Personal Pension and UC

soblivion

Good afternoon, I wondered if somebody could give me some guidance on the following please.
I have been trying to sort out my husband's personal pension since his retirement in February and need to get something sorted as I don't want UC to think I'm trying to defer it.
Because I am Power of Attorney it is taking so much longer to get quotes and information because of proving and sending in all the paperwork etc.
My husband had a major stroke 10 years ago and until retirement age he was receiving ESA. I had to give up work and receive carer's allowance. My husband now gets the State Pension and the enhanced rates of PIP and because I am much younger we can't have pension credit but get UC instead. We also get a council tax reduction too.
My husband's personal pension is about £18,000. Is there a specific thing that UC expect that I should do with the pension. Do they expect that we should just draw out the whole sum? I have a quote for a Cash Out which is 20 years of £76.49 per month. I realise that that would be income so the UC would deduct that £76.49 from us but am I allowed to do that? I am waiting to hear about an enhanced annuity but that is a minefield so someone has to call me back on that but would universal credit allow us to have an enhanced annuity? 
I know that the pension has to pay for us and not UC but will they allow it to be paid gradually or do they expect that we should just have the whole lot in one go. I am very worried if we do take the £18,000 in one go as to how long UC think it would take us to spend it. I just don't want to make a mistake with them.
Thank you for any advice. 

badmemory

I don't know the actual answer to your question, but to look at it logically.  The personal pension could have been drawn at age 55.  I suspect they never suggested that & I doubt they would.  I do think however that the £76.49 is a rather poor return.  Hopefully someone will along soon who, unlike me, does know what they are talking about.

TELLIT01

I'd be surprised if the payout now would be as high as the quote from 20 years ago.  My wife retired last year with a pot of about £30k and would have received less than that amount. 

kaMelo

There is no expectation to draw money from a personal pension before SPA, even though it's available.

Once your husband reached SPA then DWP will use one of two figures, either the amount paid from a pension or, if you defer, a notional income figure based upon the total available. This income, along with any state pension will be deducted in full from any UC entitlement.

Should you draw irregular lump sums rather than regular income from the pension then these lump sums will be capital rather than income and no deduction as income but there will still be a notional income calculated and deducted from UC based upon the remaining sum in the pension. This calculation would need to be done every time a lump sum was withdrawn from the pension.
In all cases the notional income amount would be what an annuity would pay out calculated from the total value of the pension pot.

Took me a while to find it but the ADM paperwork is here, H5150 - H5199 starting page 24.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1174380/admh5.pdf

soblivion

kaMelo said:

There is no expectation to draw money from a personal pension before SPA, even though it's available.

Once your husband reached SPA then DWP will use one of two figures, either the amount paid from a pension or, if you defer, a notional income figure based upon the total available. This income, along with any state pension will be deducted in full from any UC entitlement.

Should you draw irregular lump sums rather than regular income from the pension then these lump sums will be capital rather than income and no deduction as income but there will still be a notional income calculated and deducted from UC based upon the remaining sum in the pension. This calculation would need to be done every time a lump sum was withdrawn from the pension.
In all cases the notional income amount would be what an annuity would pay out calculated from the total value of the pension pot.

Took me a while to find it but the ADM paperwork is here, H5150 - H5199 starting page 24.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1174380/admh5.pdf

Thank you very much kaMelo for taking time to do that. If I understand things correctly, if I took the £4,500ish as the 25% tax free, I may be allowed to use that to buy a riser recliner chair for my husband as his is breaking because it will not lift enough weight and perhaps fix some things on our WAV but that would be up to an adjudicator to decide. If the rest £13,500 after tax £10,800 was used as an annuity UC would deduct £ for £ the income that is sent to us from that.
If I did a drawdown and took the first 25% then the £13,500 would be taxed and then UC would count this as having an income from it and deduct that from our UC.
If I just took the whole £18,000 there is no way of knowing what an adjudicator would feel was a necessity and what would be classed as lavish/frivolous and I have to be very careful that if UC felt it should take 6 years to spend that amount and it gets spent in 4 years we couldn't claim UC for another 2 years.
Thank you to TELLIT01 and badmemory too.

