Backdated Occupational Pension

HillStreetBlues

Catonthemoon said:

Newcad said:

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.

Are you sure that’s correct? Would that not be contrary to the provisions of s.74 of the SSA Act 1992, quoted above!

Yes it's correct.
As it's not been taken it can only be Notional Income,  rules on ESA  https://www.legislation.gov.uk/uksi/2008/794

Notional income – deprivation and income on application

106.—(1) A claimant is to be treated as possessing income of which the claimant has deprived himself or herself for the purpose of securing entitlement to an employment and support allowance or increasing the amount of that allowance, or for the purpose of securing entitlement to, or increasing the amount of, income support or a jobseeker's allowance.

(2) Except in the case of—

(a)a discretionary trust;

(b)a trust derived from a payment made in consequence of a personal injury;

(c)an employment and support allowance;

(d)a jobseeker's allowance;

(e)working tax credit;

(f)child tax credit;

(g)a personal pension scheme, occupational pension scheme or a payment made by the Board of the Pension Protection Fund where the claimant [F477has not attained the qualifying age for state pension credit];

ESA Regs exempt not taking a pension while under SP(C)A

Catonthemoon

@Newcad Thank you for that. Yes, I was referring to the text in bold, however, expanding on the rest is appreciated.

Catonthemoon

@HillStreetBlues Reg 106 (above) is so confusing imo. The para refers to entitlement to an ESA/JSA award but then goes on to ‘Except’ an ESA/JSA allowance. What!!! What does that even mean?
2(g) however, is of real interest to me as I will have a backdated lump sum which I’m considering claiming now at 62. I’m concerned that I’m overlooking something because other posters seem fairly sure that it works the other way ie you would fall foul of ESA overpayments if you claim the pension before SPA whereas if you leave it deferred until after SPA then you won’t. 

My brain is hurting.

HillStreetBlues

Catonthemoon said:

@HillStreetBlues Reg 106 (above) is so confusing imo. The para refers to entitlement to an ESA/JSA award but then goes on to ‘Except’ an ESA/JSA allowance. What!!! What does that even mean?

I agree 106 is confusing as it  there are reference to other benefits

106.—(1) A claimant is to be treated as possessing income of which the claimant has deprived himself or herself for the purpose of securing entitlement to an employment and support allowance or increasing the amount of that allowance, or for the purpose of securing entitlement to, or increasing the amount of, income support or a jobseeker's allowance.

My reading of it is as it does reference other benefits 106 it can be used for both IS & JSA, if that is the case then ESA would need to be listed in the exceptions (I could be wrong)

Catonthemoon said:

2(g) however, is of real interest to me as I will have a backdated lump sum which I’m considering claiming now at 62. I’m concerned that I’m overlooking something because other posters seem fairly sure that it works the other way ie you would fall of ESA overpayments if you claim the pension before SPA whereas if you leave it deferred until after SPA then you won’t. 

My brain is hurting.

It can be treated as in two ways. If a person had to take a (weekly /monthly)pension (couldn't be deferred) at say 60, then it's income, if it was there was no payment until say 62 and all arrears was paid as a lump sum, then what should happened is not classed as capital but calculated as when it should have been paid going back two years and ESA adjusted. If that case it would be actual income not notional income.
If pension doesn't have to be take then it would only be income if or when taken.


If you are considering taking a lump sum, that would imply it's optional  and the lump sum will be classed as capital when taken (the above Notional income doesn't apply).
It's classed as disregarded under Schedule 9 of the ESA Regs  https://www.legislation.gov.uk/uksi/2008/794/schedule/9

SCHEDULE 9CAPITAL TO BE DISREGARDED
28.  The value of the right to receive an occupational or personal pension.

29.  The value of any funds held under a personal pension scheme.

A person if free to leave money in a pension pot without any affect on ESA as the capital isn't used in calculating ESA

Yamor

I've just had a read of this thread, and don't agree with all that has been said.

Firstly, to be absolutely clear: We are not talking about a case where the pension can be deferred in the sense that it will lead to a higher pension entitlement as and when it is claimed. We are discussing a case where entitlement begins at a particular time, and if you delay claiming, you will simply receive a lump sum for the period of the delay, equivalent to the amount due over that period.

