Converting A Classic Civil Service Pension To A Different Type Of Pension

Scrounger

Ripley43 said (in other thread):

She's not due to reach state pension age for another 3 years but she was wanting to take the CSP in the near future as she doesn't want to be on benefits anymore because it's making her more poorly with all the extra stress of reassessments/impending UC migration etc. 

I would be tempted to cease the DWP benefits prior to claiming the deferred CSP.

DWP shouldn't have any claim on any future windfalls (as no longer claiming benefits) - how would they even know?


Scrounger

xylophone

Answers in below seem relevant to the case.


https://www.reddit.com/r/BenefitsAdviceUK/comments/1fel43s/income_related_esa_and_deferred_occupational/?rdt=54502

Newcad

Ripley43 said:

@Marcon

She was extremely grateful for all the advice that she previously received on here. However, since then she has spoken to someone in the DWP and they have said that the advice given is wrong and if she claims the pension then a massive recoverable overpayment will be triggered. That is why I posted here today.

I have to agree with @Marcon that the conclusion/concensus that we came to in your September thread was and is almost certainly correct and that it is the DWP person that she talked to who is wrong (still/again).
Let's face it we all know that that the DWP front line (and especially telephone) staff are often not the sharpest knives in the box, and often just trot out whatever they can from their limited knowledge.
In this case what they are telling your mother would be correct if she were taking deferred pension payments as a lump sum accrued after State Pension Age.
However deferred pension lump sums received before SPA are classed as capital and not income.
In other words either the people she has talked to at the DWP are not taking into account that she has not yet reached SPA, or they do not know that it makes a difference.
(For what it's worth my guess would be the second one - they have just been taught one thing and don't know that there is a difference).
I'm sure that KaMelo will be along to give further thoughts.

xylophone

Let's face it we all know that that the DWP front line (and especially telephone) staff are often not the sharpest knives in the box, and often just trot out whatever they can from their limited knowledge.

This may be the case.

But see the very cogent argument set out by the posters in my link above which may be the view taken by the decision maker at DWP.

They appear to have a good understanding of the situation where a person has reached Normal Scheme Pension Age (and has therefore acquired the right to a pension without actuarial reduction) before PCA.

The OP's mother has acquired the right to the PCLS (1) and the monthly pension income (2).

If taken now, she will receive both (1) and (2), where (2) is the arrears of pension paid in a lump sum.

But he fact that it is a lump sum does not change the fact that the money in question is attributable to specific periods in the past when it would have been paid as monthly income.

When it is received, (2) will be taxable as income, either in the year of receipt or (if the recipient chooses) as income in the year when it could have been received.

Perhaps Ka Melo can comment on what should be the correct interpretation of the rules.

Ripley43

Been trying to get through to ESA as @Marcon suggested for the past couple of days, this has been unsuccessful, waiting on phone for over an hour each time just for the line to go dead 🙄. 

Hoping that @Newcad, @kaMelo and @Marconcould possibly give their thoughts on the link and comments which @xylophone posted?

The way I have interpreted Xylophone's comment/link and also with what the DWP operative said, is that they believe that the lump sum of arrears will not be capital and would be treat as income because it would be derived from backdated monthly pension payments and as the arrears are payable for a period for when means tested benefits would also have been paid then an recoverable overpayment of those benefits will have occurred?

So it seems to me that what is being said here is that whilst all of these deferred payments are held by your pension provider then means tested benefits are not affected but as soon as the pension is claimed and the lump sum of saved payments is paid then DWP will penalise you and you will be made to pay back all overpaid benefits? This is despite the rules that state it is legal to receive means tested benefits whilst deferring payments of an occupational pension under state pension credit age. Maybe it would be helpful if there was something in the legislation to reflect the apparent rules of how arrears of occupational pension are treat for ESA whilst under state pension credit age?

Marcon

Ripley43 said:

Been trying to get through to ESA as @Marcon suggested for the past couple of days, this has been unsuccessful, waiting on phone for over an hour each time just for the line to go dead 🙄. 

Hoping that @Newcad, @kaMelo and @Marconcould possibly give their thoughts on the link and comments which @xylophone posted?

The way I have interpreted Xylophone's comment/link and also with what the DWP operative said, is that they believe that the lump sum of arrears will not be capital and would be treat as income because it would be derived from backdated monthly pension payments and as the arrears are payable for a period for when means tested benefits would also have been paid then an recoverable overpayment of those benefits will have occurred?

So it seems to me that what is being said here is that whilst all of these deferred payments are held by your pension provider then means tested benefits are not affected but as soon as the pension is claimed and the lump sum of saved payments is paid then DWP will penalise you and you will be made to pay back all overpaid benefits? This is despite the rules that state it is legal to receive means tested benefits whilst deferring payments of an occupational pension under state pension credit age. Maybe it would be helpful if there was something in the legislation to reflect the apparent rules of how arrears of occupational pension are treat for ESA whilst under state pension credit age?

I've looked at the link and it's extremely frustrating - the original question (with all the information it will have contained) has been deleted, as have some other posts. I don't have any specialist knowledge or expertise in the benefits field, so can't give the definitive answer you need. I'm so sorry - I'd love to help, but guessing isn't going to do the trick here.

