Another Deprivation Of Assets question!

Yamor

Even if DWP agree not to consider how you spend your "income" as potential capital deprivation**, in your case, where you then instead spend capital on regular living costs, then that capital expenditure could be called deprivation (as you could have reasonably used your income to pay for those costs).

Certainly paying into your pension straight from your capital could be deprivation.

On a separate point, though, if you think you might be found to have LCWRA, then you should try to ensure you claim UC by 5th April 2026, as if you claim after that date, you will only get the new, lower, LCWRA rate.
(Claiming by 5th April is sufficient, as you won't have to wait 3 months before getting the LCWRA element added, as you have claimed ESA.)


** In general, how you spend your income cannot in itself be capital deprivation, but if it is done to ensure the income is gone before it can become capital, then it will be possible for DWP to argue that that is capital deprivation.

Altior

The whole thing is pretty interesting, if I wasn't directly involved! At this point in time, my capital, income, expenses et al has never came up in a conversation with the authorities as I haven't made a means tested claim. In theory I could have £2million in the bank and still be receiving contributions based ESA. I suppose it's an acknowledgement that someone like me who has accumulated emergency savings and not lived a life on credit should not be penalised when something life impacting happens, such as not being able to work through illness. And get something back from the State. But as far as the DWP and myself is concerned currently, there's no distinction between income and capital. 

I suppose it's only due to my career, and more than a passing interest in anything finance related that I have some partial knowledge in this area, enough to ask the right question perhaps, without possessing the expertise.

I could definitely make the professional argument that UC claimants are encouraged to reduce their income (via pension contributions) to increase their UC receipts. Effectively if they didn't, they would have more capital at the end of their AP. As an ESA claimant, why can't I do the same? [rhetorical]

In fact, I touched on it but we do have the rather odd (to me) feature baked into the system, with HTS that positively encourages those eligible to accumulate capital via their UC receipts and other income, with a massive bonus. And if you don't qualify for UC due to being over the £16K limit, you absolutely do need to use capital for day to day living costs if you're unable to work. That's the only way to end up qualifying for UC  

Do I have the inclination to get into a battle over it, absolutely not. I will most likely play it very safe.

Many thanks @Yamor , yes I believe I should qualify for the support group. The problem is I submitted the ESA50 form at the end of October, and heard nothing subsequently, aside from a letter asking me for an additional fit note. It's purely coincidental, I applied for ESA before the changes became law, however I imagine I am not the only applicant looking for closure on the application by 5th April 2026! 

Yamor

The reduction in rates for LCWRA is only within UC.

The support group element of ESA isn't reducing (although it was always much lower than the UC equivalent anyway).

As such, to 'lock in' the higher rate, you would need to claim UC by 5th April.

It won't matter if ESA only make their decision later, as it will be backdated.

Yamor

Altior said:

I could definitely make the professional argument that UC claimants are encouraged to reduce their income (via pension contributions) to increase their UC receipts. Effectively if they didn't, they would have more capital at the end of their AP. As an ESA claimant, why can't I do the same? [rhetorical]

In fact, I touched on it but we do have the rather odd (to me) feature baked into the system, with HTS that positively encourages those eligible to accumulate capital via their UC receipts and other income, with a massive bonus. And if you don't qualify for UC due to being over the £16K limit, you absolutely do need to use capital for day to day living costs if you're unable to work. That's the only way to end up qualifying for UC  

In general, income-related benefits are designed, and expected to be, subsistence benefits, without much opportunity to save or make pension contributions. They're therefore happy to encourage the small level of pension contributions which a claimant would be able to make.

If you wanted to make regular, limited, pension contributions out of your ESA income, then that would be fine. It's only because you are only able to afford doing it by living off (and reducing) your capital that there's a potential problem.

Altior

Yamor said:

Altior said:

I could definitely make the professional argument that UC claimants are encouraged to reduce their income (via pension contributions) to increase their UC receipts. Effectively if they didn't, they would have more capital at the end of their AP. As an ESA claimant, why can't I do the same? [rhetorical]

In fact, I touched on it but we do have the rather odd (to me) feature baked into the system, with HTS that positively encourages those eligible to accumulate capital via their UC receipts and other income, with a massive bonus. And if you don't qualify for UC due to being over the £16K limit, you absolutely do need to use capital for day to day living costs if you're unable to work. That's the only way to end up qualifying for UC  

In general, income-related benefits are designed, and expected to be, subsistence benefits, without much opportunity to save or make pension contributions. They're therefore happy to encourage the small level of pension contributions which a claimant would be able to make.