Spoonie_Turtle

soblivion said:

kaMelo said:

There is no expectation to draw money from a personal pension before SPA, even though it's available.

Once your husband reached SPA then DWP will use one of two figures, either the amount paid from a pension or, if you defer, a notional income figure based upon the total available. This income, along with any state pension will be deducted in full from any UC entitlement.

Should you draw irregular lump sums rather than regular income from the pension then these lump sums will be capital rather than income and no deduction as income but there will still be a notional income calculated and deducted from UC based upon the remaining sum in the pension. This calculation would need to be done every time a lump sum was withdrawn from the pension.
In all cases the notional income amount would be what an annuity would pay out calculated from the total value of the pension pot.

Took me a while to find it but the ADM paperwork is here, H5150 - H5199 starting page 24.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1174380/admh5.pdf

Thank you very much kaMelo for taking time to do that. If I understand things correctly, if I took the £4,500ish as the 25% tax free, I may be allowed to use that to buy a riser recliner chair for my husband as his is breaking because it will not lift enough weight and perhaps fix some things on our WAV but that would be up to an adjudicator to decide.

Just so you know, if you don't already have savings that would take you over the £6,000 threshold once you took the smaller lump sum, UC won't care what you do with it because it won't affect your benefits either way.
If it does take you over £6k then from what you've said, what you propose to do with it would most likely be classed as reasonable.  (And if it is determined to be deprivation of capital, that is a decision that can be challenged.)

kaMelo

soblivion said:

kaMelo said:

There is no expectation to draw money from a personal pension before SPA, even though it's available.

Once your husband reached SPA then DWP will use one of two figures, either the amount paid from a pension or, if you defer, a notional income figure based upon the total available. This income, along with any state pension will be deducted in full from any UC entitlement.

Should you draw irregular lump sums rather than regular income from the pension then these lump sums will be capital rather than income and no deduction as income but there will still be a notional income calculated and deducted from UC based upon the remaining sum in the pension. This calculation would need to be done every time a lump sum was withdrawn from the pension.
In all cases the notional income amount would be what an annuity would pay out calculated from the total value of the pension pot.

Took me a while to find it but the ADM paperwork is here, H5150 - H5199 starting page 24.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1174380/admh5.pdf

Thank you very much kaMelo for taking time to do that. If I understand things correctly, if I took the £4,500ish as the 25% tax free, I may be allowed to use that to buy a riser recliner chair for my husband as his is breaking because it will not lift enough weight and perhaps fix some things on our WAV but that would be up to an adjudicator to decide. 

As @Spoonie_Turtle said, if your capital (including the £4500) is less than £6000 then you are free to spend as you wish. If it takes your capital over £6000 then any spending may be looked at to determine whether it's reasonable. If you're purchasing things to aid your husband it's difficult to see how it could ever be classed as deprivation but ultimately it's up to a decision maker.  Also, what's a WAV?

soblivion said:

kaMelo said:

There is no expectation to draw money from a personal pension before SPA, even though it's available.

Once your husband reached SPA then DWP will use one of two figures, either the amount paid from a pension or, if you defer, a notional income figure based upon the total available. This income, along with any state pension will be deducted in full from any UC entitlement.

Should you draw irregular lump sums rather than regular income from the pension then these lump sums will be capital rather than income and no deduction as income but there will still be a notional income calculated and deducted from UC based upon the remaining sum in the pension. This calculation would need to be done every time a lump sum was withdrawn from the pension.
In all cases the notional income amount would be what an annuity would pay out calculated from the total value of the pension pot.

Took me a while to find it but the ADM paperwork is here, H5150 - H5199 starting page 24.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1174380/admh5.pdf

If I did a drawdown and took the first 25% then the £13,500 would be taxed and then UC would count this as having an income from it and deduct that from our UC.
If I just took the whole £18,000 there is no way of knowing what an adjudicator would feel was a necessity and what would be classed as lavish/frivolous and I have to be very careful that if UC felt it should take 6 years to spend that amount and it gets spent in 4 years we couldn't claim UC for another 2 years.
Thank you to TELLIT01 and badmemory too.

