Pensions and the benefits system

Wibbleone

Hi everyone.

I have a pension question.

My wife and I receive benefits as I am chronically ill and cannot work.  My wife is my carer.

I am very likely to die before my wife.  If I do so, all the benefits and PIP will stop and my wife will be penniless.

I have a small personal pension.  Is it possible to transfer this to my wife before I die?  Or can she have my pension after I die?

Second question, we have relations that will soon pass away and are likely to leave us a around £100,000.  Can we invest this directly into a pension?

If so, how will this affect our benefit payments?  Or won’t it?

Thanks in advance!

Brie

I don't believe you can transfer a personal pension if it's already in payment, but I may be wrong.  

If your wife isn't entitled to State Pension yet then she may need to apply for benefits on her own behalf when the time comes.  Once she's collecting her SP she may be entitled as well to Pension Credits.  I suggest she get a pension forecast so that you can both organise your thoughts about money. 

Check your State Pension forecast - GOV.UK (www.gov.uk)

Assuming you are receiving UC that is income related I believe so receiving a large amount of money will stop that from being paid.  Whether it can be redirected into a pension specifically for your wife without it effecting your benefits I'll leave for someone more knowledgeable to answer.

Linton

Whether you can pass your personal  pension to your wife depends on the detail of the pension.  Is it held as a lump sum from which you can draw money or is it an ongoing payment - an annuity?  In the first case your wife can probably inherit the lot whereas in the second case your wife will only gain income from your pension after your death if this is explicitly included in the terms of the annuity.  This would have been an option when the annuity was first set up.

The amount you can put in a pension is limited.  As you are not working you can pay a maximum of £2880 into a pension each tax year to which the government adds 25% to make a total of £3600.  Assuming your wife is also not working she can also pay the same amount into a pension.  If she is working she can contribute up to 80% of her earned income.

Since it would take many years to clear the £100K with a pension a good alternative to minimise tax would be to put the maximum of £20K into ISAs for each of your wife and yourself.  So you can clear the £100K in 3 years.

Some benefits are means tested, others are not.  Clearly a lump sum of £100K, or £50K each, will limit your access to means tested benefits.  You could get information for each of your benefits from the more knowledgable peole on the benefits forum rather than this one.  I suggest you ask benefit questions there.

Of course your wife may be entitled to benefits in her own right. Again perhaps the benefits forum could help,

Brie

I'll ask for this to be moved to the benefits board as that seems more relevant.

Keep_pedalling

Inheriting £100k will stop any means tested benefits but won’t impact non means tested ones. No you can’t simply dump the lot into a pension to stop this happening and quite rightly too.

Albermarle

I have a small personal pension

You need to give some more details about this, especially whether it is just a pot of money waiting to be used in future, or is actually paying a monthly pension now ?

Spoonie_Turtle

Linton said:

Since it would take many years to clear the £100K with a pension a good alternative to minimise tax would be to put the maximum of £20K into ISAs for each of your wife and yourself.  So you can clear the £100K in 3 years.

Just for clarity for the OP, putting it into ISAs won't allow access to means-tested benefits, it will still be taken into account by means-testing.

What benefits do you currently claim?

Wibbleone

We currently recieve PIP, carers allowance and ESA.  We are not currently drawing any money from the pension (I am 60, my wife is two ears younger).
It seems to me that as I am unlikely to reach the age to claim the pension, I could draw the maximum I can each year from the pension whilst not impacting the means tested benefits.  Otherwise the £70K pension pot I have was not worth paying into al those years?

Spoonie_Turtle

Any pension over £85/week will definitely impact your ESA, whichever type it is.  I'm not sure if it would affect income-based ESA even more.

NedS

Wibbleone said:

We currently recieve PIP, carers allowance and ESA.  We are not currently drawing any money from the pension (I am 60, my wife is two ears younger).
It seems to me that as I am unlikely to reach the age to claim the pension, I could draw the maximum I can each year from the pension whilst not impacting the means tested benefits.  Otherwise the £70K pension pot I have was not worth paying into al those years?

Your wife may disagree. You can leave your pension pot to your wife as your dependant/beneficiary upon your death, to continue providing an income for her in retirement.

How will your death impact your wife's financial situation? Will she need that extra income after you die or does she have sufficient pension provision in her own right?

Wibbleone

Unfortunately my wife has no pensions at all.  Once I die, she will have no income at all.  We are lucky enough to own our own house.
Do I simply say "I leave my pension to my wife" in my will and it will happen?  I did not know it would be that easy.