Pension Lump Sum and Housing Benefit / ESA

Terrys_Choc_Orange

Hi. My partner (60) is in receipt of ESA (not sure which one as he cant find any paperwork to confirm) and as a result also receives Housing Benefit and Council Tax reduction. Over the last 6 or 7 years his ex wife has been loaning him money to help pay bills etc (he had a lot of debt which he assumed he would have time to pay off whilst working). This was on the agreement that it was repaid from his workplace pension tax free lump sum (he plans not to touch it until 67 to support his State Pension). She has however asked if this money (in the region of £18000) can possibly be repaid now as she is facing unexpected expenses. How can he do this without losing any benefits by being accused of giving it away ?. The only receipts he has is the Bank statements over the years where she has sent it under the narrative 'Loan'. Would this be acceptable as an explanation for the receipt of a lump sum without any savings to show for it? Sorry if this is not the place to ask, he obviously is keen to pay her back if possible but cannot afford to lose his current Benefits 

Brie

If he puts together an income and expenditure form that shows his monthly income, expenses and any debts including those to the ex then this will support his statement that he doesn't have excess money that would normally stop some benefits.  In my opinion this would have more weight if it's put together by a debt advice charity rather than him just filling out a statement of accounts such as are done on the debt free wannabe forum.  

Given the issue being benefits I would suggest talking to someone at Citizen's Advice to do this.  Many of their centres also have debt or budget advisers and they will be used to compiling one of these statements.  There are also other organisations such as StepChange, NationalDebtline, Community Money Advice (CMA) or Christians Against Poverty that might help.

The other thing to do is to check what type of pension he has as not all of them will allow him to take a tax free sum without also starting to have his pension paid.  If it's an older work pension is might be a defined benefit scheme which would normally need to go into payment in order to unlock any tax free benefit.  The other type is a defined contribution scheme and some of those won't allow you to only take a tax free sum but will allow you to take a set amount of money of which 25% will be tax free.  If it is one of these he may be able to get the £18k with a minimal tax hit by taking some in this tax year i.e. by the end of March and another sum and another chunk in or after April.  If this is the case he might need to take £10600 this tax year and the same again in the next.

Terrys_Choc_Orange

Thank you, yes - the Pension was transferred out to Standard Life by his ex employers and he has checked he can take the lump sum in one go (it will then leave the rest as taxable whenever / however he chooses to take it - drawdown or annuity). The only debt now is the payments of the money lent - would this still be able to be done in the way described above ? Thank you

HillStreetBlues

Has there ever been a paper trail to the loans?

Terrys_Choc_Orange

Just bank statements showing the funds crediting under the narrative 'Loan', nothing more official than that 

HillStreetBlues

Terrys_Choc_Orange said:

Just bank statements showing the funds crediting under the narrative 'Loan', nothing more official than that 

One issue could be (not saying it will be) is as it's so informal then it might not be considered a legally enforceable debt, basically the ex couldn't  take court action to recover the money if your partner refused to pay (not saying he would)
If that's the case then giving the £18k to ex could be classed as a voluntary payment, so leaves him open to  depreciation of capital  meaning he will still be treated as having the £18k so no HB CT or IR ESA payments until the depreciation has reduced.

The above might not happen but it needs thinking about as even if unlikely  it would still be a risk.

poppy12345

Paying off debt is treated differently when claiming other means tested benefits such as Income Related ESA and HB. Unless it's immediately repayable such as receive letters from bailiffs then it could be treated as deprivation of capital. 

Terrys_Choc_Orange

Thanks all, thats very useful