Advice: UC and deprivation of capital

Moonraker1900

I've recently been made redundant. I'm in my mid-50s and had a retirement date in mind based on continuing to contribute to a pension. Obviously I'm making no contributions right now.

I've just started my nJSA claim but the job market seems brutal. Far harder than when I was looking voluntarily 4 years ago (when I was successful). Even at this early stage I'm concerned that I might never get another job - the market isn't good right now and the long I'm not working, the more my age will really start to count against me. Not just because employers won't want to look at someone approaching 60 but because my skills will just become out of date (I tended to work for employers that weren't at the cutting edge anyway).

I had planned to move house for cash in 1-2 years so was saving up in an ISA. This is above the UC threshold if I don't get anything with the 6 months of nJSA.

The house thing will probably have not to happen but am I allowed to do anything with this capital pension-wise?

I don't want to shove it all in my pension and then find the DWP treat me as still having it but if I'm out of work for an extended period then not only will that money just be eaten up but my pension won't be sufficient either. It feels as it I'm being punished for trying to be responsible.

huckster

If you had under £6k capital, what would you eligible for help with under UC? E.g. Housing rent, children. Have you run your information through an online benefit calculator

In regard to putting money in a pension, your actions would have to be reasonable. If you put most of the money into a pension and were doing so purely to claim benefit money, I am not sure how a Decision Maker would treat the capital. Others on this site will no doubt respond with more technical information.

Grumpy_chap

I've recently been made redundant. I'm in my mid-50s and had a retirement date in mind based on continuing to contribute to a pension. Obviously I'm making no contributions right now.

I've just started my nJSA claim but the job market seems brutal. Far harder than when I was looking voluntarily 4 years ago (when I was successful). Even at this early stage I'm concerned that I might never get another job - the market isn't good right now and the long I'm not working, the more my age will really start to count against me. Not just because employers won't want to look at someone approaching 60 but because my skills will just become out of date (I tended to work for employers that weren't at the cutting edge anyway).

I had planned to move house for cash in 1-2 years so was saving up in an ISA. This is above the UC threshold if I don't get anything with the 6 months of nJSA.

The house thing will probably have not to happen but am I allowed to do anything with this capital pension-wise?

I don't want to shove it all in my pension and then find the DWP treat me as still having it but if I'm out of work for an extended period then not only will that money just be eaten up but my pension won't be sufficient either. It feels as it I'm being punished for trying to be responsible.

Sorry to hear about your predicament - the job market may not be as harsh as you are initially feeling; your experience will count for a lot. Opportunities are sector-dependant but you may be able to harness your transferable skills to deliver value in a sector you had not previously considered. A good Work Coach should support you exploring these types of options.

The most you can pay into a pension this tax year is your gross earned income for the year. Given the tax year starts April, so you only had 3 months' earned income, that is likely to be the limiting factor. Annual Allowance limit (£60k) and carry-forward only applies where earned income is greater.

Moonraker1900

So sound like there would be any issue with a potential UC claim (if it came to that) if I've put some of the cash I've got into my personal pension? I'm over the £16k limit let alone the £6k one.

NedS

Some numbers would be useful to help judge reasonableness, although any decision always lies with DWP.

The reason it is difficult to offer a view in such circumstances is that you fall between two competing regulations.

Firstly, any assets held within a UK registered pension scheme are disregarded indefinitely (H2046)

https://assets.publishing.service.gov.uk/media/69d7c4214abe5b6c5ddf26cb/adm-ch-h2.pdf

But H1795 says people are treated as having capital they do not have if they deprive themselves of
capital to get UC or more UC:

https://assets.publishing.service.gov.uk/media/69d528703efd329a5269df31/adm-ch-h1.pdf

Note that this is referring to deprivation of Capital, so any pension payments made from earned Income (at the time it is earned) are absolutely fine.

What we are discussing here is a later pension contribution from capital (for UC purposes, income becomes capital if it remains unspent at the end of the month)

The reason for contributing to the pension becomes relevant, as DWP would have to be satisfied that the reason was to gain access to UC (e.g, if you had £30k in capital, and contributed £25k into a pension shortly before making a claim for UC, this would be seen as evidence of Deprivation of Capital in order to claim UC)

Other arguments that may be relevant: How much of the redundancy/savings did you contribute and how much did you leave yourself available to support yourself whilst seeking alternative employment (hence some outline figures may be useful in this regard) For example, if you had £30k of capital, contributed £15k into a pension but left £15k available to support yourself whilst seeking another job (assuming that was sufficient, without knowing what your outgoings are), you may be able to argue that was reasonable (balancing your future needs with those of the present)

As @Grumpy_chap importantly states, all of this may be academic as the gross amount you can contribute into a pension this tax year is limited to your gross earnings, and if you have already been making contributions from your paid employment this tax year, then that will reduce any remaining amount available to you. Also not, not all earnings are pensionable - you will not be able to include redundancy pay in determining your pensionable earnings. So it would also be useful to know your gross pensionable earnings to date this tax year and your gross pension contributions. For example, if you were earning an average £36k/year (£3k/month) and worked for April and May, before being made redundant at the beginning of June, with only £6k of pensionable earnings and already having contributed maybe £1000 gross, you may then be limited to only contributing another £5k max which may mean that leaves you over the £16k threshold of savings/capital preventing you from making a claim to UC anyway.

