Universal Credit & Deprivation of capital?

ThriftyAberdeen

Hi all,

I'm trying to help a family member who is in an odd situation and looking for advice. We are in Scotland.

They are currently in receipt of Universal Credit, along with the highest disability premium, and a child element x 1 (although that part is due to end as the child has finished 6th year of secondary and off to college in August for HND). She is also in receipt of Adult Disability Payment (full amount for care and mobility). They receive housing benefit and council tax reduction as a result of having low income.

She has a private pension which she can withdraw now, and technically could have last year but didn't realise her pension age was 60 (NHS).

The pension itself is small (around £6500 per year) which she accepts will reduce her UC claim by the equivalent amount, which is only fair and right.

However she is also due to receive the following:

1. Back-dated pension from last year of around £6000 - this will happen whenever she receives her first payment of her pension - so first payment is to be about £7000 - future monthly payment £541.

2. She receives an automatic lump sum (this is per the NHS pension scheme and not the usual 1/12 you would expect), but one she cannot opt to keep as part of her annual pension. This is around £20000.

She is in a fair amount of debt (as a result of having 2 teenage daughters a single mum), with a credit card debt of around £4000, catalogues of around £1200, and 2 x Loans at total £8000. Further to that, there is also a car on PCP in her elder daughters name, which is used to support her regularly (and for which she has been paying an amount towards monthly for a number of years). The balloon payment for that car is £4500 due soon.

If she were to pay off all her debt would this be classed as deprivation of capital? She is unlikely to have a lump sum ever again and with her daughters all now of working age, she sees this as a way to get a fresh start so to speak and at the same time being sensible. I've read mixed things online and just want to get an idea of what she can and can't do.

I understand that it might not be possible for her to pay for the car, but does anyone have experience of this element?

Lastly for the £7000 backdated pension, will this be classed as a lump sum e.g. savings or as part of her "income" for that month.

Any guidance or advice would be gratefully received, she wants to make sure she is not breaking any rules both from a moral point of view as well as a procedural one.

Spoonie_Turtle

Paying off her own debts will not be DoC. 

Paying for a car not in her name probably would be, but DoC only applies to capital/savings over £6,000.  So if she had up to £5999 left and paid the £4500 then there wouldn't be any practical problem with UC, just the question of how wise it would be to leave herself with such a tiny safety net of less than £1500.

Does she have to start receiving her pension now?  It will reduce her UC by the full amount of the pension payment each month so she'd only be better off by whatever's left of the lump sum as savings, and not having the debt repayments each month.  And if she would get a larger payment by waiting until state pension age, having it taken off her UC each month might feel like a bit of a waste.

Grumpy_chap

ThriftyAberdeen said:

However she is also due to receive the following:

1. Back-dated pension from last year of around £6000 - this will happen whenever she receives her first payment of her pension - so first payment is to be about £7000 - future monthly payment £541.

2. She receives an automatic lump sum (this is per the NHS pension scheme and not the usual 1/12 you would expect), but one she cannot opt to keep as part of her annual pension. This is around £20000.

She is in a fair amount of debt (as a result of having 2 teenage daughters a single mum), with a credit card debt of around £4000, catalogues of around £1200, and 2 x Loans at total £8000. Further to that, there is also a car on PCP in her elder daughters name, which is used to support her regularly (and for which she has been paying an amount towards monthly for a number of years). The balloon payment for that car is £4500 due soon.

If she were to pay off all her debt would this be classed as deprivation of capital? 

Repayment of debt is never DoC.

I think you are saying she would receive £7k plus £20k (so £27k total) as lump sum.
She has debts of:
 - CC £4k
 - Catalogues £1.2k
 - Loans £8k
That is a total debt of £13k.  If that is repaid from the £27k, it will leave £14k

Depending what savings she already has (possibly none), that may bring her under the £16k zero UC threshold, but above the £6k at which UC starts to reduce.

Paying the £4.5k for the daughter's car might well be DoC.

The process, ideally, would be to pay the debts within the same assessment period that the capital sum is received.

Some of her benefits may not be means-tested so unaffected by any capital.

Brie

I would have thought a case could be made for paying off the car if it's being used for her benefit.  But then DWP aren't known for their lateral thinking so it might take a bit of fighting to get that sorted.  

