Advice needed on claiming pension credit with second property

mertywerty

Hi - I have a question about pension credit which I have already asked in the benefits / credits forum board and have been advised to post in this forum in case someone else here might have been in the same situation.

I am in the process of helping my mum and dad look at applying for pension credits.

Thanks to this very very helpful site and links around here I have managed to find 99% of what I'm looking for before I help them make the application, but there is one big question mark which I am afraid will result in an application being rejected, regarding a second property.

I have been unable to find any concrete info around this so if anyone here the answer or had have experience with this situation and could share their knowledge / advice this would be really really appreciated!

My parents are both older than 65 and live in their own house with no mortgage, and do have savings over £6k. They are getting a combined pension of around £130 a week and the council tax for this property they are paying is around £40 a week. Aside from the pension they do not get any income at all from any other sources.

Based on these figures put into the handy calculator linked from this site (entitledto.co.uk) these figures make them eligible for pension credit.

However one thing I did omit and where my doubts are is that they also have a second property, a little retail shop that they used to work in before they retired. This property has been empty and vacant for over a year, and they have been trying to sell it via property agents for that period (but there is no interest due to the credit crisis, even with dropping the asking price dramatically). My mum and dad have to pay full council tax on this business property of £55 a week.

So the situation is that my parents receive £130 a week in total pension, but pay out total of £95 in council taxes, leaving them not much else to pay for utility bills, food, insurance, etc, which is why I am looking to apply to get pension credit for them.

The bit I need advice on is around the second property. In applying you obviously have to declare the business property, whose value is used as a basis to calculate a part of the weekly income, but it also sounds like the calculations do not take into account that the business property is empty and on the market to be sold. It seems to make the assumption that every couple of hundred of pounds of the property value equates to £1 in the stream of weekly income. So adding the value of the business property to the calculator makes my parents not eligible for pension credit due to this income assumption, when in reality they are actually losing money due to having to paying council tax / insurance etc on this property.

So my question is if anyone knows how this empty business property would get treated in a real pension credit application, and if there is anything my parents could declare etc in the application to remove the assumption that just because they have this second property it is automatically included in the weekly income calculations?

Farway

I do not know the answer, my suspicion is like yours, "rules is rules" and computer says NO

However you could try contacting Age Concern, I know our local one has people who advise on benefit claims etc, so maybe yours local one has similar?

chesky369

Your mum and dad may have been trying to sell it at a greatly reduced price from what it would have fetched a year ago but I don't think the benefit agencies will see it the way you want. Most properties WILL sell if they are cheap enough - it's just that people can't bring themselves to reduce them to that rate. And if they did sell cheaply, they would probably then have too much for pension credits.

insured

I looked at this thread a couple of days ago, and my first reaction was to say that this property would be deemed capital. I am an accountant and work with a charity called TOP and am often asked to help with pension credit applications, but have never come across this before, so was reluctant to reply with “I think”.

However, I have now done some research and have found your answer.

If you have a second property other than your main home, that property will be deemed as capital for pension credit.
However, if you are trying to sell the property, the value will be disregarded for the first 26 weeks, or longer if there are real difficulties.

Furthermore, in the case of business assets, here is an extract of the pension credit guide book for advisors.

[FONT='YMGNB W+ Bliss']Business assets [FONT='YMGNB W+ Bliss'][/FONT][/FONT]
[FONT='XZRNP J+ Bliss']We will ignore the value of your customer’s assets in a business if they are the owner (or one of the owners) and they: [/FONT]
[FONT='XZRNP J+ Bliss']• [FONT='BIXMH Q+ Bliss']• [/FONT] [FONT='XZRNP J+ Bliss']do some work in that business; [/FONT][/FONT]
[FONT='XZRNP J+ Bliss']• [FONT='BIXMH Q+ Bliss']• [/FONT] [FONT='XZRNP J+ Bliss']are unable to work in the business because they are ill or disabled but plan to return as soon as they can; [/FONT][/FONT]
[FONT='XZRNP J+ Bliss']• [FONT='BIXMH Q+ Bliss']• [/FONT] [FONT='XZRNP J+ Bliss']no longer work in the business and are trying to sell or realise their assets – in which case we will ignore the assets for as long as it takes them to do this. [/FONT][/FONT]
[FONT='XZRNP J+ Bliss'] [/FONT]
[FONT='XZRNP J+ Bliss']So in effect, the value of the property will indeed be disregarded.[/FONT]
[FONT='XZRNP J+ Bliss'] [/FONT]
[FONT='XZRNP J+ Bliss']As soon as the property is sold however, there will be capital, so you will have to declare a change in circumstances, and the pension credit will be affected.[/FONT]
[FONT='XZRNP J+ Bliss'] [/FONT]
[FONT='XZRNP J+ Bliss']One thing I am not sure about however, but it would be easy enough to check if you telephoned the helpline, is whether the “loss” would be deductible from their income. That is the loss from the council tax that they are forced to pay.[/FONT]
[FONT='XZRNP J+ Bliss'] [/FONT]
[FONT='XZRNP J+ Bliss']My suspicions is that the loss would be deductible, but you really need to telephone them.[/FONT]
[FONT='XZRNP J+ Bliss'] [/FONT]
[FONT='XZRNP J+ Bliss']If you want me to do this for you, post a reply on the board and I will make enquiries.[/FONT]
[FONT='XZRNP J+ Bliss'] [/FONT]
[FONT='XZRNP J+ Bliss']However, I have mentioned this before, please contact TOP for help with your tax. It is a charity, and it is free.[/FONT]

