New to UC - advice on spouses pension

bobby21

Hello, 

A friend of mine lost her husband 5 months ago from a very sudden and unexpected illness and she has unfortunately had to stop work and claim Universal Credit as she has 3 very young children. Without both wages, she is unable to afford the ever rising cost of childcare to allow her to continue her full time job.

The problem is that her husband had paid for a very short time into a pension, which she is able to claim. Having never claimed any benefits before, she's gone ahead and claimed the pension without seeking advice.

The pension has paid a lump sum initially of about £1500, then there's about £20 / month moving forward. Her plan was to give this to the children as it is what her husband would have wanted.

Somewhat luckily, she was advised by someone to notify UC of the money before doing anything with it - which she has done.

However, she is mortified that because it's classed as 'other income' that it will basically be docked entirely - both the lump sum initially, and the monthly payments moving forward. If she had known this she would have waited until she was back in full time work. 

She has asked UC what her options are, and has asked if it's possible to:

1. Return the lump sum and have it paid into one of the boy's no access ISAs
2. Have the monthly amount paid into another one of the boy's no access ISAs

The ISAs are in the boy's names and cannot be accessed by her.

UC haven't said this is not ok, but instead said she will need to see if the money can first be returned before they can advise and to let them know. They are waiting on her to let them know if they need to notify the money for the next period.

I am not sure how to read this response, but to me this sounds as if they are saying that it's only a problem if the money comes into her account. Is this correct? I am sceptical. 

Where does she stand with this? Yes it was silly to have claimed it right now but she's grieving, very low, struggling and not thinking straight. Having never been on benefits before in her entire life, she just didn't think of the implications.

She did say she looked on the Gov website and there was a mention of a threshold of £379/month before they dock anything and she wasn't expecting the lump sum so she didn't think it would be a problem. She knew the pension was only paid into for a short time, so assumed it would be well below the £379. But on mentioning this she has been told this is only for work earnings where as the pension is classed as 'other earnings' so it's docked like for like. Whilst she understands why the system is this way, and has no intention of trying to commit benefit fraud, she's kicking herself as this could have been avoided.

If the money is returned and paid into the children's ISAs instead, is this a viable solution? She seems to have been told it is, but I am not so sure. I am concerned that because she is essentially the claimant of the pension, that they will class it as income regardless of account paid into. But then why haven't UC just said this outright?

My concern is that if the money is returned and paid into the ISA, then UC decide it should still counted, that she'll end up having it docked, but then have no access to it either! I have persuaded her to enquire about returning it, but take no action until I have sought advice here. What she had intended as a gift for the boys has turned into a very stressful situation for her.

Any advice would be greatly appreciated.

Flugelhorn

may be worth speaking to the trustees of the pension scheme, where the  payments are made is at their discretion and they may have come across this sort of thing before an may be able to advise

bobby21

Thanks, I will suggest this to her. My concern is that they either won't take it back or that even if they do the DWP will still count it. It's not a pleasant situation for her. (And, if I may get on my soap box, a travesty that someone who's never claimed a penny and worked 40 hours / week forever might not be able to give her dead husband's money to the kids).

poppy12345

Pension lump sums are usually treated as capital and not other income. The monthly income will still reduce her UC £1 for £1 even if the money is paid straight into the childrens bank accounts.

Unfortunately, UC is a means tested benefit so having worked and never claimed benefits is irrelevant.

Has she looked at5 claim Bereavement Support Payment? This will not affect her UC. https://www.gov.uk/bereavement-support-payment/eligibility

bobby21

Thanks for the link @poppy12345 I don't know if she has done this but I will send the link to her. 

Forgive me, but I don't know what the difference is between the lump sump being treated as capital as opposed to other income? What does this mean in terms of the UC?

For the monthly income, does this still apply if she cannot access the money in the children's ISAs? They are only accessible by the children when they turn 18.

poppy12345

A one off lump sum being capital means that if her total savings/capital are less than £6,000 then it will not affect her UC.

bobby21

Ok thanks, well that's at least some good news. Her savings / bank accounts are definitely under £6000, I know this much.

So assuming that she won't lose the ~£1500, what (if any) are the options for the £20 / month? Just suck it up until she returns to work?

poppy12345

She can try contacting the pension provider and ask if she can cancel the monthly income. I have no idea if this is possible with this sort of pension.

bobby21

Ok, thank you for all the advice. I will feed this all back to her and post back with the outcome when we know what's what.

Rubyroobs

This is not related to what you are asking , but just wanted to check your friend has applied for bereavement support payments ?

bobby21

Hi @Rubyroobs thanks for the suggestion, I think that's same thing that poppy mentioned? I sent the link poppy posted to her and she said she'd never heard of it so is going to apply. It looks like she may be entitled to the higher rate due to the children, which would make a huge difference.

If she can get the bereavement support payment, and indeed the lump sum is not deducted, that would be a huge relief for her. She is going to enquire about stopping the monthly payments for now and see if this is possible. I think she's taking the view that if all she loses is the £20/month for a year or two and not the lump sum, then that's just how it is and she can live with that. Someone has suggested to her that she looks at temping part time at a nursery that would be under the £379 threshold but may also give her a reduced rate for the youngest. She absolutely hates being on UC and can't wait to return to work.