Deemed Income, Notional Income - Pension Credit and CTR

D_Geek

Hey everyone....

Does anyone here know what the difference is between 'deemed income' ie., for those able to withdraw ad hoc amounts from their private pensions and 'notional income' i.e., for those who draw a regular income from their private pension in terms of how this impacts on pension credit award decisions and council tax reductions?


D_Geek

Alice_Holt

D_Geek said:

Hey everyone....

Does anyone here know what the difference is between 'deemed income' ie., for those able to withdraw ad hoc amounts from their private pensions and 'notional income' i.e., for those who draw a regular income from their private pension in terms of how this impacts on pension credit award decisions and council tax reductions?


D_Geek

      I think you may be over complicating the question.

     For those over SPA who draw a regular income from their private pension, that pension income is included when calculating any eligibility for PC. 
    If in receipt of PC there is an automatic entitlement to CTr.

For those over SPA who do not draw a regular income from their private pension pot, a level of pension income is assumed by the DWP when calculating any eligibility for PC (based on an annuity rate formulae).

Lump sums taken from a pension are generally viewed as capital rather than income by the DWP. 

What are your circumstances?  Are you post or pre SPA?  Are PC & CTr the only benefits you are wanting guidance on? 

D_Geek

Thanks for answering Alice_Holt

My parents are over SPA. There are two issues really... one is that when you complete a PC form online, the boxes available don't specify which type of pension drawdown (i.e., regular or ad hoc) the claimant has, yet there is a distinction in the PC guidance between 'notional' and 'deemed' income respectively. Why would there be a distinction? What purpose does it serve to have a distinction if the impact on PC is essentially the same?

The second issue is that before the PC was awarded, their local authority recalculated council tax and overcharged on the basis of regular pension withdrawals rather than an actual single drawdown for that tax year. We then queried it, since the overcharge was quite substantial, it then rightly triggered a recalculation based on 'notional income' from the unspent pension pot (i.e., the whole pot not just the withdrawal). So I guess my question here is, in practice, do local authorities/CTR assessment apply the same rules as PC assessment when calculating ad hoc / deemed income?

or to put it another way, what is the impact on PC or CTR of viewing pension pots as capital rather than income?

Alice_Holt

    If the drawdown is in the form of a lump sum, then it needs to be reported in the capital / savings section not the income section. 
But be aware that the DWP may decide that regular "ad-hoc" drawndowns do constitute income,

Also be aware that the remaining balance of the pension pot needs to be reported to the DWP, and they will assume a tariff income (based on annuity rates) - in the same way that the LA has for CTr. 

So, 3 things to disclose on the PC form.  Total ongoing regular income, Total savings and capital, The value of the remaining pension pot.  If the form / notes aren't clear on where to put this info on the form, I'd suggest clearly adding it (under other info / or an additional sheet), and keeping a copy to prove what was declared to the DWP.  

D_Geek

Thanks so much Alice_Holt, that clears that up. We will go down the route of change of circs then which should rectify the situation.