Help with WTC to UC migration

Carefulspender1

Hi, I wondered if the knowledgeable folk on here could cast some light on some questions I have.

My partner and I have just received our WTC to UC migration notice – our claim by date is 8th May. We are both self employed, I am 64 and work 16-18 hours a week and my partner who is 60 has been working 30 hours a week.  My partner was going to forgo the 30 hour additional WTC payment and reduce her hours to 18 at the start of April, however in the migration letter there is a paragraph stating “ This migration notice entitles you to transitional protection if your circumstances do not change before you claim UC. If your circumstances change before you make your claim this may affect the amount you get.” My questions are:

Should my partner delay changing her hours to 18 until after the 8th May when our UC claim would have gone through, to avoid loss of the transitional protection?

Should we wait to make our claim on or after 8th April? (I have read other threads that seem to recommend this as this is the WTC year-end- I think!)

Lastly, I transferred a small pension lump sum into a Hargreaves Lansdown cash account and occasionally draw down £1000 to supplement my current low income – does the amount left in the HG account count as savings for the purpose of UC?

Many thanks for any help on these questions.

peteuk

Cant help you with most of it, however if you have more than £16K in capital (to me it sounds like your HL cash account will count for towards this) then you are not eligible to claim UC, but this will be disregarded for a year under the Transitional Protection. 

If you have between £6K and £16K then your UC amount will be decreased by £4.35 for every £250 pounds. 

Happy to be corrected. 

NedS

Carefulspender1 said:

Lastly, I transferred a small pension lump sum into a Hargreaves Lansdown cash account and occasionally draw down £1000 to supplement my current low income – does the amount left in the HG account count as savings for the purpose of UC?

Any money outside of a pension wrapper counts towards your savings / capital and must be declared.

Anything inside a pension wrapper is disregarded until state pension age and you do not need to declare it.

When you say pension lump sum, I assume you have received this lump sum from your pension so it is now outside of the pension wrapper and will be classed as savings / capital.

But I'm not entirely sure what you mean as you've used the term 'drawdown', which is normally used to mean taking money out of a pension (implying it's still in a pension) as opposed to simply making a withdraw from a cash account.

peteuk

NedS said:

Carefulspender1 said:

Lastly, I transferred a small pension lump sum into a Hargreaves Lansdown cash account and occasionally draw down £1000 to supplement my current low income – does the amount left in the HG account count as savings for the purpose of UC?

Any money outside of a pension wrapper counts towards your savings / capital and must be declared.

Anything inside a pension wrapper is disregarded until state pension age and you do not need to declare it.

When you say pension lump sum, I assume you have received this lump sum from your pension so it is now outside of the pension wrapper and will be classed as savings / capital.

But I'm not entirely sure what you mean as you've used the term 'drawdown', which is normally used to mean taking money out of a pension (implying it's still in a pension) as opposed to simply making a withdraw from a cash account.

I read it as the OP has “Drawn-down” a lump sum and has it now in a HL Cash account which they use to supplement their current low wage.   So now outside the pension and in a cash accessible account possibly ISA (having looked at their web site) 

Carefulspender1

NedS said:

Any money outside of a pension wrapper counts towards your savings / capital and must be declared.

Anything inside a pension wrapper is disregarded until state pension age and you do not need to declare it.

When you say pension lump sum, I assume you have received this lump sum from your pension so it is now outside of the pension wrapper and will be classed as savings / capital.

But I'm not entirely sure what you mean as you've used the term 'drawdown', which is normally used to mean taking money out of a pension (implying it's still in a pension) as opposed to simply making a withdraw from a cash account.

Hi Ned, thanks for getting back to me - I had £12k that I transferred out from Equitable Life pension when they sold out to Utmost I think.  Rather than investing the money I put it in a HL Cash Account from which I can draw down small amounts when I need to.  Each amount is subject to tax after the first 25%.  Does that come within the Pension wrapper protection?

Carefulspender1

peteuk said:

NedS said:

Carefulspender1 said:

Lastly, I transferred a small pension lump sum into a Hargreaves Lansdown cash account and occasionally draw down £1000 to supplement my current low income – does the amount left in the HG account count as savings for the purpose of UC?

Any money outside of a pension wrapper counts towards your savings / capital and must be declared.

Anything inside a pension wrapper is disregarded until state pension age and you do not need to declare it.

When you say pension lump sum, I assume you have received this lump sum from your pension so it is now outside of the pension wrapper and will be classed as savings / capital.

But I'm not entirely sure what you mean as you've used the term 'drawdown', which is normally used to mean taking money out of a pension (implying it's still in a pension) as opposed to simply making a withdraw from a cash account.

I read it as the OP has “Drawn-down” a lump sum and has it now in a HL Cash account which they use to supplement their current low wage.   So now outside the pension and in a cash accessible account possibly ISA (having looked at their web site) 

Hi Pete thankyou for responding as I have mentioned to Ned above I had £12k that I transferred out from Equitable Life pension when they sold out to Utmost I think.  Rather than investing the money I put it in a HL Cash Account from which I can draw down small amounts when I need to.  Each amount is subject to tax after the first 25%.  Does that come within the Pension wrapper protection? 
I've just checked my paperwork and the drawdowns are called Uncrystallised Funds Pension Lump Sums if that helps.

peteuk

Carefulspender1 said:

Hi Pete thankyou for responding as I have mentioned to Ned above I had £12k that I transferred out from Equitable Life pension when they sold out to Utmost I think.  Rather than investing the money I put it in a HL Cash Account from which I can draw down small amounts when I need to.  Each amount is subject to tax after the first 25%.  Does that come within the Pension wrapper protection? 
I've just checked my paperwork and the drawdowns are called Uncrystallised Funds Pension Lump Sums if that helps.

