Tax Credits to Universal Credit - moving excess savings to a pension fund?

WildLifer

I am having to move from Tax Credits to Universal Credit. Apparently I am not allowed savings above £16,000 or I will get no U.C. I do already pay into a personal pension fund (and receive allowance for under Tax Credits). Apparently U.C. ignores what's in a personal pension fund. The implication here is that I should move my excess savings (not a huge amount) to my personal pension fund. Or is this move anticipated by HMRC and forbidden?

marcia_

 Why are you claiming uc, your choice or managed migration? 

Newcad

There is a 12 months disregard protection which applies to the savings/capital limit of £16,000 above which UC is not normally payable.
As there is no equivalent limit in Tax Credits then for those migrating from TC's to UC that £16K savings limit will be disregarded (ignored) for the first 12 months.

If you still have above £16K in savings after that 12 months then your UC will stop.

Whilst monies in a pension pot are disregarded I would expect that transferring your savings into a pension pot now to get your savings below £16K would be seen by the DWP as "Deprivation of Capital with a view to claiming or increasing benefits".
Which you can't really argue with as that is exactly why you would be doing it. It's that intention that counts.

If/when they decide that it is 'deprivation' then they can treat it as if you still had the money available as savings. That's then called 'Notional Capital' and it would still prevent you from claiming UC.

Spoonie_Turtle

Newcad said:

There is a 12 months disregard protection which applies to the savings/capital limit of £16,000 above which UC is not normally payable.
As there is no equivalent limit in Tax Credits then for those migrating from TC's to UC that £16K savings limit will be disregarded (ignored) for the first 12 months.

If you still have above £16K in savings after that 12 months then your UC will stop.

Whilst monies in a pension pot are disregarded I would expect that transferring your savings into a pension pot now to get your savings below £16K would be seen by the DWP as "Deprivation of Capital with a view to claiming or increasing benefits".
Which you can't really argue with as that is exactly why you would be doing it. It's that intention that counts.

If/when they decide that it is 'deprivation' then they can treat it as if you still had the money available as savings. That's then called 'Notional Capital' and it would still prevent you from claiming UC.

That's what I used to think but one member who works for DWP clarified that as you still have the capital, just now in a pension pot that's disregarded, you still have it so you can't have deprived yourself of it.  (Kind of like if you use it to buy a house to live in, you still have the capital but in a form that's ignored.  If you then sold the house and didn't use the funds for another, you'd have that capital taken into account again.)

Equally if it's done during the transitional period whilst the extra savings are disregarded then there should be no issue either; it's ignored so essentially doesn't exist for UC purposes, therefore no issue how it is spent or used during the transitional period.  (A bit like benefits backpay is disregarded and you can spend it how you wish during the period of disregard.)

Yamor

I would be careful here, as there is actually clear case law (starting with R(SB) 40/85 - see para. 8 of the judgement - which has also been followed in a number of other cases) that using capital to obtain another asset which is ignored as capital for means-tested benefits can still be treated as deprivation.

huckster

Agree with Yamor. The question will always be whether the actions to move money were reasonable and not done mostly to create benefit entitlement.

For these transitional capital cases, they are being logged and before 12 months is up, the capital will have to be redeclared. And where the capital has been reduced significantly to bring it below £16000, they will be referred to Decision Makers. And as Yamor indicates they could decide that deprivation has taken place, but each case on its own merits.

Grumpy_chap

WildLifer said:

I am having to move from Tax Credits to Universal Credit. Apparently I am not allowed savings above £16,000 or I will get no U.C. I do already pay into a personal pension fund (and receive allowance for under Tax Credits). Apparently U.C. ignores what's in a personal pension fund. The implication here is that I should move my excess savings (not a huge amount) to my personal pension fund. Or is this move anticipated by HMRC and forbidden?

The rules about pension contributions and UC are complex so I will let others comment on that aspect in detail.
AIUI - pension contributions are not wholly forbidden and there can be a difference as to how things are treated depending upon the detail of how contributions are made.

You are correct that over £16k means no UC, but UC will start to be reduced for savings from above £6k.

It is important to bear in mind that pension contributions cannot exceed your earned income.

WildLifer

marcia_ said:

 Why are you claiming uc, your choice or managed migration? 

I received a migration letter - so forced to migrate.

WildLifer

Thanks everyone. I can see it's a grey area ultimately subject to decision makers who may decide either way depending upon their view of 'intention'. However it seems I will (probably) have a 12 month transition period where the savings will be ignored so who knows what changes will happen in the next year. Thanks again everyone.

Newcad

Just for the £16K limit situation:

It's been announced today that you can now use the Entitledto benefits calculator to show how much you could get when migrating to UC if you currently receive tax credits and have money, savings and investments over £16,000.

https://www.gov.uk/guidance/tax-credits-and-some-benefits-are-ending-move-to-universal-credit

The Entitledto calculator can be found here: https://www.entitledto.co.uk/benefits-calculator/Intro/Home?cid=16799cf6-4c7c-4f58-8507-4110ff43d5a4

I'd be careful about moving the savings though, because I still regard what you are proposing with moving savings into a pension fund as Deprivation.
Moving your savings into/between some other forms of investment, property, stocks and shares, savings schemes, ISA's etc. doesn't change anything because those still affect benefits, benefits will not increase because you moved them, so you have not done it with the intention of increasing benefits, so it cannot be Deprivation.

However moving then to somewhere like a pension which is disregarded for benefits is a different matter, and if you have done it with the intention of claiming or increasing benefits then that's Deprivation.

You don't want to end up in the situation where you have moved your savings to a pension fund where you can't access them, but the DWP still treat you as still having the savings as 'Notional Capital'.

In the end though they are your savings, and whilst people can advise, no one can stop you moving them about if that's what you want to do.

WildLifer

Thanks Newcad.
It looks to be too risky a move. If I shift some savings to a pension fund AND they treat it as Deprivation then I'm stuffed: No U.C. Less savings and a pension I can't touch till Im 50!
Thanks again all.