Backdated Occupational Pension

Taylor2000

Hello 

Looking for some advice please.

I came across this post on Rightsnet from yesterday titled Backdated Occ Pension.

I'm confused about the advice given to the OP can anyone shed some light on this ie by explaining what the answers mean in simple terms? Has an overpayment occurred or not?  

https://www.rightsnet.org.uk/forums/viewthread/21008/#97873

Thanks

molerat

I would say this is more about benefits, so should be posted in that forum, than the actual pension.

edit  https://forums.moneysavingexpert.com/discussion/6594346/backdated-occupational-pension#latest

Marcon

OP - here's the link - it's easier to read that way:

https://www.rightsnet.org.uk/forums/viewthread/21008/#97873

From the answers given (and I'm relying on those - not my area of knowledge), the conclusion appears to be that if someone is receiving IRESA and receives a backdated payment of occupational pension where they were entitled to that payment at some previous date, then an appropriate reclaim of IRESA will be made, as if the individual had been in receipt of their pension from the date of the entitlement:

'.....s.74(1) of the Social Security Administration Act 1992 allows the recovery of the amount of IRESA that would not have been paid if the pension had actually been paid on its due dates.'

Taylor2000

@Marcon
Thanks for sorting that link for me. I understand this is not your area of expertise but I thought I would add this in case anyone else has any insight.
Yes it's all very confusing as if you look at 

'.....s.74(1) of the Social Security Administration Act 1992 allows the recovery of the amount of IRESA that would not have been paid if the pension had actually been paid on its due dates.'

would this imply that if you can take your occupational pension at lets say 60 (as this is classed as the normal pension age for some schemes) then you have to claim it if your on IRESA? As I thought you could defer it until current state pension age?

or 

Is this reclaim of IRESA only on the proviso that you have received a backdated sum?
If so, this seems mightily discriminatory towards people with pensions that can only be backdated and they cannot increase monthly payment amounts through deferral, as to those who can defer to increase their monthly amounts and or commencement lump sums?

Marcon

Taylor2000 said:

@Marcon
Thanks for sorting that link for me. I understand this is not your area of expertise but I thought I would add this in case anyone else has any insight.
Yes it's all very confusing as if you look at 

'.....s.74(1) of the Social Security Administration Act 1992 allows the recovery of the amount of IRESA that would not have been paid if the pension had actually been paid on its due dates.'

would this imply that if you can take your occupational pension at lets say 60 (as this is classed as the normal pension age for some schemes) then you have to claim it if your on IRESA? As I thought you could defer it until current state pension age?

An occupational pension is normally 'due' on the date a member reaches the normal retirement age (NRA) for that particular scheme. Taking the pension before then is 'early retirement' and taking it after then is 'late retirement'. 

Taylor2000 said:

Is this reclaim of IRESA only on the proviso that you have received a backdated sum?

Not according to the answers on the thread; the pension simply had to be 'due'.

Taylor2000 said:

If so, this seems mightily discriminatory towards people with pensions that can only be backdated and they cannot increase monthly payment amounts through deferral, as to those who can defer to increase their monthly amounts and or commencement lump sums?

Nobody can force you to claim it (bit tricky if you decline to provide bank details, say), but based on the answers on the thread to which you referred, it can still be taken into account for benefit purposes as if you had taken it at the scheme's NRA.

Nothing discriminatory about that - and in any case, remember that discrimination has to be unlawful in some way before it becomes actionable. You also need to bear in mind that early and late retirement factors are generally set on the basis of being 'cost neutral', so that by the time someone dies, they will have received the same amount of (private) pension whatever age they first drew that particular pension.

I must again add the caveat that I'm relying on the people answering on Rightsnet being correct. I'm not pretending to have the requisite knowledge to do otherwise.

Newcad

My understanding of the Rightsnet discussion is as follows:

They are generally saying that under current benefits rules it depends on when you take the pension payments that are in deferral.

If you are below State Pension Age then you can defer any private/occupational pension that becomes due for commencement until you reach SPA without that deferral becoming Notional Income (income that you could be taking but aren't) and so affecting Income Related benefits.
(I'm currently doing exactly that. I could have taken income from a workplace pension at 65, but if I had it would be deducted £ for £ from my UC. So I've left it deferred, and growing, until I reach 66 and SPA).

However the nub in the Rightsnet discussion is what happens if/when you do take the pension payments at any time before before you reach SPA.
The conclusion is that they are then actual income, and so they do affect Income Related benefits.
If taken before SPA as a lump sum backpayment  to the commencement date (as in the case being discussed) then they are regarded as being paid on the date that each individual payment was due, which results in an overpayment of the IR benefit from the deferred commencement date until the lump sum was taken.

