Another Deprivation Of Assets question!

Altior

itsthelittlethings said:

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!

It's just a fraction of the savings I'm potentially considering for pension, around 5-10%. I could clear the CC balances overnight and would still be over the UC capital threshold. 

NedS

Altior said:

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%. 

What you are proposing is not unlawful (certainly allowable from an HMRC tax perspective), but may fall foul of the UC DoC rules, so that is what we must consider here. Whether anyone make like it or look unfavourably on it is irrelevant - either the law allows it or not.

For DoC to have occurred, DWP must prove that you deliberately deprived yourself of capital in order to claim means-tested benefits. To be deliberate, presumably there would be a change in your behaviour (i.e, you deliberately did something, such as increasing your pension contributions). The issue you have is that previously YOU made no pension contributions as these were made by your employer (employer conts, not employee conts) through SalSac. So DWP can legitimately argue that you have changed your behaviour and are now making pension conts that you weren't previously making in order to reduce your capital and claim (more) means-tested benefits. IOW, that fact you previously used SalSac unfortunately takes away your ability to make that argument and in doing so strengthens DWPs position.

Altior

NedS said:

Altior said:

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%. 

What you are proposing is not unlawful (certainly allowable from an HMRC tax perspective), but may fall foul of the UC DoC rules, so that is what we must consider here. Whether anyone make like it or look unfavourably on it is irrelevant - either the law allows it or not.

For DoC to have occurred, DWP must prove that you deliberately deprived yourself of capital in order to claim means-tested benefits. To be deliberate, presumably there would be a change in your behaviour (i.e, you deliberately did something, such as increasing your pension contributions). The issue you have is that previously YOU made no pension contributions as these were made by your employer (employer conts, not employee conts) through SalSac. So DWP can legitimately argue that you have changed your behaviour and are now making pension conts that you weren't previously making in order to reduce your capital and claim (more) means-tested benefits. IOW, that fact you previously used SalSac unfortunately takes away your ability to make that argument and in doing so strengthens DWPs position.

Technically the employer contributes as the employee sacrifices salary, but in effect the employee contributes by way of forgoing salary. The 'real' employer contribution is on top of that. That would be a spurious argument from DWP in my view.

I have actually also contributed to numerous private pensions outside of my workplace pension over time, but they were less consistent. Based on fluctuating market conditions, primarily. 

The gap in contributions since I was forced to leave would be harder to defend, though I didn't know how long I would be ill for, and when I had to leave work I cancelled absolutely everything I didn't need in the short term, and sold my car. I have now settled into my more circumspect lifestyle, one might consider!

I think ultimately it won't be worth the fight, for what doesn't amount to a huge amount of money. A lot safer to OP mortgage.

Are you aware of how meticulously DWP people go through bank statements? I can't imagine they interrogate every line, line by line for every application. And If I do go ahead and apply for UC in the end, pension payments would not stand out, maybe £50 or £60 here or there, whereas £30K in debt repayments certainly would. 

Grumpy_chap

Altior said:

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. 

That is a large amount of unsecured debt and also a complicated web of savings accounts.  Everything might be simpler if you could, well, simplify everything into fewer places.

It would be worth visiting the DfW (debt free wanabee) areas of these forums and, as a minimum, preparing a SoA (Statement of Affairs) so you can see how the debts can be managed given that your income is now reduced.  You don't need to share it unless you want to, but the SoA can be a useful tool just for own budgeting purposes.

You suggest you have £25k savings over and above the amount of debt.  I would normally say that paying down the debt is far more important than paying extra into pension, so clear that £45k unsecured debt as a priority. 

Some of your comments do not seem to show that you have understood the impact of your currently reduced income status.  Doing the SoA may help you see what your future expenses have to be to manage long term financially.  It is not obvious that you have the current income to support the long list of expensive purchases you suggest - again an SoA may bring clarity in that regard.

What timescale do you expect to be able to return to work and earning at the sort of rate you previously earned at?

Altior

Grumpy_chap said:

Altior said:

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. 

That is a large amount of unsecured debt and also a complicated web of savings accounts.  Everything might be simpler if you could, well, simplify everything into fewer places.

It would be worth visiting the DfW (debt free wanabee) areas of these forums and, as a minimum, preparing a SoA (Statement of Affairs) so you can see how the debts can be managed given that your income is now reduced.  You don't need to share it unless you want to, but the SoA can be a useful tool just for own budgeting purposes.

