Another Deprivation Of Assets question!

Altior

itsthelittlethings said:

Altior said:

NedS said:

From a tax perspective, as discussed above you can contribute what you earn each tax year, subject to some higher limits.

From a benefits perspective, what you are talking about is reducing your overall capital by making extra pension contributions for the purposes of claiming means-tested benefits, and that could certainly be viewed as deprivation of capital. I believe there is previous case law in this area where this has been ruled to be DoC.

Paying off debt is allowed and this should certainly be done, especially where the debt interest is higher than that you can earn on those savings.

Thanks!

The interesting element (if that's the correct adjective!) is that my overall capital is reducing whilst on benefits, over time, as my benefits and interest income are less than my day to day necessary expenditure. Definitely any pension contributions from my benefit income would effectively expedite the reduction overall, as I would need to use some additional capital on necessary living expenses.

I am qualified and it's a no brainer to contribute the maximum allowable over the tax year, as from my calculations I am due a tax rebate as well for 25/26, but would still get tax reclaimed on my contributions, up to gross annual earnings. That's regardless of whether I make a subsequent UC claim or not, but I can see how it could be interpreted as DoC if I utilise the financial opportunity. This is why I need to lean on benefits expertise. 

I have also read in my research that paying off debt is a red line, in the sense that it's never considered DoC, whatever the scenario, as long as it's your own personal debt. It's just the worst option for me, as all of my debt is 0% interest and the mortgage is 2% interest over the next three years. My mortgage lender offers 10% capital  overpayments annually without penalty, and their cut off is the calendar year. So I could effectively do close to 20% in the next week, but I have five days left to decide if I want to do the first 10%. My financial brain is telling me it would be absolutely daft to reduce debt at 2% when the capital is yielding 5%+, but I do need to consider the long term perspective!

How much debt do you have? If it’s a significant amount you can’t rely on 0% forever, especially if your benefits income is appreciably less than your previous income and you’d probably be wise to start reducing it.

Unsecured debt is in the region of £45K, plus mortgage. The savings are in various accounts, long terms bonds, ISA's etc, across probably 20+ institutions. Another twist is that I loaded up on long term bonds when I thought interest rates peaked, so I can't access all of my capital savings. 

You're right that there is no guarantee that 0% deals will continue ad infinitum. I do have some already locked in, well into 2027, and one on the table currently that is 2.7% fee for 17 months, 1% minimum repayment. That offer ends on 31/12/2025 as well! 

itsthelittlethings

Altior said:

itsthelittlethings said:

Altior said:

NedS said:

From a tax perspective, as discussed above you can contribute what you earn each tax year, subject to some higher limits.

From a benefits perspective, what you are talking about is reducing your overall capital by making extra pension contributions for the purposes of claiming means-tested benefits, and that could certainly be viewed as deprivation of capital. I believe there is previous case law in this area where this has been ruled to be DoC.

Paying off debt is allowed and this should certainly be done, especially where the debt interest is higher than that you can earn on those savings.

Thanks!

The interesting element (if that's the correct adjective!) is that my overall capital is reducing whilst on benefits, over time, as my benefits and interest income are less than my day to day necessary expenditure. Definitely any pension contributions from my benefit income would effectively expedite the reduction overall, as I would need to use some additional capital on necessary living expenses.

I am qualified and it's a no brainer to contribute the maximum allowable over the tax year, as from my calculations I am due a tax rebate as well for 25/26, but would still get tax reclaimed on my contributions, up to gross annual earnings. That's regardless of whether I make a subsequent UC claim or not, but I can see how it could be interpreted as DoC if I utilise the financial opportunity. This is why I need to lean on benefits expertise. 

I have also read in my research that paying off debt is a red line, in the sense that it's never considered DoC, whatever the scenario, as long as it's your own personal debt. It's just the worst option for me, as all of my debt is 0% interest and the mortgage is 2% interest over the next three years. My mortgage lender offers 10% capital  overpayments annually without penalty, and their cut off is the calendar year. So I could effectively do close to 20% in the next week, but I have five days left to decide if I want to do the first 10%. My financial brain is telling me it would be absolutely daft to reduce debt at 2% when the capital is yielding 5%+, but I do need to consider the long term perspective!