mertywerty

Hi - many thanks for the replies and for the research specifically for this question - that makes the situation a lot more clearer now (I wish the official pension credit website would have this level of detail in their FAQs!).

Incidentally I did phone up the pension credit department yesterday morning before seeing this post, and asked for advice on this issue. The answer they gave was actually contrary to the info given here!

They said that any second property regardless of being business / residential property, empty or occupied, on the mkt for sale or not - would be strictly deemed as property captial and hence would be included (using some form of the previously mentioned assumptions) in the calculations for the weekly income coming in. In short they said they do not cater for any special cases, hence any second property would be treated uniformly across all applications.

I am guessing the pension credit queries department don't have access to the advisor's guidebook that "insured" has!

"One thing I am not sure about however, but it would be easy enough to check if you telephoned the helpline, is whether the “loss” would be deductible from their income. That is the loss from the council tax that they are forced to pay. My suspicions is that the loss would be deductible, but you really need to telephone them.[FONT=XZRNP J+ Bliss]If you want me to do this for you, post a reply on the board and I will make enquiries."
[/FONT]
Thanks very much for this offer - however, my parents had already applied for Pension Credit (via telephone application) by the time I saw this post. Whilst lots of in depth questions were asked of my parents, I am unsure if they asked for the amount of the "loss" from paying business rates on the second property. Hopefully if they assess the application as per the pension guidebook quote - then it should be ok.

My parents have been informed that the next stage following the initial phone application is for a letter of acknowledgement in 1 - 2 weeks time, followed (if not rejected already) by a home visit by a pension credit agency rep to verify paperwork and records etc.

I will update on the progress of this application - thanks again for the advice.

B42

I am a benefit adviser. The rules regarding Pension Credit like Insured have stated are quite complex and there is the 26 week disregard if you are trying to sell a property (Page 203 of the Disability Rights Handbook).

It is likely that the Pension Service will take a similiar stance to Income Support with regard to the property hence the reply you have received from the Pension Service.
The Rules according to the Disability Rights Handbook states: 13 Income generated from Capital, page 31 "Income derived from capital is generally not treated as income but added to your capital from the date it is normally due to be credited to. However, income derived from the following items of disregarded capital is treated as income - your home; premises you've acquired to live in, but have not yet been able to move in; business assets..."

I would strongly recommend you speak in depth with a trained Benefit Adviser at the Citizen Advice Bureau, Benefit advice centre or your local Age Concern as more indepth advice is needed particularly regarding the value of the property and any other assets, savings etc. You may also need to prove you are taking active steps in selling the property. It would probably be benefitial if you have an adviser contact the Pension Service on your behalf and remind them of the 26 week disregard of capital if you are trying to sell the property and perhaps fax the Pension Service proof that the property is up for sale or has been valued by an estate agent etc. These type of cases can take a long time to sort out and having an adviser to help can make the process a lot less stressful. Hope this helps.

chesky369

B42 - it's a good idea to mention the fact that you've resurrected a thread from nearly a year ago, when you've done so. Most people reading through items won't notice the date, so get a wrong idea re its topicality. (I suddenly came across my name and was rather taken aback). Also, the original poster hasn't contributed to the site since, so its probable that they will never see your advice which in itself was excellent.

cleo1299

chesky369, that's a good point about the topicality. However, for anyone who may have come across this thread because, like me, they've got a similar problem now (in Aug 2009), I would like to add that there's a downloadable guide on the Pension Service website, which specifically states the circumstances under which a second property can be ignored. This includes if you're trying to sell the property, and also if it's a property you've just bought and are planning to move into. The guide is called "PC10S - a detailed guide for advisers and others" and it can be downloaded from the Pension Service website. From the home page, click on "guides and forms", then click on "Guides for employers, providers and advisers", and then it is the second guide shown. (Roundabout way of getting there, but the spam protection quite rightly doesn't let me post links). Hope this helps someone.