U/C and pension savings

Wrinklebonce

My daughter was given a huge rebate from DWP, back paid 9 yrs. She has lost her Housing benefit and U / C. because of this rebate. She has epilepsy / mental health issues and cannot get a job.
She is in her mid 30's.
My question is, can we put the money into a pension plan for her and declare it, or will it be held against her as excess capitol.  
Regards Wrinklebonce.

TadleyBaggie

You can't just put a large amount into a pension, the amount is limited to the amount of income per year. If there is no income, the amount is limited to £2400.

itsthelittlethings

I thought that benefit rebates don’t count as capital?

Grumpy_chap

TadleyBaggie said:

You can't just put a large amount into a pension, the amount is limited to the amount of income per year. If there is no income, the amount is limited to £2400.

That's not quite correct.

Gross pension contributions are limited to earned income.  In this case, earned income appears to be nil given the statement the individual cannot get a job.

When there is no earned income, pension contributions are capped at £2,880 which is grossed up to £3,600

itsthelittlethings

Grumpy_chap said:

TadleyBaggie said:

You can't just put a large amount into a pension, the amount is limited to the amount of income per year. If there is no income, the amount is limited to £2400.

That's not quite correct.

Gross pension contributions are limited to earned income.  In this case, earned income appears to be nil given the statement the individual cannot get a job.

When there is no earned income, pension contributions are capped at £2,880 which is grossed up to £3,600

You can put as much as you like in your pension even if you’re not earning. You just won’t get tax relief. The purpose here is not to get tax relief.

Spoonie_Turtle

What was the 'rebate' for?  Benefits backpay?

Her options will depend on exactly what the payment is for (and the rough amount).

Lifematters

If it was a lump sump benefit payment it may be disregarded as capital for 52 weeks, possibly more but need to know what it was for and how much. 

TELLIT01

I'm well aware that the benefits system isn't 'fair' as I worked on it for several years.  However it seems to be even more so if underpayments over a period of 9 years are only potentially disregarded for 1 year.

NedS

What were the back payments for and how much was the back payment?

If they were claiming UC at the time and the amount of benefit back payments were over £5,000, then they should be disregarded for the life of the UC claim and the claim should not have been closed.

Wrinklebonce

My daughter has never held a job due to chronic Epilepsy. Therefore has never paid tax. In January of 2025, she was given a backdated rebate from DWP of £20,000. At the time her personal bank account was over the £16.000 limit. (my fault). She applied for and was refused U/C because of excess savings. Then her Housing Benefit was stopped and after an enquiry, they stated because of excess savings, stating £22,000, (bank) but no mention of the rebate sum.
Nobody will clarify whether or not this rebate will be held against her indefinitely or can we invest it into a pension fund.
If she 'blows' the lot, its classed as 'miss-appropriation' of funds. Dammed if you do and Dammed if you don't.

itsthelittlethings

I suspect you won't be able to get it disregarded for UC, because she wasn't originally on UC. Presumably she was due to be migrated. Therefore you won't get it disregarded for housing benefit, as this should be paid for by UC now. You've been very unlucky. I wouldn't blow the lot but definitely a little bit of extra spending on things she needs to improve her life can probably be excused.