Universal credit/pension

muswellblue

Hi, I’m 51 and may have to take ill health retirement. Someone mentioned universal credit to me, but not sure I would be eligible. I have about £90000 in a pension pot that I may be able to access before I’m 55. Does this £90000 count as savings and/or is any amount I withdraw each year counted as income regarding universal credit? I saw something about £16000 mentioned, but I’m a bit confused about it. 

Appreciate any help on this. 

NedS

Any amount in a pension fund is disregarded in full until you reach State Pension age (68)

Any money you take out of the pension will be taken into consideration for UC.

Regular pension payments (monthly etc) will be considered as income and will reduce any UC entitlement pound for pound.

Any pension lump sum withdrawals will be considered as capital. Combined capital over £6k will affect a UC claim, and there is no entitlement to UC if capital is over £16k

muswellblue

So if I take 25% tax free lump sum in the first year this would be treated as capital. If I then took one lump sum a year after that, would that count as income?

Also if I used part of the 25% tax free lump sum to pay off some debt would only what’s left be treated as capital? 

Danien

muswellblue said:

So if I take 25% tax free lump sum in the first year this would be treated as capital. If I then took one lump sum a year after that, would that count as income?

Also if I used part of the 25% tax free lump sum to pay off some debt would only what’s left be treated as capital? 

Any lump sum draw down is treated as capital. Not sure about the debt pay off as UC is not my area.

Your 25% drawdown would mean you weren't entitled to UC, so it wouldn't matter what you spent it on as long as you don’t do it with the intent of reducing your capital to qualify for UC.

Alice_Holt

muswellblue said:

Also if I used part of the 25% tax free lump sum to pay off some debt would only what’s left be treated as capital? 

 Yes, paying off debt is an allowable use of capital for UC. 

https://england.shelter.org.uk/professional_resources/legal/benefits/universal_credit/universal_credit_capital_rules

muswellblue

Thanks for the responses. Just had an online chat about this with citizens advice. They started by saying any lump sums would be classed as income, then by the end of the chat it was concluded that any the 25% tax free lump sum would be treated as capital, as would taking 1 lump sum a year in the following years. No wonder I’m getting confused ;-). They did actually give me that link to shelter though. 

kaMelo

Any subsequent withdrawals could be treated as either capital or income, which one applies is determined by the nature of withdrawals.

Ad-hoc withdrawals of  irregular amounts are likely to be treated as capital. Withdrawals that form a regular pattern, either in the amount taken, how often they are taken or both are more likely to be classed as income.

poppy12345

muswellblue said:

Thanks for the responses. Just had an online chat about this with citizens advice. They started by saying any lump sums would be classed as income,

That's not correct, it would be capital.