Pension lump sum. On benefits

caz1965

Hello. Please can I have some advice?
I'm over 55 and now on universal credit.
I need to take a lump sum from my pension to help move home.
It will be under £6000.
Tax will be paid and I'll receive the rest.
Will I get my benefit stopped as universal credit might think I've worked? 

DE_612183

I think as long as it's under £6k you will be ok - maybe worth checking with the DWP.

calcotti

An ad hoc pension lump sum is treated as capital and if your total capital remains below £6,000 will have no impact on your UC.

Spoonie_Turtle

DE_612183 said:

I think as long as it's under £6k you will be ok - maybe worth checking with the DWP.

For future reference checking with DWP is useless - at best the people on the end of the phone usually don't know, and at worst they give incorrect advice.

caz1965

Thank you all.
I'm concerned that HMRC will show I've paid tax and they will think it's earnings. Meaning they will stop my benefits.
I've had wrong information from them before.  I get better help here or other forums.

Numberwang_2

calcotti said:

An ad hoc pension lump sum is treated as capital and if your total capital remains below £6,000 will have no impact on your UC.

Would it not be treated as unearned income in the period it was received? Ie. If you were to take a monthly payment of £420 this would be income on UC but if instead took a one off £5000 drawdown then this would not be income? Also as op is paying tax on the drawdown then one presumes they have already taken the  tax free allowance from their pot, so won’t all future drawdowns be income under UC?

calcotti

Numberwang_2 said:

calcotti said:

An ad hoc pension lump sum is treated as capital and if your total capital remains below £6,000 will have no impact on your UC.

Would it not be treated as unearned income in the period it was received? 

No.

Numberwang_2 said:. If you were to take a monthly payment of £420 this would be income on UC but if instead took a one off £5000 drawdown then this would not be income? 

If money was taken as regular income then you are correct that it would be treated as unearned income (and deducted in full when calculating UC payable).

Numberwang_2 said: Also as op is paying tax on the drawdown then one presumes they have already taken the  tax free allowance from their pot, so won’t all future drawdowns be income under UC?

Whether or not tax is payable is not relevant. The issue is whether the payment is regular and made with reference to a period of time.
(Your assumption about the pension situation may also be incorrect if they have taken an uncrystallised lump sum withdrawal in which case tax will be payable.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1061722/admh5.pdf

Capital treated as income

H5100 Any sums that are paid

1. regularly and

2. with reference to a period of time

have to be treated as income even if they would normally be regarded as capital or as having a capital element.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1073425/admh1.pdf

H1021 A payment is capital if it is

1. not made or due to be made regularly and
2. made without reference to a period.

The payment is income if this does not apply.

caz1965

I took the tax free amount last year, when I lost my job. This will be taxed.
I don't receive any monthly income from.the pension. It's in a pot from my workplace pension.
It's only £14000.  I need the money to move ASAP.
The rest is for my funeral. Or an emergency before then

Dazed_and_C0nfused

caz1965 said:

I took the tax free amount last year, when I lost my job. This will be taxed.
I don't receive any monthly income from.the pension. It's in a pot from my workplace pension.
It's only £14000.  I need the money to move ASAP.
The rest is for my funeral. Or an emergency before then

Why would a tax free lump sum be taxed 🤔

Spoonie_Turtle

Dazed_and_C0nfused said:

caz1965 said:

I took the tax free amount last year, when I lost my job. This will be taxed.
I don't receive any monthly income from.the pension. It's in a pot from my workplace pension.
It's only £14000.  I need the money to move ASAP.
The rest is for my funeral. Or an emergency before then

Why would a tax free lump sum be taxed 🤔

I think they mean 'this' (one), the current lump sum they're considering taking, the original subject of this thread, rather than the tax-free one already taken.

caz1965

Spoonie_Turtle said:

Dazed_and_C0nfused said:

caz1965 said:

I took the tax free amount last year, when I lost my job. This will be taxed.
I don't receive any monthly income from.the pension. It's in a pot from my workplace pension.
It's only £14000.  I need the money to move ASAP.
The rest is for my funeral. Or an emergency before then

Why would a tax free lump sum be taxed 🤔

I think they mean 'this' (one), the current lump sum they're considering taking, the original subject of this thread, rather than the tax-free one already taken.

That's correct. Thank you.
I understand the first 25% is tax free, the rest is taxed.
I don't want to get in trouble with the DWP and do everything correct.