How much debt do you have? If it’s a significant amount you can’t rely on 0% forever, especially if your benefits income is appreciably less than your previous income and you’d probably be wise to start reducing it.

Unsecured debt is in the region of £45K, plus mortgage. The savings are in various accounts, long terms bonds, ISA's etc, across probably 20+ institutions. Another twist is that I loaded up on long term bonds when I thought interest rates peaked, so I can't access all of my capital savings. 

You're right that there is no guarantee that 0% deals will continue ad infinitum. I do have some already locked in, well into 2027, and one on the table currently that is 2.7% fee for 17 months, 1% minimum repayment. That offer ends on 31/12/2025 as well! 

I would say unsecured debt of 45k is a bit risky heading into benefits.

itsthelittlethings

The only way I would consider that level of debts is if I had savings to cover it which were earning more interest. However you’re talking about putting those savings into a pension (probably a bad idea as potentially DoC) but even without that, leaving yourself in a very risky position.

NedS

Altior said:

NedS said:

From a tax perspective, as discussed above you can contribute what you earn each tax year, subject to some higher limits.

From a benefits perspective, what you are talking about is reducing your overall capital by making extra pension contributions for the purposes of claiming means-tested benefits, and that could certainly be viewed as deprivation of capital. I believe there is previous case law in this area where this has been ruled to be DoC.

Paying off debt is allowed and this should certainly be done, especially where the debt interest is higher than that you can earn on those savings.

Thanks!

The interesting element (if that's the correct adjective!) is that my overall capital is reducing whilst on benefits, over time, as my benefits and interest income are less than my day to day necessary expenditure. Definitely any pension contributions from my benefit income would effectively expedite the reduction overall, as I would need to use some additional capital on necessary living expenses.

DWP would argue that you already do not have sufficient income to live off, so can't afford (from income) to make additional pension contributions. By that logic, any additional pension contributions are effectively from capital (or you are using your capital to subsidise your living expenses having contributed more to your pension).

The legal argument here is whether the reason for increasing your pension contributions was to reduce your capital so that you could claim means tested benefits. From what you have told us, I think that's a fair assumption, and it would not be unreasonable for DWP to determine that to be Deprivation of Capital. The fact that you are aware of the law and it's consequences and are here asking questions about it show intent (so you cannot claim you didn't do it intentionally).

What were your pension contributions previously? Would your pension contributions have increased, and if so by what measure? If you could show that you have in fact always contributed that much to your pension and there has been no overall increase in your level of contributions, then your behaviour has not changed - i.e, you could argue that you have not suddenly done something different (deprived yourself of capital) in order to claim means-tested benefits. 

born_again

TBH with £45K debt I would be posting in Debt free section.

Altior

itsthelittlethings said:

The only way I would consider that level of debts is if I had savings to cover it which were earning more interest. However you’re talking about putting those savings into a pension (probably a bad idea as potentially DoC) but even without that, leaving yourself in a very risky position.

Just some into pension, is what I am/was considering.

There are so many moving parts to it, not easy to put an exact number on it. Say approximately net £25K capital right now, plus I need a car really. I sold my car when I was forced to leave work to reduce costs, but I've discovered how much it's now missed when I don't have one! 

I also genuinely need stuff for the home, sofa, office chair etc, I basically put any kind of spending that could be considered discretionary on hold whilst this was all happening. They are knackered though and would take pictures before replacing them. 

I could therefore end up below £16K capital without mortgage OP or pension contributions. I could do it with mortgage OP alone, as you allude to there is inherent risk there as I would be leaving the unsecured balance around the same, whilst reducing my access to liquid capital. And my benefits could stop any time, if the ESA people don't put me in any group, or once the 12 months of contributions based ESA has been satisfied. 

itsthelittlethings

Altior said:

itsthelittlethings said:

The only way I would consider that level of debts is if I had savings to cover it which were earning more interest. However you’re talking about putting those savings into a pension (probably a bad idea as potentially DoC) but even without that, leaving yourself in a very risky position.

Just some into pension, is what I am/was considering.

