Cashing in a pension while on benefits! Advice needed.

BernieLondon

Hello all

I have sadly been on benefits for a number of years.  After my Wife had a devastating stroke I had to become her full time carer.  We currently receive Income Support, Carers Allowance & PIP - plus my Wife receives a State Pension.  I worked for a company for 13 years & which built up a pension pot.  In 2020 it was worth around £60K.  The current worth is around £39K.  I am due to get this pension at the age of 68 which is around 4 years time.  My guess it will be worth even less by then.

As per the rules for this particular pension I cannot take out any "lump sums" but I can surrender the entire pension and take what ever it is worth.  After tax & fees etc it could be around £35K.

It I was to receive this amount it would of course affect what benefits I receive as it would be considered income.  What I would prefer to do is to get this amount is to give it entirely to my Son to help him buy a house as he struggling, along with his partner, to raise enough funds for a house deposit. So, I have no intention of using/keeping this money at all. If I was to wait until 68 to get the pension t would generate around £30 a week.

Any advice or help would be very much appreciated.  I can imagine the Department of Work and Pensions would take a very dim view of what I would like to do.

HillStreetBlues

You can not give the money away (£35k)  and  still claim income related benefits.
You would be deemed to still have the money, and entitlement  to  income related benefits would end.

fatbelly

IIRC this would be called notional capital and it would be difficult to show the DWP how that was reducing as time goes on. So it would screw up your means tested benefits for years and thus is a really bad idea.

If this is a Defined Contribution pension you need to get advice on your options from Pensionwise

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Keep_pedalling

BernieLondon said:

Hello all

As per the rules for this particular pension I cannot take out any "lump sums" but I can surrender the entire pension and take what ever it is worth.  After tax & fees etc it could be around £35K.

That does not sound right, you can’t just take your pension in one lump cash um without some hefty tax penalties. There will be options to transfer to another provider or use it to purchase an annuity. You need to get a grip on what the rules of this pension actually say and also to look at the funds that are actually held within it. 

BernieLondon

Keep_pedalling said:

BernieLondon said:

Hello all

As per the rules for this particular pension I cannot take out any "lump sums" but I can surrender the entire pension and take what ever it is worth.  After tax & fees etc it could be around £35K.

That does not sound right, you can’t just take your pension in one lump cash um without some hefty tax penalties. There will be options to transfer to another provider or use it to purchase an annuity. You need to get a grip on what the rules of this pension actually say and also to look at the funds that are actually held within it. 

Thank you for the reply.  Yes, you are right.  I spent an hour looking at my "pension small print" and  there is an option to transfer the present pension to a Master Pension Scheme which will have other options such as taking out smaller sums instead of the entire pot.

Thank you again.

calcotti

Taking the pension will be treated as capital - not income.

Carer’s Allowance and PIP would not be affected.

The capital will be over £16,000 so the IS will be stopped (as will and Council Tax Reduction or Housing Benefit). 

Giving money to your son will likely be used as deprivation of capital and if so you will treated as if you still have it.

calcotti

fatbelly said:

IIRC this would be called notional capital and it would be difficult to show the DWP how that was reducing as time goes on.

The notional capital is reduced each week by the benefit entitlement has has been ‘loss’. It is how DWP will calculate it - the claimant hasn’t to difficult anything to show how the notional capital would reduce.

fatbelly said:

If this is a Defined Contribution pension you need to get advice on your options from Pensionwise
https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

I am not aware of any requirement to obtain advice from Pension Wise for a Defined Contribution pension. Nonetheless advice may we useful (a drop of a third in the value of the pot from 2020 to 2023 appears excessive).

BernieLondon

I am not aware of any requirement to obtain advice from Pension Wise for a Defined Contribution pension. Nonetheless advice may we useful (a drop of a third in the value of the pot from 2020 to 2023 appears excessive).

I had not logged in for a couple of years to my Pension Scheme website and I did get quite a shock when I saw the drop of around 22K in only 3 years.  I did inquire as to the reason why. I was told it was due to a "bond market crash".

Thank you for the reply.

Spoonie_Turtle

calcotti said:

Taking the pension will be treated as capital - not income.

Carer’s Allowance and PIP would not be affected.

(Typo, easily done!)

calcotti

Spoonie_Turtle said:

calcotti said:

Taking the pension will be treated as capital - not income.

Carer’s Allowance and PIP would not be affected.

(Typo, easily done!)

Thanks, now corrected.

Keep_pedalling

BernieLondon said:

I am not aware of any requirement to obtain advice from Pension Wise for a Defined Contribution pension. Nonetheless advice may we useful (a drop of a third in the value of the pot from 2020 to 2023 appears excessive).

I had not logged in for a couple of years to my Pension Scheme website and I did get quite a shock when I saw the drop of around 22K in only 3 years.  I did inquire as to the reason why. I was told it was due to a "bond market crash".

Thank you for the reply.

If you pension is in bonds that is not a surprise, normally seen as low risk but they have been hit badly in the last few years.