UC Managed Migration and Capital (Savings)?

TELLIT01

Managed migration may be looming, but most Government timetables slip and slip more than once.  Depending on the ages of the children they may no longer qualify by the time migration actually happens.

calcotti

TELLIT01 said:

Managed migration may be looming, but most Government timetables slip and slip more than once.  Depending on the ages of the children they may no longer qualify by the time migration actually happens.

My sense is that they will want to front end Tax Credit claimants because having a means tested benefit administered by HMRC is an anomaly in the system - however I haven't seen anything to say this.

HillStreetBlues

calcotti said:

My sense is that they will want to front end Tax Credit claimants because having a means tested benefit administered by HMRC is an anomaly in the system - however I haven't seen anything to say this.

Won't that also be where the biggest saving will be?

calcotti

HillStreetBlues said:

calcotti said:

My sense is that they will want to front end Tax Credit claimants because having a means tested benefit administered by HMRC is an anomaly in the system - however I haven't seen anything to say this.

Won't that also be where the biggest saving will be?

Good point. Quite possibly true, particularly as those disqualified by capital drop off after 12 months.

Migration of ESA claimants (not also getting Tax Credits delayed until 2028 because that is thought to save the government about £2bn because many will be better off on UC,

NedS

HillStreetBlues said:

ElwoodBlues said:

I've read on other places (rightsnet) where professionals seem to think that's a grey area because overpaying a mortgage is not necessary to service the debt, and deliberately reducing UC eligible capital by switching it to disregarded capital (private home equity) could be considered deprivation of (eligible) assets.

I thought that might be the rule under different benefits such as ESA.

Indeed, but I don't think the argument holds water under UC (although I've seen DWP try to argue some strange things).

Capital is capital is capital - you either have it or you don't. Deprivation, in law, has no special meaning, only it's regular meaning in the English language, whereby if someone is deprived of something, they no longer have it.

So for deprivation of capital to exist, the person by definition must no longer have the capital. If they do still have the capital, deprivation cannot have taken place and DWP must treat the capital according to the appropriate regulations. There is nothing in the regulations that prevent a person moving capital between categories where it would fall to be disregarded (i.e, by moving capital into a house they live in by paying off mortgage*, or paying capital into a personal pension). They still have that capital, and DWP must treat that capital according to the regulations.

* The paying off mortgage example is actually a poor example, because it is specifically allowed anyway under the regulations relating to paying off debt. The example of moving capital into a pension is a better example because clearly you still have the capital (therefore there is no deprivation) and the regulations say it must now be fully disregarded as long as it remains in the pension, until state pension age. It's just £10k sat in a bank account versus £10k sat in a pension account - it's still just £10k of capital regardless of where it is.

HillStreetBlues

NedS said:

The example of moving capital into a pension is a better example because clearly you still have the capital (therefore there is no deprivation) and the regulations say it must now be fully disregarded as long as it remains in the pension, until state pension age. It's just £10k sat in a bank account versus £10k sat in a pension account - it's still just £10k of capital regardless of where it is.

That is very interesting.
With pension rules is there a maximum amount you can pay in per year?
EG someone wins £10k,  can they just put it into a pension pot?

ElwoodBlues

TELLIT01 said:

Managed migration may be looming, but most Government timetables slip and slip more than once.  Depending on the ages of the children they may no longer qualify by the time migration actually happens.

Yes, it has slipped several times, but they do now seem to be making progress. Pilots are being extended etc, the ball is rolling and everything seems to suggest that mass managed migration is going to be occurring in the next 12-18 months. I kind of feel lucky that I've had this much 'breathing space'. My kids are age 9-13, so pretty sure we'll be on UC before they're all adults. 

And anyway, in the meantime, a lot of people have migrated to UC through change of circumstances. There can't actually be that many people left on tax credits now can there??NedS said:

HillStreetBlues said:

ElwoodBlues said:

I've read on other places (rightsnet) where professionals seem to think that's a grey area because overpaying a mortgage is not necessary to service the debt, and deliberately reducing UC eligible capital by switching it to disregarded capital (private home equity) could be considered deprivation of (eligible) assets.