If you drew the 25% TFLS this would leave £13,500. Whilst it's correct that any further money withdrawn from that is taxable income, whether any tax is actually payable depends upon many other factors. To be clear, the pension provider will deduct basic rate tax from any further withdrawals, depending upon your husbands total income in the financial year this may be correct or he may be due a refund of some or all of it. In a worst case scenario he may owe more tax. Without knowing his situation it's impossible to say which will apply.

If you took the whole £18,000 then, after deducting basic rate tax from the taxable 75%, this would give you a lump sum of £15,300. If this takes you over £16,000 in capital then your UC would close. If not there would be a tariff deduction of £4.35 from your UC for every £250 of capital (or part thereof) over £6000. On £15,000 this would be a deduction of £165.30.


I just want to ask, are DWP aware your husband has reached state pension age?  
The private pension held by your husband should have been declared to DWP when he reached state pension age, at which point a notional income calculation would have taken place and going forward this amount, along with his state pension, would have been deducted pound for pound from your UC payments. If this hasn't happened yet it's likely you've received an overpayment. 

If rather than an annuity you choose irregular drawdown sums, the money would be classed as capital rather than income and after any withdrawal the notional income would need recalculating as the sum used in the calculation will have dropped.  Depending upon how much other capital you have this can sometimes be the more beneficial method. but you'll need to do your own calculations. Here is an article explaining in more detail, although it's in reference to pension credit it's relevant to UC too.

https://benefitsinthefuture.com/notional-income-from-pensions-too-notional-for-some-advisers/

Spoonie_Turtle

^ a WAV is a wheelchair-accessible vehicle (or van).

soblivion

kaMelo said:

If you took the whole £18,000 then, after deducting basic rate tax from the taxable 75%, this would give you a lump sum of £15,300. If this takes you over £16,000 in capital then your UC would close. If not there would be a tariff deduction of £4.35 from your UC for every £250 of capital (or part thereof) over £6000. On £15,000 this would be a deduction of £165.30.

Yes this would take us over £16,000 but only until or if we were allowed to use some to buy the chair and repair the vehicle and I believe we would not be entitled to CTR either.


I just want to ask, are DWP aware your husband has reached state pension age?  
The private pension held by your husband should have been declared to DWP when he reached state pension age, at which point a notional income calculation would have taken place and going forward this amount, along with his state pension, would have been deducted pound for pound from your UC payments. If this hasn't happened yet it's likely you've received an overpayment. 

Yes absolutely. I told UC how much the private pension was, I told them that my husband is now getting SP, I told them that we were getting ESA before but had to change to UC because we couldn't have pension credit. I have kept UC informed every step of the way and also the benefits people who do the council tax reduction too. I told them that I had to have an appointment with pensionwise which took 3 weeks, then I had to have an appointment with citizens advice which took more time. I told them everything. I have had someone ring me back today about an enhanced annuity because of my husband's condition. It has to go to an "underwriter" now - is that the right word? and I have to wait now for a quote. It's taking ages to try and sort, every time I talk to somebody new, I have to send over both sets of power of attorneys and then they check them to make sure they can talk to me. I understand why but it's taking ages. We haven't had any monies deducted for the private pension and I am very worried about that. I will put in the journal part again tomorrow just so as it's completely transparent and I will ask if we should have a notional income taken from us. I really get in a panic about not getting things right.

If rather than an annuity you choose irregular drawdown sums, the money would be classed as capital rather than income and after any withdrawal the notional income would need recalculating as the sum used in the calculation will have dropped.  Depending upon how much other capital you have this can sometimes be the more beneficial method. but you'll need to do your own calculations. Here is an article explaining in more detail, although it's in reference to pension credit it's relevant to UC too.

https://benefitsinthefuture.com/notional-income-from-pensions-too-notional-for-some-advisers/

Thank you for the link. If I understand it correctly if we did the drawdown, UC would take an amount from us every month as if we were having the pension money but it would stay where it is until we wanted to draw a second or third amount from it. If we had a drop in UC and didn't use the money from the pension either things would be very, very tight. I don't think we could afford to do that.