I hope @Newcad and @kaMelo will be able to assist - they clearly know their stuff.

xylophone

As far as I can gather, there has never been any definitive decision in writing on your mother's case.

Had you considered helping her to draft a letter to DWP?

LHW99

Marcon said:

Ripley43 said:

Been trying to get through to ESA as @Marcon suggested for the past couple of days, this has been unsuccessful, waiting on phone for over an hour each time just for the line to go dead 🙄. 

Hoping that @Newcad, @kaMelo and @Marconcould possibly give their thoughts on the link and comments which @xylophone posted?

The way I have interpreted Xylophone's comment/link and also with what the DWP operative said, is that they believe that the lump sum of arrears will not be capital and would be treat as income because it would be derived from backdated monthly pension payments and as the arrears are payable for a period for when means tested benefits would also have been paid then an recoverable overpayment of those benefits will have occurred?

So it seems to me that what is being said here is that whilst all of these deferred payments are held by your pension provider then means tested benefits are not affected but as soon as the pension is claimed and the lump sum of saved payments is paid then DWP will penalise you and you will be made to pay back all overpaid benefits? This is despite the rules that state it is legal to receive means tested benefits whilst deferring payments of an occupational pension under state pension credit age. Maybe it would be helpful if there was something in the legislation to reflect the apparent rules of how arrears of occupational pension are treat for ESA whilst under state pension credit age?

I've looked at the link and it's extremely frustrating - the original question (with all the information it will have contained) has been deleted, as have some other posts. I don't have any specialist knowledge or expertise in the benefits field, so can't give the definitive answer you need. I'm so sorry - I'd love to help, but guessing isn't going to do the trick here.

I hope @Newcad and @kaMelo will be able to assist - they clearly know their stuff.

I think this will be it?

https://cc.bingj.com/cache.aspx?q=https://www.reddit.com/r/BenefitsAdviceUK/comments/1fel43s/income_related_esa_and_deferred_occupational/?rdt=54502&d=4932134760294133&mkt=en-GB&setlang=en-US&w=BcdzsYnwRSPC4B5a4BbZLxeWLrXXr_da

Newcad

Whilst I understand what @xylophone is arguing, and respect it, for me that interpretation presents a 'double whammy' in that the deferred funds when received would then be treated BOTH as income and as capital .
(The DWP having their cake and eating it?).

In the normal course of events that would not happen because we have to assume that if taken then the pension income would have been spent each month if it had been recieved each month.
It would only become capital later if not spent. (Which of course the claimant couldn't do because they didn't have it to spend).

The current general DWP policy is that pension income which has been deferred is not counted as notional income so does not affect benefits as income, and that any pension payments taken all at once (lump sums) count as capital for benefits purposes, not as income.*
That isn't just 'Pension Commencement Lump Sums'(PCLS) it's any lump sum that is taken from a pension pot.

PS. Despite the votes of confidence here I am by no means an expert on how pensions and benefits interact.**
I'm just giving opinion on what I have seen of how the DWP's policy has been treating them in the past few years.

*(Sometimes that DWP policy is more lenient than the strict letter of the legislation, they don't want to be seen as hitting pensioners with double whammy's).
The many different pension types, with different rules, are confusing at the best of times and these Civil Service pensions seem to have some odd rules of their own.

**(I'm still not 100% sure of if I can take a PCLS from my own works pension and defer the rest until SPA, to avoid it affecting my UC £ for £ as income - and that is due to commence in a few months.
I should have more idea when I get my commencement information pack, due at the end of this month.
I will be deferring any income from it for a year to avoid it affecting UC, but if I can take a PCLS as well then that will be capital and I can then pay myself from it without it being classed as income by UC).

xylophone

Whilst I understand what @xylophone is arguing,

What I was trying to do was to try to understand the view of the DWP operative who advised the OP's mother on how the payments would be regarded if she claimed her deferred pension now.

There would be two amounts, (1) the PCLS and (2) the arrears.

It seems to me that the PCLS would be capital.

However,  while (1) could be regarded as capital, (2) is not  a  lump sum that is taken from a pension pot.

A DB pension does not have a "pot". 

Payment (2) is arrears of pension paid as a lump sum.

It is undoubtedly the case that these arrears arose from payments due on a monthly basis from or around the date when the 

OP's mother turned 60.

One question is if she claims now,  is the  DWP entitled to set payment (2) against means tested benefits received by the OP's 

mother from the time that she turned 60?

Another question is if the OP's mother refrained from claiming the deferred pension until she reached PCA, would  (2) 

received at that point be set against those benefits received up to PCA so that a repayment would be due?

And what about (1) received now or at PCA? It is capital - how would it have affected any entitlement to benefits in the years 

between age 60 and PCA?

Or is it the case that if the pension is not claimed until PCA, the fact that  payments were due from age 60 simply does not 

matter in terms of the means tested benefits received?

The specific case is discussed again here 

https://www.rightsnet.org.uk/forums/but/viewthread/20587/

In the OP's mother's case, I would get an answer in writing from DWP before taking any action.