deprivation of savings for U.C?

Rt90

Two questions in one really but I was wondering if anyone has any experience or knowledge on these and their effect on Universal credit.
As I understand it pension contributions are taken off your gross income but could they be considered deprivation of assets?
Overpaying a mortgage also seems like it could be a grey area?
 My wife and I are currently claiming child tax credit so will be facing managed migration at some point. I work full time and currently pay as much as I can afford into a pension but was also considering trying to overpay the mortgage a bit.
We’ve probably got 20k of capital/savings if we put everything together so I would have to legitimately decrease that by a few grand long term which I would do if it’s the best financial decision for my family,
Big thank you to all helpful responses.

calcotti

Overpaying a mortgage is not deprivation of capital because the regulations specifically state that paying off debt cannot be treated as deprivation of capital.

Paying money into a pension fund from income as it is received cannot be treated as deprivation of capital because at that point it isn't capital.

Moving savings into a pension fund could, in my opinion, possibly be treated as deprivation of capital.

Rt90

calcotti said:

Overpaying a mortgage is not deprivation of capital because the regulations specifically state that paying off debt cannot be treated as deprivation of capital.

Paying money into a pension fund from income as it is received cannot be treated as deprivation of capital because at that point it isn't capital.

Moving savings into a pension fund could, in my opinion, possibly be treated as deprivation of capital.

Thank you for the response. Your point on paying into a pension does make sense.
 I suppose moving savings to pay some mortgage off could also be frowned upon.
 My other concern with overpaying a mortgage is that while it is a debt it doesn’t have to be immediately repaid. I wonder if anyone has any knowledge or experience about this?

Tucosalamanca

Additional contributions into a pension would actually be beneficial to your UC claim.
Pension contribution is calculated at x100/80
for example £1,000 x 100/80 = £1,250 would be deducted from your annual income.
This only applies to additional contributions.
As you will hopefully be already aware, pension contributions through employment can also be deducted from your income.
Calculating tax credits income « What is income « How do tax credits work? « Guidance « Tax Credits (revenuebenefits.org.uk)

Rt90

Yes. Paying into a pension if you can afford it while on tax credits is a bit of a no brainier. It grows your pension while also giving you a larger tax credit payment due to the income deduction.
 I was just wondering if this was different with Universal credit as it was means tested because if I didn’t voluntarily pay into a pension then that money could become savings and and make me ineligible.
It seems this isn’t the case though.

calcotti

Rt90 said:  I suppose moving savings to pay some mortgage off could also be frowned upon.

No, paying off debt cannot be treated as deprivation of capital. That is enshrined in the regulations.

Rt90 said: My other concern with overpaying a mortgage is that while it is a debt it doesn’t have to be immediately repaid. 

That is irrelevant for UC. It used to matter for old benefits but UC simply says paying off debt is not deprivation of capital, there is no qualification about whether or not it is immediately repayable.

calcotti

Rt90 said: I was just wondering if this was different with Universal credit as it was means tested because if I didn’t voluntarily pay into a pension then that money could become savings and and make me ineligible.

It seems this isn’t the case though.

I'm not sure what you mean by this. If you don't pay into a pension scheme any income received each month which is not spent by the end of the month becomes capital. So if you have surplus income that will increase your capital and could ultimately mean you no longer qualify.

Rt90

calcotti said:

Rt90 said: I was just wondering if this was different with Universal credit as it was means tested because if I didn’t voluntarily pay into a pension then that money could become savings and and make me ineligible.

It seems this isn’t the case though.

I'm not sure what you mean by this. If you don't pay into a pension scheme any income received each month which is not spent by the end of the month becomes capital. So if you have surplus income that will increase your capital and could ultimately mean you no longer qualify.

I was wondering if they might look at it as if you are deliberately depriving yourself of surplus income by paying into a pension in order to remain eligible to claim.
I would hope thots not the view they take.

Rt90

calcotti said:

Rt90 said:  I suppose moving savings to pay some mortgage off could also be frowned upon.

No, paying off debt cannot be treated as deprivation of capital. That is enshrined in the regulations.

Rt90 said: My other concern with overpaying a mortgage is that while it is a debt it doesn’t have to be immediately repaid. 

That is irrelevant for UC. It used to matter for old benefits but UC simply says paying off debt is not deprivation of capital, there is no qualification about whether or not it is immediately repayable.

Thank you. I was unaware that didn’t apply to Universal Credit. That’s a big help.

calcotti

Rt90 said:

I was wondering if they might look at it as if you are deliberately depriving yourself of surplus income by paying into a pension in order to remain eligible to claim.
I would hope thots not the view they take.

Paying into a pension is not deprivation of income.

NedS

Rt90 said:

calcotti said:

Rt90 said: I was just wondering if this was different with Universal credit as it was means tested because if I didn’t voluntarily pay into a pension then that money could become savings and and make me ineligible.

It seems this isn’t the case though.

I'm not sure what you mean by this. If you don't pay into a pension scheme any income received each month which is not spent by the end of the month becomes capital. So if you have surplus income that will increase your capital and could ultimately mean you no longer qualify.

I was wondering if they might look at it as if you are deliberately depriving yourself of surplus income by paying into a pension in order to remain eligible to claim.
I would hope thots not the view they take.

To clarify, there are two considerations:

1. Deprivation of Capital

2. Deprivation of Income

1. As @calcotti has already stated, income only becomes capital at the end of an assessment period when it remains unspent. Therefore, paying into a pension out of monthly income cannot be considered deprivation of capital, becuse that money was never capital to start with.

2. Deprivation of Income - by definition you cannot deprive yourself (or be deprived) of something which you have received. By the very fact that you have received the income (e.g, your employer paid it to you, and it shows on your payslip as gross earnings), it cannot be considered as deprivation of income. What you choose to spend your income on (e.g, gambling addiction, alcohol/drug addition, chocolate addiction, pension contributions or whatever) is of no concern of DWP/UC as it is treated as your earned income and has already been fully taken into account when calculating your UC award. To argue deprivation of income (and I have seen DWP attempt this) would be to penalise you for that income twice - once when you received it as earned income and again for deprivation of income that you did actually receive (DWP legal dropped the case once they received the tribunal papers and read the arguments)