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

Ripley43

DMG 52050, R(IS) 3/93 confirms when income becomes capital. Therefore, I'm just wondering if mum claims her civil service pension then the backdated pension arrears payment could actually be classed as capital when it's paid into her bank? Any thoughts would be appreciated.

mybestattempt

Ripley43 said:

DMG 52050, R(IS) 3/93 confirms when income becomes capital. Therefore, I'm just wondering if mum claims her civil service pension then the backdated pension arrears payment could actually be classed as capital when it's paid into her bank? Any thoughts would be appreciated.

Since I last posted on this thread I have done some further research.

To answer this specific question I don't believe any arrears of pension are capital when actually paid but, will become capital after being paid.

On the question of how the arrears are treated if actually paid my understanding comes from DMG Chapter 48.

This, to me, suggests any pension arrears are allocated to the weekly periods they relate to and half of any amount exceeding £85 a week would cause the amounts of ESA paid for those periods to be recalculated and thus any overpayment established.

I don't think @Ripley43, you have said what the amount of arrears would be if the deferred Classic CSP is claimed now and the monthly CSP going forward, do they exceed £85 on a weekly basis?

Ripley43

Ripley43 said:

DMG 52050, R(IS) 3/93 confirms when income becomes capital. Therefore, I'm just wondering if mum claims her civil service pension then the backdated pension arrears payment could actually be classed as capital when it's paid into her bank? Any thoughts would be appreciated.

mybestattempt said:

Ripley43 said:

DMG 52050, R(IS) 3/93 confirms when income becomes capital. Therefore, I'm just wondering if mum claims her civil service pension then the backdated pension arrears payment could actually be classed as capital when it's paid into her bank? Any thoughts would be appreciated.

Since I last posted on this thread I have done some further research.

To answer this specific question I don't believe any arrears of pension are capital when actually paid but, will become capital after being paid.

On the question of how the arrears are treated if actually paid my understanding comes from DMG Chapter 48.

This, to me, suggests any pension arrears are allocated to the weekly periods they relate to and half of any amount exceeding £85 a week would cause the amounts of ESA paid for those periods to be recalculated and thus any overpayment established.

I don't think @Ripley43, you have said what the amount of arrears would be if the deferred Classic CSP is claimed now and the monthly CSP going forward, do they exceed £85 on a weekly basis?

@mybestattempt Thank you for your comments. It seems to me that what you are saying is that the arrears (if paid) will be treated as income and then treated as capital? @Newcad mentioned something similar to this in an earlier post. 

Any further thoughts from anyone regarding DMG 52050, R(IS) 3/93 would be appreciated.

mybestattempt

Ripley43 said:

Ripley43 said:

DMG 52050, R(IS) 3/93 confirms when income becomes capital. Therefore, I'm just wondering if mum claims her civil service pension then the backdated pension arrears payment could actually be classed as capital when it's paid into her bank? Any thoughts would be appreciated.

mybestattempt said:

Ripley43 said:

DMG 52050, R(IS) 3/93 confirms when income becomes capital. Therefore, I'm just wondering if mum claims her civil service pension then the backdated pension arrears payment could actually be classed as capital when it's paid into her bank? Any thoughts would be appreciated.

Since I last posted on this thread I have done some further research.

To answer this specific question I don't believe any arrears of pension are capital when actually paid but, will become capital after being paid.

On the question of how the arrears are treated if actually paid my understanding comes from DMG Chapter 48.

This, to me, suggests any pension arrears are allocated to the weekly periods they relate to and half of any amount exceeding £85 a week would cause the amounts of ESA paid for those periods to be recalculated and thus any overpayment established.

I don't think @Ripley43, you have said what the amount of arrears would be if the deferred Classic CSP is claimed now and the monthly CSP going forward, do they exceed £85 on a weekly basis?

@mybestattempt Thank you for your comments. It seems to me that what you are saying is that the arrears (if paid) will be treated as income and then treated as capital? @Newcad mentioned something similar to this in an earlier post. 

Any further thoughts from anyone regarding DMG 52050, R(IS) 3/93 would be appreciated.

Yes, that's how I see it from my understanding.

Assuming your mother has received ESA before/since reaching age 60 if arrears relating to CSP accrued/due since reaching age 60 is paid next week, it would be income to be allocated over the ESA weeks from reaching age 60 to the date paid, then the following ESA week it will be capital.

I'm also interested in how others see this.

xylophone

 Apropos of the discussion, this morning from Steve Webb. But with all this " appears to be", he seems no surer than anybody here.....


https://www.thisismoney.co.uk/money/pensions/article-14114353/Taking-NHS-pension-Universal-Credit.html

In short, the rules about when you can be expected to take different types of pension seem to be loosely based around the age at which you might reasonably be expected to draw them.

In the case of ‘pot of money’ pensions, the government has decided that you could only be expected to have drawn on your pension pot once you reached pension age.

But for occupational pensions which may have a lower ‘normal pension age’, it is the age at which you become entitled to it (at the normal rate) which appears to be the key.

Ripley43

@Newcad @kaMelo @Marcon @Sarahspangles the one thing I thought wasn't in doubt was the fact my Mum was allowed to defer until SPA and the pension wouldn't be classed as notional income. The article posted by @xylophone seems to contradict this and also what has been said on Rightsnet (please see below what one such person has stated)

xylophone said:

 Apropos of the discussion, this morning from Steve Webb. But with all this " appears to be", he seems no surer than anybody here.....


https://www.thisismoney.co.uk/money/pensions/article-14114353/Taking-NHS-pension-Universal-Credit.html

In short, the rules about when you can be expected to take different types of pension seem to be loosely based around the age at which you might reasonably be expected to draw them.

