pension contributions and UC

char115

I am due to get a small amount of money, £1500 refund of pension contributions from a previous job.  I am claiming Universal Credit.  Will my UC credit payments and Housing Benefit be affected.

calcotti

To be clear - are you actually getting Housing Benefit? Very few people claim HB at the same time as UC, help with rent is usually provided through the housing element of UC.

A refund of pension contributions will I think be treated as earnings but it may depend on how the refund is reported to HMRC. If it is treated as earnings it will be treated in the same way as any other earnings for the month in which you receive it.

NedS

Yes, you would need to declare it and it will reduce the amount of UC you receive.

Why are you taking a refund on the pension contributions? Why not ask the employer to transfer it into another pension for you, which would also allow you to keep your UC (win #1).

Normally employers refund pension contributions when you have been in a job for less than two years - but they only refund YOUR contributions and you lose the employer contributions. If you ask for the pension contributions to be transferred into another pension, you get to keep the whole lot (win #2). It's in the employers interests to refund your pension contributions to you as they get back their own contributions so they are financially better off and you are taking the hit.

Dazed_and_C0nfused

In addition to all the good reasons provided by @NedS you also have to pay tax on the refunded contributions.

And you can't claim the tax back.

All in all from a financial perspective a refund is a very poor choice.

On the Pensions board not so long back there was a poster who ended up with a pension pot of several thousand pounds rather than a post tax contribution refund of a few hundred pounds.