There are so many moving parts to it, not easy to put an exact number on it. Say approximately net £25K capital right now, plus I need a car really. I sold my car when I was forced to leave work to reduce costs, but I've discovered how much it's now missed when I don't have one! 

I also genuinely need stuff for the home, sofa, office chair etc, I basically put any kind of spending that could be considered discretionary on hold whilst this was all happening. They are knackered though and would take pictures before replacing them. 

I could therefore end up below £16K capital without mortgage OP or pension contributions. I could do it with mortgage OP alone, as you allude to there is inherent risk there as I would be leaving the unsecured balance around the same, whilst reducing my access to liquid capital. And my benefits could stop any time, if the ESA people don't put me in any group, or once the 12 months of contributions based ESA has been satisfied. 

Then what are you going to do about your debt?

Altior

NedS said:

Altior said:

NedS said:

From a tax perspective, as discussed above you can contribute what you earn each tax year, subject to some higher limits.

From a benefits perspective, what you are talking about is reducing your overall capital by making extra pension contributions for the purposes of claiming means-tested benefits, and that could certainly be viewed as deprivation of capital. I believe there is previous case law in this area where this has been ruled to be DoC.

Paying off debt is allowed and this should certainly be done, especially where the debt interest is higher than that you can earn on those savings.

Thanks!

The interesting element (if that's the correct adjective!) is that my overall capital is reducing whilst on benefits, over time, as my benefits and interest income are less than my day to day necessary expenditure. Definitely any pension contributions from my benefit income would effectively expedite the reduction overall, as I would need to use some additional capital on necessary living expenses.

DWP would argue that you already do not have sufficient income to live off, so can't afford (from income) to make additional pension contributions. By that logic, any additional pension contributions are effectively from capital (or you are using your capital to subsidise your living expenses having contributed more to your pension).

The legal argument here is whether the reason for increasing your pension contributions was to reduce your capital so that you could claim means tested benefits. From what you have told us, I think that's a fair assumption, and it would not be unreasonable for DWP to determine that to be Deprivation of Capital. The fact that you are aware of the law and it's consequences and are here asking questions about it show intent (so you cannot claim you didn't do it intentionally).

What were your pension contributions previously? Would your pension contributions have increased, and if so by what measure? If you could show that you have in fact always contributed that much to your pension and there has been no overall increase in your level of contributions, then your behaviour has not changed - i.e, you could argue that you have not suddenly done something different (deprived yourself of capital) in order to claim means-tested benefits. 

It is a calculated approach, but so is reducing net income when on UC by way of pension contributions to increase UC payments. I saw in my research that was deliberately written into legislation, and some people are milking that loophole, by making radical contributions, such that their net income for the purposes of UC is £0!

Not sure I'd want to test it in court, but if challenged I would explain that for every additional £100 I contributed to my pension, I would get £25 topped up by HMRC, but I won't have paid tax on it originally, due to my circumstances. They might not like it in the same way they don't like people taking advantage of the contributions to reduce net income loophole. I must stress that I want to stay the right side of the rules, perhaps utilising some of my financial knowhow is prudent. I'm not daft and don't want a legal fight when I am ill. 

When employed I always used SalSac, over many years. The elective contribution varied between 5% and 20%, always enough to secure employer matching, which was capped at 5%. 

Altior

born_again said:

TBH with £45K debt I would be posting in Debt free section.

It's legacy stoozing basically (started way before I fell ill). There's no short term financial distress, but due to stoozing I am technically currently vastly over the capital savings threshold for UC. It's not real capital in the sense that net I'm not a million miles over the threshold, but they completely ignore debt in their calculations. That's the genesis of the thread really.

itsthelittlethings

Altior said:

born_again said:

TBH with £45K debt I would be posting in Debt free section.

It's legacy stoozing basically (started way before I fell ill). There's no short term financial distress, but due to stoozing I am technically currently vastly over the capital savings threshold for UC. It's not real capital in the sense that net I'm not a million miles over the threshold, but they completely ignore debt in their calculations. That's the genesis of the thread really.

Well it won’t be stoozing if you pay the savings into your pension!