Hopefully this is all academic and you will be back in work long before your JSA claim expires. Do not underestimate what you can bring to an employer at your age. The number one thing any employer wants is reliability, and you can demonstrate a long history of that in spades. Many employers will take that, along with your experience over a younger person all day long. I know this from personal experience having been made redundant at around 50 and not having a clue where my next job would come from, and having those exact same thoughts that you are having now. What I can tell you with certainty is that you WILL get another job, just not what that job will be or when you will get it. So just keep your options open and keep creating opportunities and something WILL happen for you. The moment you stop looking or give up is the moment you fail, and that's purely on you.

Moonraker1900

Thanks for the advice.

Okay, without giving away too much PI.

My cash balance is £60k. This tax year I've probably earned £12k (this excludes the redundancy payment). My pension contributions this year are probably £5k in total (Ers and Eees). My nJSA runs out on 23/12.

Clearly I'm never getting the cash balance down anytime soon.

If I can another job, I'd be happy to pretty much max out my pension contribution every month, leave myself just enough to get by, and if I need to use the cash balance for anything major I can. I'm 56 so if I was still able to move I'd be able to use some of my pension to fund the difference between my house and one I'd buy.

NedS

https://forums.moneysavingexpert.com/discussion/comment/82057269#Comment_82057269

Thanks for that. So with gross pensionable earnings of £12k, YOU (employee contributions) can contribute that amount into a pension (£12k less any employee contributions you have already made). Clearly pension contributions alone will not bring you close to the point you are able to claim UC (capital below £16k), so UC looks like a non-starter at present.

As you say, once you find further employment, you could certainly pay your entire salary into your pension and use your £60k savings to live on, effectively allowing you to move that £60k of savings into your pension, which at least protects it in the event future means-tested benefit claims should they be required down the line. Are you of sufficient age that you can access your pension funds now should you so need (I think the current limit is age 57)? If not, then that delay in being able to access funds may be an issue for you, especially if you decided to go ahead with the house move.

I see no tax benefit or burden from moving your savings from ISA to pension. You will get tax relief on the way in and pay tax on the way out, so the tax position is largely neutral. ISA potentially has the benefit of being fully and immediately accessible without incurring HRT (in the case of a house purchase)

You have 6 months on JSA (plus 9 months remaining in the tax year), so plenty of time to find another job and to make any such financial decisions, so no immediate rush to do anything

QrizB

Do you currently have a mortgage?

If so, could you use some of your cash to make a mortgage overpayment? That's "as good as" savings towards a house move, will reduce the amount of interest you pay on your mortgage, and (depending on how your mortgage company treats repayments) you might even be able to get the cash back again if you need it in the future.

Moonraker1900

The mortgage is fully paid up. I was hoping to move for cash or with a very small mortgage depending on timescale and the difference in value between my current house and one I might buy (I'm looking to trade up).

I'd have to look into any HRT implications - hadn't thought of those.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/82057269#Comment_82057269

You might be too late now, and the employer might not facilitate it in any case, but would your (ex-)employer allow you to "redundancy-sacrifice" the redundancy payment to pension?

Have you claimed nJSA, which is not means-tested? I assume you will have the sufficient NI contributions to be eligible.

With regard to pension contributions, your gross earnings are £12k. Pension contributions to date are £5k (employers plus employees). What is that split? For the purpose of discussion, I will assume £2k personal (employees) contribution just to give us a number to use for example.

£12k earnings less £2k employees contribution leaves £10k.

That £10k gross means £8k paid by you into SIPP. The other £2k is claimed by the pension provider.

(Obviously you need to adjust that for your actual employees contributions.)

Overall, though, the way to look at this is that you are fortunate to have a good resilience and buffer / emergency fund. This is the type of event that an emergency fund is for. You are far better placed than many people who would never be in a position to have this level of savings. I also think your prospects of re-employment are higher than you initially fear.

Moonraker1900

I did think at the time about asking for the redundancy payment to be paid into my pension, but I only had three years' service so it wasn't that much anyway.

So far, I'm not even getting a nibble but to people for the positive comments on that front. I'm hoping that I can get something which would enable me to max out (or at least use a sizeable amount of) the available pension contribution even if it means chunking down my savings a little. Age-wise I think I can take the pension next year or 2028 anyway, so it wouldn't make much difference either way if I was unable to find anything.