Housing Benefit: Notional Income Computation

bkmla

I’m in receipt of Housing Benefit (HB).

Recently, I received a decision from Glasgow City Council (GCC) advising me that I owed them £742.41 because for the past few years I’d been overpaid HB due to having notional income of £13.85, weekly, from a pension plan, the fund of which stands at £22,650.

I'm 67 and received my State Pension when I was 66.

Under current legislation I could have taken the benefits deriving from my personal pension - a lump sum and an annual income - at age 55. But I deferred retirement age for the purpose of this pension to 70. 

Because of this I’m deemed to have notional income, which should be taken into account when calculating my HB entitlement. I don’t dispute this. But what I’m uncertain of is the accuracy of the figure given for weekly notional income, i.e. £13.85.

I contacted GCC to advise me how the figure of £13.85 was calculated. To date, they haven’t replied; therefore, I’ve appealed the decision.

Subsequently, I did a Google to see if I could find information on how notional income is calculated. After some searching I came across the following article:

https://benefitsinthefuture.com/notional-income-from-pensions-too-notional-for-some-advisers/

If you click on the link, the article tells you how notional income is calculated. Apparently, there are Government Actuaries Department tables for annuities. These tables assess the income per £1000 of pension savings using the saver’s age and the 15 year gilt rate published in the Financial Times.

Can anyone supply me with a link to the tables mentioned above?

Also included in the article is an illustration of how notional income is calculated. Unfortunately, I don’t understand the calculation. If anyone does, could they please calculate notional income for someone who is 67 and has £22,650 in their pension fund.

This would be most helpful and would be very much appreciated.

HillStreetBlues

AFAIK notional income should be based on the actual income that's been deferred.
When you reached State Pension age if you took that pension how much would that have been?

8dayweek

https://assets.publishing.service.gov.uk/media/5a7c431bed915d7d70d1dab0/hbgm-bp2-assessment-of-income.pdf

P2.680 onwards, I think… 

bkmla

HillStreetBlues said:

AFAIK notional income should be based on the actual income that's been deferred.
When you reached State Pension age if you took that pension how much would that have been?

In my wording of the post, I may have inadvertently given the impression that I had deferred payment of my State Pension. This isn't the case. I deferred payment of my personal pension. 

Apologies for that particular section of the post being poorly worded. I've edited the original post.

bkmla

8dayweek said:

https://assets.publishing.service.gov.uk/media/5a7c431bed915d7d70d1dab0/hbgm-bp2-assessment-of-income.pdf

P2.680 onwards, I think… 

In my wording of the post, I may have inadvertently given the impression that I had deferred payment of my State Pension. This isn't the case. I deferred payment of my personal pension. 

Apologies for that particular section of the post being poorly worded. I've edited the original post.

NedS

Whilst I do not know how the LA will calculate notional income from a deferred pension pot, the amount they are using does not seem unreasonable - it equates to around 3.18% of the capital amount, with the 10 year gilt rate currently hovering around 4.5% (and nearer 4% a year ago).

HillStreetBlues said:

AFAIK notional income should be based on the actual income that's been deferred.
When you reached State Pension age if you took that pension how much would that have been?

I think in this case it's a pot of money (a DC pension) so there is no 'actual income'. They could chose to take an income through drawdown or to use the pot to buy an annuity, but that is their choice which they are yet to make.

sheramber

https://www.gov.uk/government/publications/pension-freedoms-and-dwp-benefits/pension-freedoms-and-dwp-benefits

Once you (or your partner) reach the qualifying age for Pension Credit, you are expected to use your pension or pensions to help support yourself.

If you choose not to buy an annuity after reaching the qualifying age for Pension Credit, an amount of ‘notional’ income will be taken into account when your benefit is worked out. ‘Notional’ income (in this case) is an amount equivalent to the income you would have received if you had bought an annuity.

If you take an income from your pension pot, the amount which will be taken into account when assessing your benefit will be the higher of the actual income or notional income. If you take a cash lump sum, this will be taken into account as capital.

It is your responsibility to tell DWP – and your local council where appropriate – if you or your partner take any money from your pension pot.

…………….

Pension Wise provides free and impartial government guidance to people aged 50 years and over with a defined contribution pension, to help them understand their options.

Visit Pension Wise through the MoneyHelper website to:

• book a free Pension Wise appointment
• find out how any pension money may affect your entitlement to benefits

Newcad

As the others have said it sounds a reasonable deduction for Notional Income in this case.

Once you turn SPA then any monies that you could be taking from a pension but aren't can be classed as 'Notional Income' for benefits purposes. (Before SPA Notional Income from pensions is disregarded)
So once you turned 66 Notional Income applied for benefits purposes.

As to the amount itself:
Assuming that you invested your £22,650 and got a 3.18% return that would be £720.27 a year or £13.85 a week.

If it's been just over a year from when you turned 66 to when they did the calculation, say it's been 54 weeks, then £13.85 x 54 = £747.90.

So the £7442.41 the council are asking for is probably for 53 weeks and 4 or 5 days.
(with some rounding because it's not exactly £13.85 but £13.851346).

PS. You asked for the tables used, I believe these are the ones you mean, I have never used them.
Be very careful with the dates that each table applies to: https://www.gov.uk/government/publications/drawdown-pension-tables
Guidance on their use: https://www.gov.uk/government/publications/drawdown-pension-tables/drawdown-tables-for-calculations-for-use-from-1-september-2025-instructions
Best of luck with those, but I have no doubt that if you do calculate it all out using the correct tables then they will show the council to be correct.