If you leave the pension payments in deferral until you reach SPA then all is good,  no private pension income is  being taken while you are claiming IR benefits so IR benefits are not affected.
Your Working Age IR benefits end at SPA so what you do with the private/commercial pension after SPA can't affect them.

Notional Income (income that you could be taking but aren't) and where it does apply for deferred pension income:
If you leave the private/occupational pension payment in deferral after SPA then it will then be classed as being 'Notional Income' for Pension Age IR Benefits, ie Pension Credit and Housing Benefit, and can reduce PC/HB whether you take the private income or not.

Taylor2000

@Newcad Thank you for your explanation, from what I've previously read and been told these backdated sums of pension payments (pension arrears) when taken under SPA would be treat as capital but going off the Rightsnet thread that doesn't seem to be the case?

This is where my confusion lies. 

Another query would be, is that once you reach SPA and take the occupational pension resulting in the backdating of pension payments as a big lump sum, what would be the tax situation? I've heard you can have those payments attributed back to relevant tax years (so as not to face higher rate liability) but if a person applied to do this would these backdated pension payments then suddenly come back into play in regards of DWP ESA/UC purposes and be classed as income for the years they received means tested benefits thus still resulting in an overpayment?

HillStreetBlues

Taylor2000 said:

@Newcad Thank you for your explanation, from what I've previously read and been told these backdated sums of pension payments (pension arrears) when taken under SPA would be treat as capital but going off the Rightsnet thread that doesn't seem to be the case?

This is where my confusion lies.

There might be confusion,  if a person takes a one lump sum then it's classed as capital, if it's regular payments it becomes income. In the Rightsnet  thread it's income as should have been paid weekly. Although it was paid as a lump sum, it would sill be classed as income.

Taylor2000

HillStreetBlues said:

Taylor2000 said:

@Newcad Thank you for your explanation, from what I've previously read and been told these backdated sums of pension payments (pension arrears) when taken under SPA would be treat as capital but going off the Rightsnet thread that doesn't seem to be the case?

This is where my confusion lies.

There might be confusion,  if a person takes a one lump sum then it's classed as capital, if it's regular payments it becomes income. In the Rightsnet  thread it's income as should have been paid weekly. Although it was paid as a lump sum, it would sill be classed as income.

Do you mean that a lump sum can only be classed as capital if it's not arrears? 

HillStreetBlues

Taylor2000 said:

HillStreetBlues said:

Taylor2000 said:

@Newcad Thank you for your explanation, from what I've previously read and been told these backdated sums of pension payments (pension arrears) when taken under SPA would be treat as capital but going off the Rightsnet thread that doesn't seem to be the case?

This is where my confusion lies.

There might be confusion,  if a person takes a one lump sum then it's classed as capital, if it's regular payments it becomes income. In the Rightsnet  thread it's income as should have been paid weekly. Although it was paid as a lump sum, it would sill be classed as income.

Do you mean that a lump sum can only be classed as capital if it's not arrears? 

It depends on the arrears.
If you get a lump payment it's capital,  if later found the lump sum was incorrect an you should have a bigger lump sum, then the arrears is still capital.
If you get monthly payments, then it's income, if later found the monthly payments should have been more, then that arrears is still  income.

Taylor2000

HillStreetBlues said:

Taylor2000 said:

HillStreetBlues said:

Taylor2000 said:

@Newcad Thank you for your explanation, from what I've previously read and been told these backdated sums of pension payments (pension arrears) when taken under SPA would be treat as capital but going off the Rightsnet thread that doesn't seem to be the case?

This is where my confusion lies.

There might be confusion,  if a person takes a one lump sum then it's classed as capital, if it's regular payments it becomes income. In the Rightsnet  thread it's income as should have been paid weekly. Although it was paid as a lump sum, it would sill be classed as income.

Do you mean that a lump sum can only be classed as capital if it's not arrears? 

It depends on the arrears.
If you get a lump payment it's capital,  if later found the lump sum was incorrect an you should have a bigger lump sum, then the arrears is still capital.
If you get monthly payments, then it's income, if later found the monthly payments should have been more, then that arrears is still  income.

Sorry if I'm not getting it just want to double check. So you receive an initial arrears payment as a lump sum (made up of backdated monthly pension payments) this is capital? If that is the case how has the person mentioned in the Rightsnet post been overpaid for their backdated arrears, how has that been classed as income and not capital?