Early retirement and benefits

Spoonie_Turtle

tacpot12 said:

Thanks for the update. I noticed in your signature that you have a considerable amount of personal debt (but that you have also paid a good deal off - well done!) This opens up an avenue of using your pension lump sum to clear your debts. The amount of the lump sum is likely to be sufficient to clear them completely, and leave you with about £4,000. This is under the amount that would result in any deduction for capital from Universal Credit.  

But if you intend to claim any means-tested benefits, such as Universal Credit, you need to be aware of the rules on deliberate depravation of capital. 

These rules say that you can be regarded as still having your capital even if you have used it to repay your debts, if your "significant operative reason" for repaying the debts was to increase your entitlement to means-tested benefits. Practically, what this means is that, providing you are saving more than a trivial amount of interest, any debt repayment will be allowed. You just need to be clear to the DWP that you have cleared your debts to avoid paying unnecessary interest. 

Paying off/reducing debt is not treated as deprivation of capital for Universal Credit

ADM H1

H1796 People are not treated as having capital of which they have deprived themselves if
1. it reduces or pays a debt owed by the person

Onebrokelady

tacpot12 said:

Thanks for the update. I noticed in your signature that you have a considerable amount of personal debt (but that you have also paid a good deal off - well done!) This opens up an avenue of using your pension lump sum to clear your debts. The amount of the lump sum is likely to be sufficient to clear them completely, and leave you with about £4,000. This is under the amount that would result in any deduction for capital from Universal Credit.  

But if you intend to claim any means-tested benefits, such as Universal Credit, you need to be aware of the rules on deliberate depravation of capital. 

These rules say that you can be regarded as still having your capital even if you have used it to repay your debts, if your "significant operative reason" for repaying the debts was to increase your entitlement to means-tested benefits. Practically, what this means is that, providing you are saving more than a trivial amount of interest, any debt repayment will be allowed. You just need to be clear to the DWP that you have cleared your debts to avoid paying unnecessary interest.

However, clearing these debts, would leave you with a much smaller lump sum, and hence less income if you were to plan to spend this over the period between retirement and receiving your state pension. Another reasonable use of your lump sum would be to make any voluntary NI contributions necessary to secure you the maximum state pension. As you are on a low income currently, the last year or so may need topping up. This can be very efficient as you only need to top up you NI contributions in those years - you may have already paid most of what would be needed. You need to get a forecast of your state pension, and check if you have any years that are not "full". You can do this online, although you will need a Government Gateway login. These take about 10 days to arrive. You can also fill a form in and have the information sent in the post. 

I think you will find that with your correct pension forecast from your two NHS pensions, and ESA, and having cleared your debts with your lump sum, you will be able to survive until your state pension kicks in and then things should get a bit easier. 

I would need to use some of my lump sum to pay off the rest of my mortgage if I retired now so wouldn't be able to use it to pay the debts