Thank you for all your help. It is appreciated.

Thank you Spoonie_Turtle too.

kaMelo

It's obviously not my choice to make but, for what it's worth, I don't think taking the whole lot in one go would be the wisest choice as it impacts both UC and CTR. Even it it's temporary it's something you could probably do without. And while you don't mention how much state pension your husband receives it is taxable income which probably means income tax would be payable on the majority of the £13,500 left after the tax free lump sum.

It's good to know you've informed DWP, you hadn't implicitly said you had so thought I'd ask. You can't do any more than inform them, any delay is now up to them. Reading the ADM paperwork more closely I came across this too under H1580:

 From what date should the DM take notional income into account
1 Assume that an application was made on the date that there is sufficient evidence to show that a notional income should be calculated and
2.Add the estimated time it would take the pension fund holder to process an application for that income.

ExampleHolly is in receipt of UC. Her husband, Bernard, is of qualifying age for SPC.On 1 November the DM receives evidence that Bernard is entitled to a personal pension but has notbought an annuity or drawn an income.The pension fund holder states that Bernard’s scheme can provide an income. In Bernard’s case 100% ofthe rate of the annuity which the fund would generate, based on the Government’s tables, is £23 a week.Once an application is made it would take the pension fund holder six weeks to arrange for the maximumincome to be paid.

In that example there is a six week delay before any notional income would be classed as payable. Given the short amount of time between your husband reaching SPA in February and now, around six to eight weeks, then actually I don't think they could fairly claim you've had an overpayment. Setting up an annuity takes time, the guidance states this, you have informed them of the pension in a timely manner and any delay on working out what to do is on their part rather than yours.

I appreciate you mention things might be tight if you're classed as taking an income without actually taking it. Only you can make the decision as to what is right for you. The reason I mentioned about irregular drawdown is that, if done correctly, it can be the most beneficial way to access the money in the pension although it has to be said the benefits of doing so are considerably lower when claiming UC than when claiming pension credit due to the different rules on capital deductions...

peteuk

Spoonie_Turtle said:

soblivion said:

kaMelo said:

There is no expectation to draw money from a personal pension before SPA, even though it's available.

Once your husband reached SPA then DWP will use one of two figures, either the amount paid from a pension or, if you defer, a notional income figure based upon the total available. This income, along with any state pension will be deducted in full from any UC entitlement.

Should you draw irregular lump sums rather than regular income from the pension then these lump sums will be capital rather than income and no deduction as income but there will still be a notional income calculated and deducted from UC based upon the remaining sum in the pension. This calculation would need to be done every time a lump sum was withdrawn from the pension.
In all cases the notional income amount would be what an annuity would pay out calculated from the total value of the pension pot.

Took me a while to find it but the ADM paperwork is here, H5150 - H5199 starting page 24.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1174380/admh5.pdf

Thank you very much kaMelo for taking time to do that. If I understand things correctly, if I took the £4,500ish as the 25% tax free, I may be allowed to use that to buy a riser recliner chair for my husband as his is breaking because it will not lift enough weight and perhaps fix some things on our WAV but that would be up to an adjudicator to decide.

Just so you know, if you don't already have savings that would take you over the £6,000 threshold once you took the smaller lump sum, UC won't care what you do with it because it won't affect your benefits either way.
If it does take you over £6k then from what you've said, what you propose to do with it would most likely be classed as reasonable.  (And if it is determined to be deprivation of capital, that is a decision that can be challenged.)

Out of interest - does DWP ever retrospectively look at spending eg

OP takes £4,500 and spends it on a raising seat - doesnt go over the £6K limit so therefore doesnt have to declare spending it.

OP takes another sum £12K which does put them over the £6K threshold, which they declare which had they not brought the chair would put them over the £16K limit.   At this point could/would the DWP look back or is it just a simple today you have £12K which you plan to buy a car with.