60+ with savings but facing unemployment

Brinsleytoon

Hi group, a friend has been made redundant after a few years of illness and now facing the need for unemployment benefit. His wife works in school meals (and has done for many years) so a change of career at this stage to earn more money isn't going to happen. They have savings above the threshold (about £20k) for benefits, but little or no pension. They are unsure of what to do so I have suggested putting the savings into a drawdown pension. I'm thinking that they can put her salary equivalent into it (and possibly his sick pay) without anything tax implications but gain tax allowance on it. The initial deposit should bring them below the savings threshold for benefits. Is this good and the best advice for him?

NedS

He is entitled to claim Job Seekers Allowance (JSA) if fit for work or Employment Support Allowance (ESA) if unfit for work. This is not means-tested.

With savings of £20k, they are not entitled to claim means-tested benefits (Universal Credit). They need to be careful about reducing their capital in order to try to claim means-tested benefits as this can be seen as Deprivation of Capital, and they can be treated as if they still have those £20k of savings and still not entitled to means-tested benefits. Suddenly increasing their pension contributions may be seen in this way.

Spoonie_Turtle

I can't really advise about putting savings into a pension pot but is he aware of the non means-tested ESA?  If he's been employed for the past two full tax years he should be eligible.

https://www.gov.uk/employment-support-allowance

He should do a benefits calculation putting in their combined details as if they're below the 16k threshold to see what any UC entitlement might potentially be, to see whether it would even be worth trying to savings into a pension or not (if it's doable) in the first place. 

https://benefits-calculator.turn2us.org.uk/
https://www.entitledto.co.uk/

He also needs to know that if he does have a private pension he can access and takes a regular income from it, it will affect any potential UC (deducted in full) and anything over £85/week would affect any ESA payments as well.

itsthelittlethings

Nothing practical to say but all the best to your friend and his wife. 

elsien

You say he’s been made redundant due to illness? Redundancy is nothing to do with health, it’s when the job role itself is no longer needed rather than the person. 

Just clarifying, because I’m wondering if he got a redundancy payment Because he’s no longer needed, or he’s been let go because he’s not able to do the job anymore due to his health .

TELLIT01

As he knows he going to claim benefits because his job is ending, moving capital to a pension etc will almost certainly be seen as deprivation of capital.  If that happens he still won't have any entitlement to UC (income related benefit) but won't have access to the capital either.  Not a great idea.

Brinsleytoon

elsien said:

You say he’s been made redundant due to illness? Redundancy is nothing to do with health, it’s when the job role itself is no longer needed rather than the person. 

Just clarifying, because I’m wondering if he got a redundancy payment Because he’s no longer needed, or he’s been let go because he’s not able to do the job anymore due to his health .

It's more of managed out due to ill health, although still very capable of doing his job. A nominal cash payment was made, redundancy payment would have been larger. Unfortunately he accepted so no going back to correct bad advice regarding that situation 

Brinsleytoon

TELLIT01 said:

As he knows he going to claim benefits because his job is ending, moving capital to a pension etc will almost certainly be seen as deprivation of capital.  If that happens he still won't have any entitlement to UC (income related benefit) but won't have access to the capital either.  Not a great idea.

Thanks, wasn't aware of the 'deprivation of capital' situation. 

TELLIT01

Brinsleytoon said:

TELLIT01 said:

As he knows he going to claim benefits because his job is ending, moving capital to a pension etc will almost certainly be seen as deprivation of capital.  If that happens he still won't have any entitlement to UC (income related benefit) but won't have access to the capital either.  Not a great idea.

Thanks, wasn't aware of the 'deprivation of capital' situation. 

Deprivation of Capital does only apply to UC and other income related benefits.  It doesn't affect 'JSA' or 'ESA' as mentioned in previous responses.

itsthelittlethings

Had he been on SSP? That would normally run out and transfer seamlessly (hopefully) to ESA. Is there hope of a return to health?

Spoonie_Turtle

itsthelittlethings said:

Had he been on SSP? That would normally run out and transfer seamlessly (hopefully) to ESA. Is there hope of a return to health?

I'm not sure if I'm misunderstanding you but someone does have to be aware of and claim ESA, there's no process linking them together.  You just can't claim ESA whilst still being entitled to SSP.