Sorry to say I dont know enough, and having looked at such Funds it doesnt really suggest anything either way.  However should it not fall into the pension wrapper protection then as it’s under £16K it wont stop you from claiming UC.  It will however reduce your UC by £4.35 for every £250 over £6K. 

NedS

Carefulspender1 said:

peteuk said:

NedS said:

Carefulspender1 said:

Lastly, I transferred a small pension lump sum into a Hargreaves Lansdown cash account and occasionally draw down £1000 to supplement my current low income – does the amount left in the HG account count as savings for the purpose of UC?

Any money outside of a pension wrapper counts towards your savings / capital and must be declared.

Anything inside a pension wrapper is disregarded until state pension age and you do not need to declare it.

When you say pension lump sum, I assume you have received this lump sum from your pension so it is now outside of the pension wrapper and will be classed as savings / capital.

But I'm not entirely sure what you mean as you've used the term 'drawdown', which is normally used to mean taking money out of a pension (implying it's still in a pension) as opposed to simply making a withdraw from a cash account.

I read it as the OP has “Drawn-down” a lump sum and has it now in a HL Cash account which they use to supplement their current low wage.   So now outside the pension and in a cash accessible account possibly ISA (having looked at their web site) 

Hi Pete thankyou for responding as I have mentioned to Ned above I had £12k that I transferred out from Equitable Life pension when they sold out to Utmost I think.  Rather than investing the money I put it in a HL Cash Account from which I can draw down small amounts when I need to.  Each amount is subject to tax after the first 25%.  Does that come within the Pension wrapper protection? 
I've just checked my paperwork and the drawdowns are called Uncrystallised Funds Pension Lump Sums if that helps.

Uncrystallised Funds Pension Lump Sums are a method of withdrawing from a pension, so it sounds like that money is still within a pension wrapper. It sounds like you transferred an Equitable Life pension to Hargreaves Lansdown but left it as cash after the transfer rather than investing it.
Anyway, as it's within a pension, you would not need to declare it as capital when making a claim for UC. Once on UC, if making Uncrystallised Funds Pension Lump Sum withdraws, those withdraws would be classed as capital on UC, not income.

Carefulspender1

NedS said:

Uncrystallised Funds Pension Lump Sums are a method of withdrawing from a pension, so it sounds like that money is still within a pension wrapper. It sounds like you transferred an Equitable Life pension to Hargreaves Lansdown but left it as cash after the transfer rather than investing it.
Anyway, as it's within a pension, you would not need to declare it as capital when making a claim for UC. Once on UC, if making Uncrystallised Funds Pension Lump Sum withdraws, those withdraws would be classed as capital on UC, not income.

Hi Ned, yes that's exactly what I did as I knew I would probably need access following a decline in income. Thank you for clarifying that it is still within a pension wrapper.  

Do you have any thoughts on my other question - whether it is advisable for my partner to make changes to their working hours after May 8th or should they keep working 30 hours until  the transitional protection has expired in a years time to ensure we have full transitional protection for that year?

NedS

When you apply for UC, your Transitional Protection will be based on your Tax Credits award the day before you apply, and that I believe is based upon last tax years earnings. So I do not believe any changes to earnings now will affect the amount of transitional protection you receive (but I could be wrong - happy for others to share differing views).

The most obvious affect of reducing hours now is that under UC you will be worse off than if you didn't reduce hours (salary will fall by more than UC will rise so overall you will be worse off). By reducing hours you are taking a drop in income - can you afford to take a drop in income? If that drop places your partner's earnings under the AET threshold, they will be required to attend weekly appointment's with a work coach to look for more work. Seems counter-productive to me - she may as well keep working the 30h.

Carefulspender1

NedS said:

When you apply for UC, your Transitional Protection will be based on your Tax Credits award the day before you apply, and that I believe is based upon last tax years earnings. So I do not believe any changes to earnings now will affect the amount of transitional protection you receive (but I could be wrong - happy for others to share differing views).

The most obvious affect of reducing hours now is that under UC you will be worse off than if you didn't reduce hours (salary will fall by more than UC will rise so overall you will be worse off). By reducing hours you are taking a drop in income - can you afford to take a drop in income? If that drop places your partner's earnings under the AET threshold, they will be required to attend weekly appointment's with a work coach to look for more work. Seems counter-productive to me - she may as well keep working the 30h.

Thank you Ned. Yes it does seem that the best policy is not to change hours.  My goodness I've just had a look at the AET and it seems a complete nightmare for self employed people...I'm assuming that they calculate the AET based on averaging out a self employed persons income for the previous year to calculate it.  Even with that we could come under the AET which would then involve this work coach in the run up to me retiring if it's reviewed whilst we're receiving the transitional payments!  Do you know when they make their decisions on whether we would qualify for UC when the transitional protection expires? Is it when we first apply this April - or do they wait until the transitional protection has expired?