Universal credit & Pension lump sum

djr2031

We currently claim Universal credit and are looking at using a lump sum from my pension (I am over 55) to pay down some of the mortgage. Just spoken to an adviser at Universal Credit and been told I will have to declare any lump sum as income which will  reduce our Universal credit that we rely on.  Does anyone know if this is correct. 

Spoonie_Turtle

As it's a one-off without reference to a time period it should surely be capital, and then using it to pay the mortgage is fine because it's paying off debt.

Receive it and pay off the mortgage within the same assessment period and it won't affect your UC at all (but do tell them afterwards what's happened, so if/when the temporarily higher bank balance is flagged, they already know about it and where the money's gone).

Can someone more knowledgeable please confirm/correct?  I'm always slightly wary that pensions might be treated a bit differently from other types of capital.

djr2031

I had thought that any lump sum would be treated as savings and so as long as we are below savings limit then we should be OK. 

HillStreetBlues

I agree.
It's capital (savings). Just complete the withdrawal and pay off mortgage is same AP as advised above.

frayedknot

A lump sum is treated as capital for UC purposes. Any amount received over £6000 needs to be reported and will affect UC if not spent in the same assessment period. Any spending must be allowable, e.g paying debt, necessary items, etc.

If you opt to take only the  25percent tax-free amount you will receive this in full. If you go for the 25% tax-free/ 75% taxed option you will be taxed on the 75% as if you earn this every month, so there could be a substantial tax deduction meaning you get less than you took out, which you may be able to claim back at the end of the tax year depending on your taxable earnings. 

It is easy to be confused because for  HMRC the taxable element (75%) of your lump sum is earnings but for
 the DWP it is all capital. 

djr2031

Thank you, DWP were not particularly helpful when I called them and seems very dependent on the advisor as to what answer you get.  Have never been able to replicate calculations for tax credits and Universal Credit which makes me very nervous as don't want to be paid too much or do something that will mean we loose a benefit that we don't take for granted but really helps us through the month. 
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