In the case of ‘pot of money’ pensions, the government has decided that you could only be expected to have drawn on your pension pot once you reached pension age.

But for occupational pensions which may have a lower ‘normal pension age’, it is the age at which you become entitled to it (at the normal rate) which appears to be the key.

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

1 October 2024, 03:46 pm#2

Daphne
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For ease, ESA reg 106 - https://www.legislation.gov.uk/uksi/2008/794/regulation/106

and HB Reg 42 - https://www.legislation.gov.uk/uksi/2006/213/regulation/42

notional income does not include that from an occupational pension scheme where the claimant has not attained the qualifying age for state pension credit

Sarahspangles

Ripley43 said:

@Newcad @kaMelo @Marcon @Sarahspangles the one thing I thought wasn't in doubt was the fact my Mum was allowed to defer until SPA and the pension wouldn't be classed as notional income. The article posted by @xylophone seems to contradict this

Yes, I saw the link from xylophone and agree with him/her that it’s no clearer, as Steve Webb has ‘qualified’ what he says about public sector pensions with ‘seems to be’.

Remember the Alastair example I found in the DMG? That used an example where deferring allowed the pensioner to-be of 61 or 62 to qualify for extra pension by deferring a year, but he was overruled by DWP.

However kaMelo then clarified that the reference to an age between 60 and 65 was a red herring, it didn’t appear the guide had been updated to reflect that SPA is now higher, and this was an example about someone already over the age they could claim pension credit. This could have misled Steve Webb too? I think he’s usually quite sensible and clear, but even he doesn’t seem to know for sure.

For what it’s worth, I previously looked at this ‘the other way’ and tried to find either a regulation, or a report that suggested DWP can and do require people to commence their occupational pension below SPA with a lower NPA. And I couldn’t find one. If it did happen, surely someone in a position like your mum’s would have grumbled about it online by now?

Sorry you're still going round in circles. Many years ago as a student I was the ‘test case’ for challenging some poorly worded regulations and while I’m pleased to say it was resolved in my favour, and cleared up an issue affecting lots of other people, it was still frustrating and exhausting.

mybestattempt

Ripley43 said:

@Newcad @kaMelo @Marcon @Sarahspangles the one thing I thought wasn't in doubt was the fact my Mum was allowed to defer until SPA and the pension wouldn't be classed as notional income. The article posted by @xylophone seems to contradict this and also what has been said on Rightsnet (please see below what one such person has stated)

xylophone said:

 Apropos of the discussion, this morning from Steve Webb. But with all this " appears to be", he seems no surer than anybody here.....


https://www.thisismoney.co.uk/money/pensions/article-14114353/Taking-NHS-pension-Universal-Credit.html

In short, the rules about when you can be expected to take different types of pension seem to be loosely based around the age at which you might reasonably be expected to draw them.

In the case of ‘pot of money’ pensions, the government has decided that you could only be expected to have drawn on your pension pot once you reached pension age.

But for occupational pensions which may have a lower ‘normal pension age’, it is the age at which you become entitled to it (at the normal rate) which appears to be the key.

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

1 October 2024, 03:46 pm#2

Daphne
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rightsnet writer / editor

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Total Posts: 3641

Joined: 14 March 2014

For ease, ESA reg 106 - https://www.legislation.gov.uk/uksi/2008/794/regulation/106

and HB Reg 42 - https://www.legislation.gov.uk/uksi/2006/213/regulation/42

notional income does not include that from an occupational pension scheme where the claimant has not attained the qualifying age for state pension credit

This is how I understand the position:

For ESA purposes if a Classic CSP remains deferred until SPA it is not income nor is it notional income.

However, if the pension is claimed before SPA the person is now entitled to the pension and it is income.

Then, the lump sum (which is the accumulated pension due from age from age 60 to the pre SPA date that lump sum is paid) is allocated to each of the ESA periods when it would have been received if it hadn't been deferred.
 
I think that the fact the deferred pension is not notional income if not claimed before SPA is perhaps clouding the issue here.

The issue, it seems to me, is simply how are arrears of income treated when paid for ESA purposes?-  and that is covered in DMG Chapter 48.

xylophone

Steve Webb also says

However, DWP have rules about ‘notional income’ from pensions and other sources.

This allows them to treat you as receiving an income even if it is not actually being drawn.

I have looked at the detailed regulations which cover Universal Credit and at Section 74(1), which is entitled 'Notional Unearned Income' it says:

'If unearned income would be available to a person upon the making of an application for it, the person is to be treated as having that unearned income.'

In the case of an occupational pension where you have reached the normal pension age, it seems that you would be treated as if you were already drawing it and your UC reduced in any case.

There are no "late payment increases" in CS Classic - NRA is 60. In this connection see his comment on LGPS.

 Even if the pension is deferred to PCA/SPA, then it would be logical to assume that the arrears of income would be backdated to the 

years to which they relate,  in which case there would be a case for the benefits to be assessed accordingly?

Ripley43

@xylophone I see what you're saying but Steve Webb is using the Universal Credit Regs and not the ESA Regs, would UC Regs apply to my Mum when she is NOT in receipt of UC or will be as she is not going to migrate?