I thought that might be the rule under different benefits such as ESA.

Indeed, but I don't think the argument holds water under UC (although I've seen DWP try to argue some strange things).

Capital is capital is capital. Deprivation, in law, has no special meaning, only it's regular meaning in the English language, whereby if someone is deprived of something, they no longer have it.

So for deprivation of capital to exist, the person by definition must no longer have the capital. If they do still have the capital, deprivation cannot have taken place and DWP must treat the capital according to the appropriate regulations. There is nothing in the regulations that prevent a person moving capital between categories where it would fall to be disregarded (i.e, by moving capital into a house they live in by paying off mortgage*, or paying capital into a personal pension). They still have that capital, and DWP must treat that capital according to the regulations.

* The paying off mortgage example is actually a poor example, because it is specifically allowed anyway under the regulations relating to paying off debt. The example of moving capital into a pension is a better example because clearly you still have the capital (therefore there is no deprivation) and the regulations say it must now be fully disregarded as long as it remains in the pension, until state pension age. It's just £10k sat in a bank account versus £10k sat in a pension account - it's still just £10k of capital regardless of where it is.

Yes, I can see that pensions are a clearer example. But a house/property is still a capital asset (hence CGT etc), just a fixed one rather than cash. These replies re giving me a bit of relief that I would be ok to move my savings into equity on my home though. Worst case I do that and then remortgage when I'm in a position to extend/renovate properly.

HillStreetBlues

ElwoodBlues said:

But a house/property is still a capital asset (hence CGT etc), just a fixed one rather than cash.

Yes there are classed as  that  but the property you live in  is disregarded for income related benefits.
If you don't live in the property you own, then it comes into play. 

NedS

HillStreetBlues said:

NedS said:

The example of moving capital into a pension is a better example because clearly you still have the capital (therefore there is no deprivation) and the regulations say it must now be fully disregarded as long as it remains in the pension, until state pension age. It's just £10k sat in a bank account versus £10k sat in a pension account - it's still just £10k of capital regardless of where it is.

That is very interesting.
With pension rules is there a maximum amount you can pay in per year?
EG someone wins £10k,  can they just put it into a pension pot?

Yes, there are limits set by HMRC pensions regulations. Most of the limits relate to the tax relief you can receive, so you can in theory breach the limit, but would not be eligible for any tax relief or may incur a tax charge for doing so (which would generally be considered a bad idea as you would be paying taxed income into a pension only to be taxed on it again when taking it back out).

Generally, you are limited by your income (you cannot contribute more than you earn) AND the Annual Allowance (AA) which limits all contributions (employee and employer) to a maximum of £40k/year.

So if you earn £10k in a year (gross), you can contribute £10k (gross) into a pension as this does not exceed your earnings, and does not exceed the £40k AA. Note these are HMRC pension rules and DWP may take a different view (I can imagine they will try to argue deprivation of capital) - but I'd happily argue that at tribunal.

This most commonly comes up when people choose to pay a large proportion of their salary into a pension each month in order to reduce their take home pay that is considered for UC purposes, but equally you could choose to make a large contribution to your pension out of capital at the end of the tax year so long as you had earnings to cover it.

calcotti

ElwoodBlues said:. 

And anyway, in the meantime, a lot of people have migrated to UC through change of circumstances. There can't actually be that many people left on tax credits now can there?.

https://www.gov.uk/government/statistics/child-and-working-tax-credits-statistics-provisional-awards-april-2022/commentary-child-and-working-tax-credits-statistics-provisional-awards-april-2022

In April 2022 there were:

• 1.43 million families claiming CTC and/or WTC in April 2022 - this is a fall of 467,700 when compared to a year earlier.
• 2.7 million children in tax credit claiming families - this is a fall of 787,400 when compared to a year earlier.