Universal Credit and Private Pension Pots

norm27

Hello. My brother in law is a 64 years old low paid, single, Care Worker living in a Council property. He has been off work ill for 4 months and during that time has used up what little savings he had and now  has less than £1000 in the bank. The only other finance he has is a small private Pension Pot into which he has been paying over the years.

He has recently applied for Universal Credit in the hope of financial assistance until he gets back to work as his outgoings are more than his incomings.  In a DWP interview today he was told that his case would be referred to a 'decision maker' on the question of whether he would have to draw down the funds in his Pension Pot now and live off those rather than being granted Universal Credit.

Sources on the internet state that Pension Pot finance is disregarded when calculating Universal Credit eligibilty but my question is different ie ' can a person applying for Universal Credit be compelled by the DWP to cash in their Pension Pot in advance of normal pension age and use that in lieu of Universal Credit funding?

I can't find an answer to this so if anyone has any advice it would really be appreciated. My brother in law is very worried about having to face a future with his private pension wiped out.

Thankyou.

itsthelittlethings

I really thought they could not make you draw even an annuity before your pension ages, let alone your pot.

Baldytyke88

I would think he would need to reach 66/67 official pension age 

NedS

They can refer it to a decision maker if they wish (through lack of knowledge), and the correct outcome will be that he doesn't have to draw their pension until they reach state pension age. Any other outcome would be wrong.

However, if they do draw a regular income from the pension, then this will be deducted from their UC award £ for £ (so there is no incentive to draw the pension early, especially if it is only small)

huckster

It is only where someone is deferring taking a pension and instead claiming UC, where they would need to refer to a Decision Maker.

So if the person was able to receive pension at say aged 60 and decides that they won't take until years later, then a Decision Maker could decide that the person could have been receiving £××× per month. And they will ask the person to provide this information about when pension date had been reached and what they could have been receiving. And then UC will take into account this notional income by deducting on a £1 for £1 basis.

So I can only presume Brother in Law gave impression that they had delayed taking pension or the person in Job Centre has misunderstood.

itsthelittlethings

huckster said:

It is only where someone is deferring taking a pension and instead claiming UC, where they would need to refer to a Decision Maker.

So if the person was able to receive pension at say aged 60 and decides that they won't take until years later, then a Decision Maker could decide that the person could have been receiving £××× per month. And they will ask the person to provide this information about when pension date had been reached and what they could have been receiving. And then UC will take into account this notional income by deducting on a £1 for £1 basis.

So I can only presume Brother in Law gave impression that they had delayed taking pension or the person in Job Centre has misunderstood.

I thought they couldn’t ask you to take a pension before pension age, given that you can take most pensions from 55.

Grumpy_chap

huckster said:

It is only where someone is deferring taking a pension and instead claiming UC, where they would need to refer to a Decision Maker.

So if the person was able to receive pension at say aged 60

Doesn't "deferral" of a pension in this context only really apply to DB pensions, where there is a normal pension age written into the scheme?

In the case of DC pensions, the same consideration cannot really be applied in the same way as the effect would be to mean that anyone over the age of 55 (currently, due to change) would have their pension considered in some way and potentially mean that very few people over the age of 55 would be eligible for any UC or other means-tested benefits.

huckster

I have an employment pension which I could take at 60.  I also have the option to delay receiving pension and this affects how much I could receive. The pension administrators have previously given examples of how much I could receive at 60 and 62. 

If I decided to delay receiving this pension until later and found myself unemployed, I could contact pension administrators and ask to start receiving the pension. I could not really claim UC, fail to disclose a pension that I was entitled to take and not take this pension. 

The ability to take a pension at 55 is a slightly different issue. Some pensions have a normal pension payable date actually written into them, ,some aged 60. Taking a pension at 55 is actually taking the pension early before the normal pension date. UC would not be requiring people to start claiming any  pensions early before the normal pension date stated.

norm27

Thankyou all for your comments,they are appreciated and give me some hope that DWP might come back and say the pension pot won't be touched. Whilst awaiting the decision, which they said would take up to 14 days, I am going to contact Citizens Advice (and anyone else I can find), to see if they have any information or evidence to support the brother in law. 

I will post a progress report when the DWP reply.

Thanks again.

NedS

It's UC Reg 74(3):

https://www.legislation.gov.uk/uksi/2013/376/regulation/74

Notional unearned income
74.—(1) If unearned income would be available to a person upon the making of an application for it, the person is to be treated as having that unearned income.
(2) Paragraph (1) does not apply to the benefits listed in regulation 66(1)(b).
(3) A person who has reached the qualifying age for state pension credit is to be treated as possessing the amount of any retirement pension income for which no application has been made and to which the person might expect to be entitled if a claim were made.

As above, deferred pensions can only be taken into account once they have reached the qualifying age for state pension credit, otherwise pensions are disregarded indefinitely as described in Schedule 10, paragraph 10 (ADM H2046)

https://www.legislation.gov.uk/uksi/2013/376/schedule/10

https://assets.publishing.service.gov.uk/media/6894a1a7a6eb81a3f9b2e227/adm-chaper-h2-capital-disregards.pdf

If a claimant chooses to take a regular income from their pension before SPA, then it will be treated in the normal way as unearned income and deducted from the UC award pound for pound, and any irregular lump sumps treated as capital.

huckster

To correct previous post, Government only clarified in December 2024 that deferred pensions not taken before pension credit age date, do not count as notional income. Link to Ministerial answer below.

Written questions and answers - Written questions, answers and statements - UK Parliament https://share.google/cgVjDbqUkDqR9kmPo