In such a case, for legacy working-age benefits, the rules are clear that the lump sum is treated as income over the period of referral, and will lead to an overpayment, potentially recoverable under s.71 or s.74 of the SSAA.

For Pension Credit, the rules are less clear, but there is case law that the lump sum will only count as income from the date it is received. However, DWP are still likely to be able to recover any amounts of SPC which would not have been paid had the deferred pension been paid on time, under s.74 of the SSAA.

For UC, the rules on attributing unearned income are also not completely clear, but it seems to be accepted (and the authors of the Sweet and Maxwell commentary to the legislation also suggest this) that the income should be taken into account for the period in respect of which it was paid.
To clarify, this is nothing to do with the notional income rules, but simply how to attribute the actual income received as a lump sum later.
To give an example where this often happens in practice: if someone is awarded Carer's Allowance backdated for 6 months, UC will amend the payment statements for each AP in the period to account for the CA income despite it only being paid much later.
And to further clarify, it makes no difference when the lump sum is received. Even if it is received after turning pension-age, or after the UC claim has ended for any other reason, the same rules will apply. Although in those cases it may be more likely that UC won't realise, and you 'get away' with it.

Taylor2000

@Yamor It was my understanding that if someone chooses to take the occupational pension at SPA and then receives a large backdated lump sum of pension payment arrears then all is good and no overpayment will have occurred. It's only if you take that income (in any form) before SPA that it affects IR benefits.

However, the last paragraph of your post states that even if the pension and all the arrears are taken after SPA then an overpayment will still have occurred? Have I understood that correctly? 

HillStreetBlues

I stand to be corrected
With ESA there is a difference between deferred and not taken personal pension. If deferred meaning the pension amount increases during the period it's deferred then these is no effect on ESA if taken when reaching SPA ( it hasn't build up, it's just increased).
It if just not taken and weekly amount builds up, then while it's not being taken it isn't notional income,  but when it is finally taken even if after SPA it will be classed as income during the period it could have been paid and ESA adjusted accordingly.
But of course @Yamor knows far more than i do.

Yamor

Taylor2000 said:

@Yamor It was my understanding that if someone chooses to take the occupational pension at SPA and then receives a large backdated lump sum of pension payment arrears then all is good and no overpayment will have occurred. It's only if you take that income (in any form) before SPA that it affects IR benefits.

However, the last paragraph of your post states that even if the pension and all the arrears are taken after SPA then an overpayment will still have occurred? Have I understood that correctly? 

Legally, there is no difference between getting the pension arrears before turning pension age or after.

Perhaps getting it after will mean it is less likely for UC to pick up on it (as your UC claim will have ended already), and it may be more likely that you get away with it.

For those not convinced by what I'm saying, think about my Carer's Allowance example. We know that when Carer's Allowance is awarded and backdated for a few months, then UC recalculate the past months, and generate an overpayment. There is of course no difference whether the Carer's Allowance is paid out before or after turning pension age.

Pension income is no different.

(And just to add: Pension age is only relevant for notional income from a pension, not when there is actual income.)

Taylor2000

@HillStreetBlues, @Yamor, thank you for the replies. However, I'm finding it hard to understand that if the pension arrears are paid after SPA then an overpayment will still have occurred. The reason being is that you are legally entitled to defer income from a pension until SPA. I can't find anywhere where it sates you cannot defer a pension that pays the back payments to you at a later date. 

Yamor

HillStreetBlues said:

I stand to be corrected
With ESA there is a difference between deferred and not taken personal pension. If deferred meaning the pension amount increases during the period it's deferred then these is no effect on ESA if taken when reaching SPA ( it hasn't build up, it's just increased).
It if just not taken and weekly amount builds up, then while it's not being taken it isn't notional income,  but when it is finally taken even if after SPA it will be classed as income during the period it could have been paid and ESA adjusted accordingly.
But of course @Yamor knows far more than i do.

I'm not sure we're disagreeing, because I agree with this post completely! My understanding of the OP's posts was that their situation was one where the weekly amount builds up.

(One point perhaps where I would disagree is that if the weekly amount builds up, but it is NEVER claimed, then that would still be notional income.)