25% Tax Free Pension Lump Sum and Universal Credit (LCWRA)

LucaPuca

So i am basically better off just withdrawing £6k knowing all my current benefits will remain in place .. is that right?? ... will i still be taxed? ... Thank you for your speedy reply much appreciated

Alice_Holt

Your partners CA will not be affected.
But note that as you and your partner have a joint UC claim, this should include the carers element. And then the CA received is deducted from UC in full.
Have a look at the UC payment breakdown to check this.
 
The UC carers element (which is what you both, in effect, are receiving) is not subject to the earnings limit that applies to CA.  

You need to understand that your UC is a joint claim, so any savings your partner has (like their earnings) will count towards those £6 /16k thresholds. 

LCWRA is an element of your joint claim (as is the carers element) - it is not separate from UC.  

HillStreetBlues

LucaPuca said:

So i am basically better off just withdrawing £6k knowing all my current benefits will remain in place .. is that right?? ... will i still be taxed? ... Thank you for your speedy reply much appreciated

It will depend on any other capital you both have, the total would need to be under £6K at end of AP.

If you decided to take £20K  over a year taking £5k every three months, I would expect it would then be classed as income rather than capital, and that would affect the UC claim,   But a one off payment would be OK.

LucaPuca

My question then would  be would I still be taxed on withdrawing only £5999.99p or £6k as a one off and leave the rest in my pension until official retirement age

NedS

LucaPuca said:

My question then would  be would I still be taxed on withdrawing only £5999.99p or £6k as a one off and leave the rest in my pension until official retirement age

That depends on how you take the £6000 from the pension - there are many different ways of withdrawing money from a pension and different taxable rules can apply so you would need to consult your pension provider as to any possible income tax that may be deducted.

If treated as income, there are no deductions for tax on pensions under UC, so the full gross amount would be taken into consideration regardless whether any tax was deducted or not.

LucaPuca

NedS said:

LucaPuca said:

My question then would  be would I still be taxed on withdrawing only £5999.99p or £6k as a one off and leave the rest in my pension until official retirement age

That depends on how you take the £6000 from the pension - there are many different ways of withdrawing money from a pension and different taxable rules can apply so you would need to consult your pension provider as to any possible income tax that may be deducted.

If treated as income, there are no deductions for tax on pensions under UC, so the full gross amount would be taken into consideration regardless whether any tax was deducted or not.

Thank you soo much once I get the Ill Health Declaration form back from Doctors will arrange an appointment with the Financial Advisor from the Pension company I am with and take it from there.  Thank you soo much for all your responses its opened  my eyes to how this government really has you over no matter how little you wish to take to try and survive

ElwoodBlues

What do you want to use the lump sum for? If it's to pay off a debt then make sure you do it all within the AP. If it's not to pay off a debt then would you be better taking the 25% tax free in smaller instalments? You always get 25% tax free (until the govt remove that particular allowance), it's not lost if you don't take it as one big lump sum. 

LucaPuca

Yeah but my main concern is losing the Universal Credit as a whole as my only form of income as a registered Disabled unable to work  is Personal Independence Payment £272 per month, and Universal Credit £700 per month with bills being (not incl debts) and then there's shopping and to be honest £21500 is not alot of money compared to what I would lose.

As your previous advisors explained claimed capital from £16k+ Universal Credit will be lost. Anything capital from £6k to £16k benefits will be more or less halved. That's why i kinda understand that im better off just taking £5500 but then want to know if Id be taxed on that and if so would it be even worth taking anything out

NedS

LucaPuca said:

Yeah but my main concern is losing the Universal Credit as a whole as my only form of income as a registered Disabled unable to work  is Personal Independence Payment £272 per month, and Universal Credit £700 per month with bills being (not incl debts) and then there's shopping and to be honest £21500 is not alot of money compared to what I would lose.

As your previous advisors explained claimed capital from £16k+ Universal Credit will be lost. Anything capital from £6k to £16k benefits will be more or less halved. That's why i kinda understand that im better off just taking £5500 but then want to know if Id be taxed on that and if so would it be even worth taking anything out

There is no magic answer for you here. UC is a means tested benefit. If you withdraw large amounts of capital from your pension then you will be expected to use that capital to support yourself as you will no longer need means tested benefits.

If you withdraw a smaller amount (£5500) and that is your only taxable income, you may have income tax deducted but will be able to claim it back as you would be under your personal allowance for income tax. If once you have withdrawn £5500, your total capital does not exceed £6000 then there will be no impact on your UC.

PersianF

Hi, I have a small pension from a job I worked at for 5 months.  The pension pot for this job is £2900.  I want to withdraw the whole sum to help me with business startup costs.  I started claiming UC just under 2 months ago  Can anyone advise how dating the whole sum could or will affect my UC payment?  Thanks