Backdated Occupational Pension

Yamor

I disagree with the Rightsnet post.

The rule for ir-ESA is that income paid late is treated as having been received on its due date - see reg. 93(1), and therefore an overpayment is potentially recoverable under s. 71 of the SSAA 1992.

Furthermore, even where s. 71 does not apply, say because there was no misrepresentation by the claimant, DWP could still rely on s. 74 of the SSAA 1992 to recover any ESA paid out because the pension was only paid late.

The fact that the income was only actually received after the claimant reached pension age has no relevance to all of this. The rule about pension income not being included as notional income where the claimant is under pension age is only for the NOTIONAL income rule. Here, we are dealing with ACTUAL income received (albeit late).

The only other point to make is that if the pension arrears are received after the ir-ESA claim has ended, then in practice you are more likely to get away with it, because the ESA claim has already ended. But that doesn't change the legal position.

The author of the post you quote from Rightsnet has mixed up the rules for actual income with those for notional income. See also the post before that from Elliot Kent which alludes to this difference between actual income and notional income.

Taylor2000

@Yamor

Sorry for the late reply, I’ve been going over things again and just wanted to check something. Does what you’re saying apply to pensions where the scheme allows deferral past NPA, and arrears are paid when the pension is actually claimed? Since the pension isn’t ‘due’ at NPA if it’s deferred, I just want to make sure the arrears aren’t treated as ‘late income’.

Yamor

Taylor2000 said:

@Yamor

Sorry for the late reply, I’ve been going over things again and just wanted to check something. Does what you’re saying apply to pensions where the scheme allows deferral past NPA, and arrears are paid when the pension is actually claimed? Since the pension isn’t ‘due’ at NPA if it’s deferred, I just want to make sure the arrears aren’t treated as ‘late income’.

I don't think it makes any difference.

As per my earlier post, you are likely to get away with it anyway (and it is even possible that this is the policy intent, regardless of what the Regs say).

born_again

NedS said:

Yamor said:

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.

Legally that may be the case, but operationally UC will automatically calculate the overpayment in your CA example because the UC system will see and take into account the CA payments as recorded on CIS (so once a CA award is eventually added onto CIS, the UC system sees it and now takes it into consideration generating the overpayment), but the UC system has no knowledge of any pension payments other than state pension (which again are recorded on CIS) so no automatic recalculation of the award can/will occur.

For the non-state pension income to be taken into account, the claimant would have to declare the pension payments (or a UC agent discover they have not been declared), and someone would have to work out how the pension should be treated under the law and manually recalculate any overpayment that may have occurred. I would estimate the chances of that all happening correctly as slim to very slim.

Of course this is a deficiency in the UC system that could be rectified (at some point in the future) as pension income is reported to HMRC by the pension administrator's payroll system and is available to DWP through RTI, just that the UC system is not (currently) built to automatically include pension income from RTI when calculating the UC award (unlike earned income). It's almost like DWP's attitude is we will catch up with it and recover it eventually, and is probably one of the flags that triggers a UC case review.

A question on this.
As HMRC are aware & assign tax codes & tax has to be paid on personal pension payments. Why are HMRC not reporting this like a normal wage onto the system?

Yamor

The most likely reason is because 'unearned income' (which includes pension income) is calculated very differently to earned income for UC purposes, and they cannot simply take into account the amounts received in any AP, as they do for earned income.

In fact, in an ideal world, earned income would also have been calculated in a similar fashion to unearned income (as in fact it was for legacy benefits), but this was not done due to the difficulties in converting actual, real-life, RTI figures to consistent monthly earnings figures.
This is what has led to the issues for those paid weekly, or four-weekly, or not on a consistent day of the month, or are paid late or early.