If you wanted to make regular, limited, pension contributions out of your ESA income, then that would be fine. It's only because you are only able to afford doing it by living off (and reducing) your capital that there's a potential problem.

That's right, it's a quirk in the system perhaps that contribution based benefits are by definition not income based, or else I would qualify for income based ones. It muddies the water perhaps that I also receive interest income currently, too. So, if for example I used interest yielding from my existing capital to contribute into a pension, I'm neither using my benefit income, nor my inferred capital balance. The nature of interest income means that it is sporadic, but I could make a linear distinction by exactly matching my realised interest income to my pension contributions. 

I suppose the question that arises in that hypothetical scenario, is am I compelled to use all/any income that arises, on my living expenses that predate an UC claim....

Altior

Yamor said:

The reduction in rates for LCWRA is only within UC.

The support group element of ESA isn't reducing (although it was always much lower than the UC equivalent anyway).

As such, to 'lock in' the higher rate, you would need to claim UC by 5th April.

It won't matter if ESA only make their decision later, as it will be backdated.

I see, this is a big help, thanks. So I may need to be fully committed to a UC claim. It's quite a significant one as once I clear down my stoozing pot (if doing so), there's no going back. 

I don't suppose the DWP frontline staff would be that familiar with applicants having just reversed a stoozing pot, so it could take some explaining. 

Grumpy_chap

Altior said:

if for example I used interest yielding from my existing capital to contribute into a pension, 

Interest income is not earned income and not eligible for pension contributions.  You are limited to the earned income from the early part of the tax year.

If you have sufficient capital to generate income that supports pension contributions then you will probably be outside the limits of UC

Altior

Grumpy_chap said:

Altior said:

if for example I used interest yielding from my existing capital to contribute into a pension, 

Interest income is not earned income and not eligible for pension contributions.  You are limited to the earned income from the early part of the tax year.

If you have sufficient capital to generate income that supports pension contributions then you will probably be outside the limits of UC

I am currently outside the limits of UC. What I am exploring is the impact of pension contributions that predate an (at this point) hypothetical UC application, ie when I become eligible. Putting in a big lump sum from existing capital I have concluded would be too risky and open to be interpreted as deliberate DoC. However, what I feel can be considered at least are contributions that are sourced from neither benefit income, or existing capital balances. For example, the Zopa RS that I referenced will pay almost £150 interest on Tuesday. Could I put the exact amount into a pension, where the tax can be recovered and remain the right side of the rules. 

It's an intellectual challenge to myself if anything, perhaps due to missing similar challenges when I was able to work. It's going to nag at me if I let the opportunity pass, it could easily be the last time I can contribute to a pension from earned income (within the same tax year). 

NedS

Altior said:

Grumpy_chap said:

Altior said:

if for example I used interest yielding from my existing capital to contribute into a pension, 

Interest income is not earned income and not eligible for pension contributions.  You are limited to the earned income from the early part of the tax year.

If you have sufficient capital to generate income that supports pension contributions then you will probably be outside the limits of UC

I am currently outside the limits of UC. What I am exploring is the impact of pension contributions that predate an (at this point) hypothetical UC application, ie when I become eligible. Putting in a big lump sum from existing capital I have concluded would be too risky and open to be interpreted as deliberate DoC. However, what I feel can be considered at least are contributions that are sourced from neither benefit income, or existing capital balances. For example, the Zopa RS that I referenced will pay almost £150 interest on Tuesday. Could I put the exact amount into a pension, where the tax can be recovered and remain the right side of the rules. 

Interest received is classed as capital the moment you receive it. You may view it differently (i.e, as some form of income), but under UC regs it's capital, and if you pay it into a pension then it is your capital that you are paying into a pension.

I think you have a good grasp of the issues here. If you have a large amount of capital (over £16k) that would prevent you from making a claim for UC, and then prior to making a claim you deliberately seek to reduce your capital in order to make that claim, DWP will likely view that as DoC unless you can make good arguments to the contrary. Paying off debt is fine and runs no risk. Purchasing things you require is fine, although said purchased must not be deemed excessive and if you are running down a large capital balance they will look at each expenditure with a fine tooth comb. Paying large amounts into a pension may certainly be classed as DoC, especially where you were not previously making such pension contributions.

As others have said, clearing any debts first is the obvious choice and carries zero risk. If you then make a claim for UC and then have excess income, you can then consider paying that into a pension in order to keep capital levels below £6k/£16k

born_again

If that £45K of debt is all due to stoozing. I would be paying it off now. So you know exactly where you are financially, also puts more than 3 months before you might have to claim UC & LCWRA element @ old rate.
Where as waiting till later, you could be opening a can of worms from DWP & DOC