ThriftyAberdeen

Hi everyone,

Thank you for the replies.

The 

I think it's probably best for her to take her pension now, if she waits another 6 years she will be in a worse position as she will have 7 x 6500 (plus inflation increase) of backdated pension too. Given her age and condition (stroke a few years ago) she is not going to be in a position to return to work prior to State Pension.

My thinking is that when she gets to 67 she will take her state pension, have her private pension, her ADP, and to my understanding will still be entitled to her Housing Benefit element of UC (although I think claimed separately). By this point I suspect she will be in semi-supported accommodation (her wish, she is only staying in a house currently until her daughters settle down).

I guess safest bet is to ask in her Journal if they'd consider a case for the car being used to support her (it's how she is taken to hospital appointments, shopping etc).

Another question, she is due to move house, into another local authority house soon. Would buying a sofa (not something extravagant), and getting new carpets in, along with fresh paint be justifiable? She will be amending her address on her UC to this new address around same time. I assume this would also be ok?

Grumpy_chap

ThriftyAberdeen said:

I guess safest bet is to ask in her Journal if they'd consider a case for the car being used to support her (it's how she is taken to hospital appointments, shopping etc).

The way UC (and DMs) work is that they cannot usually comment on something that may be done or may not be done.  Something has to be done and only afterwards will they make a decision as to whether that has an impact on the eligibility for benefits.

I think the rationale is that staff are not there to provide advice on how to act or what to do to maximise your benefit entitlement (or not lose it).

ThriftyAberdeen said:

Another question, she is due to move house, into another local authority house soon. Would buying a sofa (not something extravagant), and getting new carpets in, along with fresh paint be justifiable? She will be amending her address on her UC to this new address around same time. I assume this would also be ok?

This will all come down to reasonableness and the acceptance of a DM after the fact.
In my opinion, the items mentioned would be fine.  My opinion counts for nothing.

Taylor2000

Please see this post

https://forums.moneysavingexpert.com/discussion/6594339/backdated-occupational-pension/p1

kaMelo

Which NHS pension scheme is she a member of, 1995, 2008 or 2015? (or a combination of those schemes)  The fact you mention a compulsory PCLS and normal retirement age of 60 makes me think 1995 scheme but it would be good to clarify.

ThriftyAberdeen

Thanks, its the 1995 scheme so she is getting the PCLS. She was part-time so it's a little under £20k.

Taylor2000 said:

Please see this post

https://forums.moneysavingexpert.com/discussion/6594339/backdated-occupational-pension/p1

Looking at this thread it seems the consensus at the end was that the back-dated was classed as capital in the end?

If that is the case I think the best course of action is for her to pay off all debt due, get her sofa, pay for the home improvements to the new home in advance, along with the redecoration? With the car I suspect she will take the risk and pay it off, the amount was due anyway and was going to be paid so worst case is that she waits a few months to see if a Decision Maker is happy with the decision and if not then nothing really lost. I assume that when she updates the journal to advise she is receiving an Occupational Pension they will probably ask about lump sums etc anyway as standard and she will have to justify what she has paid out?

kaMelo

Thanks for clarifying it is the 1995 scheme.

The reason I asked is your mention of backdated pension, as far as I'm aware, under the 1995 scheme anything that may have been payable between NRA and actually claiming the pension is lost, there is no backdated pension payment to cover those payments for that period

Edited as it was only partially correct, a deferred member does receive a backdated payment.

That's why the normal advice for anyone with a 1995 scheme membership is to claim it as soon as they reach their NRA of 55/60

ThriftyAberdeen

kaMelo said:

Thanks for clarifying it is the 1995 scheme.

The reason I asked is your mention of backdated pension, as far as I'm aware, under the 1995 scheme anything that may have been payable between NRA and actually claiming the pension is lost, there is no backdated pension payment to cover those payments for that period. .

That's why the normal advice for anyone with a 1995 scheme membership is to claim it as soon as they reach their NRA of 55/60

Thanks - I didn't realise this as was contrary to what I was told when I called for her. Is this maybe different because she wasn't actively employed age 60 and had stopped paying in many years ago?