You suggest you have £25k savings over and above the amount of debt.  I would normally say that paying down the debt is far more important than paying extra into pension, so clear that £45k unsecured debt as a priority. 

Some of your comments do not seem to show that you have understood the impact of your currently reduced income status.  Doing the SoA may help you see what your future expenses have to be to manage long term financially.  It is not obvious that you have the current income to support the long list of expensive purchases you suggest - again an SoA may bring clarity in that regard.

What timescale do you expect to be able to return to work and earning at the sort of rate you previously earned at?

I do appreciate where you are coming from. But the debt side of it is in hand. The ultimate backstop is my property, though obviously that is very much the last resort. 

I feel like returning to working again is unlikely, as there is no remedy for my conditions.

I can't really make any definitive choices about the long term, until I have my WCA, and am made aware of the outcome. 

itsthelittlethings

I think it’s unbelievable that people can overpay on a pension to get themselves under the limit to claim UC, when if they are on state pension plus PIP in retirement will me on a lot more money than many people anyway.

Altior

There's a sense of the powers that be wanting people on UC to be contributing to their pension. Personally I find the HTS scheme utterly bizarre, the system is full of weird looking incentives and disincentives, but we discuss using the policies as they stand on this board, rather than what they might or should be

I talked about that incentive, as it's somewhat correlated to my scenario, albeit not earned income but unearned income, ie if the lawmakers think it's reasonable to encourage people to lower their net wage to increase UC via pension contributions, it's not too dissimilar to me using ESA to increase my pension. 

Altior

Many thanks to all of the contributors to my query.

I've more or less concluded that I will allow things to run their course. 

If I get put into the group that means ESA continues after the 12 months, then I can clear my debt down and apply for UC.

If the other group or no group, I will reapply (apply under the UC umbrella) once my capital is below the threshold, naturally. That way I can contribute to my pension without being challenged re DoC.

It is really important for me that my WCA is carried out soon. So chasing this up asap is on my immediate agenda. 

Grumpy_chap

Altior said:

I will reapply (apply under the UC umbrella) once my capital is below the threshold, naturally. That way I can contribute to my pension without being challenged re DoC.

There have been some posts where people have reported making a new UC claim and being asked about capital changes in the period shortly prior to the UC claim.
This does make sense as it is quite imaginable that there would be some people that would have greater than £6k / £16k of capital so go on a spending spree in December and then claim UC in January, for example.
You may need to be prepared that you could still be asked about the pension contributions and DoC queries even if that is spent down prior to any UC claim.

Altior

Grumpy_chap said:

Altior said:

I will reapply (apply under the UC umbrella) once my capital is below the threshold, naturally. That way I can contribute to my pension without being challenged re DoC.

There have been some posts where people have reported making a new UC claim and being asked about capital changes in the period shortly prior to the UC claim.
This does make sense as it is quite imaginable that there would be some people that would have greater than £6k / £16k of capital so go on a spending spree in December and then claim UC in January, for example.
You may need to be prepared that you could still be asked about the pension contributions and DoC queries even if that is spent down prior to any UC claim.

Thanks, yes but I don't anticipate it to be before 2027 if it plays out that way. 

Not disguising anything at all, but I thought I would take a look at one of my current account's activity just for December. It's impossible for me to trace what is happening and it's me doing it! For example I have multiple standing orders in my own name, other transfers as I have bonus accounts with Zopa and Chase. A little bit of ISAs, I use another current account for some bills to get cashback. I paid £120 to Freetrade for subscription to the plus account, only I know what that is, on the current account listing it just shows as a payment to Freetrade. And it's because they were offering £1K cashback on a SIPP transfer, but you needed a subscription to plus at the time. 

I'm comfortable with all of these movements and managing them, and for the most part they tick along on their own. But for example on the 1st, I need to create three manual transfers to different building societies, as I wanted to retain some control over a few of them. The Zopa RS matures in three days, that's £3750 ish I need to move straight away, as the balance converts into a basic savings account. For the Zopa current account bonus you have to put £500 in the biscuit account, but you can take it back out again immediately. If someone wants to try and work it all out over a year later, channelling a famous line in a movie, good luck!