Universal Credit and pension draw down

Hi, I'm on UC and also the higher rate of PIPs due to having a stroke and and disabled down my right sie (arm and leg). I recently found out I had a forgotten pension from 1988 which is worth around £51,000. When it mature in 2034, it'll gain we around £1,500 a year in pension, which hardly seems worth, just over £100/month.

I'd rather drawn £40,000 out( permissable early, I'm 54, due to my disability) , to give my 4 Children £10,000 each. I've emailed HMRC to see how much tax i'd need to pay so I can drawn the additional money to pay the tax as well as the £40,000 for my kids.

My question is, how wil DWP view this? will my UC be affected even though when I recieve the money I will be transfering it to my kids straight away?

Thanks
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Comments

  • Rubyroobs
    Rubyroobs Posts: 848
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    edited 24 September 2023 at 9:54PM
    You can't just receive 40k and give it away when you are in receipt of means tested benefits. look up the deprivation of capital rules. If you give the money away they will treat you as if you still have the money and all UC would stop.
  • ader42
    ader42 Posts: 265
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    As I understand it your pension income will be classed as income and therefore your means tested benefits such as UC will cease and they will still view you as having that money (deprivation of capital). You would do better to leave the pension for them to inherit maybe after transferring it to a SIPP so it never “matures”. 

    Happy to be corrected by the more knowledgeable here.
  • Brie
    Brie Posts: 9,272
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    It's like any sudden income you get, if you receive it and even if you then give it away UC will consider it's your savings and then will question why you've "hidden" it even if you know it's a gift to children.  You are, quite frankly, better off leaving it where is is until you can receive it as a pension.

    I would just question is it actually something you know you can "drawdown"?  This implies it's a DC (defined contribution) pension.  But if it's from 1988 it may in fact be a defined benefit pension which would be treated very differently.
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • poppy12345
    poppy12345 Posts: 17,725
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    ader42 said:
    As I understand it your pension income will be classed as income

    That's not correct, a lump sum draw down is classed as capita and not incomel. With a sum of £40k then all means tested benefits will end because giving money away is highly likely to be treated as DoC.
  • Alice_Holt
    Alice_Holt Posts: 5,855
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    Doing this would end your UC and other means tested benefits (CT reduction), for many years,
    (Until the £40+k you have given away is reduced by the UC you might had received). 

    https://england.shelter.org.uk/professional_resources/legal/benefits/universal_credit/universal_credit_capital_rules#:~:text=When the DWP decides that,capital will reduce over time.

    PIP would not be affected.

    A more sensible plan might be to keep the SIPP and let your children inherit it.  Assuming you are not intending to claim Pension Credit, and have no need of the SIPP income in retirement.
    This means they might feel able to reduce their contributions into their pension scheme.

    https://www.hl.co.uk/help/sipp,-drawdown-and-annuity/sipp/retiring/what-happens-to-my-SIPP-when-i-die

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  • ader42
    ader42 Posts: 265
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    ader42 said:
    As I understand it your pension income will be classed as income

    That's not correct, a lump sum draw down is classed as capita and not incomel. With a sum of £40k then all means tested benefits will end because giving money away is highly likely to be treated as DoC.
    Any idea where the line is drawn between a lump sum (capital) and regular drawdown (income)?

    What if one was to drawdown £1k a month? Or £3k every quarter? Or £6k bi-annually? 

    There must be some sort of formula… 

  • poppy12345
    poppy12345 Posts: 17,725
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    ader42 said:
    ader42 said:
    As I understand it your pension income will be classed as income

    That's not correct, a lump sum draw down is classed as capita and not incomel. With a sum of £40k then all means tested benefits will end because giving money away is highly likely to be treated as DoC.
    Any idea where the line is drawn between a lump sum (capital) and regular drawdown (income)?

    What if one was to drawdown £1k a month? Or £3k every quarter? Or £6k bi-annually? 

    There must be some sort of formula… 


    They may start asking questions if you withdraw £1k per month or even £3k every 3 months and a decision maker could decide that this is a regular income.
  • ader42 said:
    ader42 said:
    As I understand it your pension income will be classed as income

    That's not correct, a lump sum draw down is classed as capita and not incomel. With a sum of £40k then all means tested benefits will end because giving money away is highly likely to be treated as DoC.
    Any idea where the line is drawn between a lump sum (capital) and regular drawdown (income)?

    What if one was to drawdown £1k a month? Or £3k every quarter? Or £6k bi-annually? 

    There must be some sort of formula… 

    Yes, it's not the amount it's the regularity.  Even once a year if it's on about the same date each time could be classed as regular.

    ADM H1
    H1021 A payment is capital if it is
    1. not made or due to be made regularly and
    2. made without reference to a period.
    The payment is income if this does not apply.

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1163111/admh1.pdf
    Paragraph 3 of the legislation here https://www.legislation.gov.uk/uksi/2013/376/regulation/46
  • I feel frusteted at this, but understand it, to me,  the £100/month is'nt worth it as I do'nt feel I'II last another 10 years! I'd miuch rather give my kids something now which they could benefit from now!  But I get around £400/month form UC, so that means no UC for aroung 10 years!
  • poppy12345
    poppy12345 Posts: 17,725
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    You can do what you want with the money but yes your UC will end if you go ahead with this. 

    Surely your children wouldn’t expect to receive anything if it stops your UC? £400 a month is a lot of money to lose. 
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