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Claiming personal pension early and claiming UC
I met with tenants today and hoping someone will be able to help . The tenant I spoke to is receiving treatment for her end of life . Her partner wishes to claim his pension early at 55 years old so he can take her on a holiday with the lump sum which they can claim . This will be approximately £3000 . He will then receive approximately £100 payment from the private pension each month .
They claim UC as a couple. Carers allowance is claimed separately for him and ESA (support Group ) is also claimed separately for her. These benefits are deducted from UC each month .
They claim UC Carers Element , UC -LCWRA for her and UC Housing Element
The questions are
Will the £100 pcm be treated as income so 55p is deducted for every £1?
Will the lump sum be treated as income in the UC assessment period which could leave them with surplus amount being carried into the next assessment period ? They have no other capital
They also had a question about bereavement payment eligibility as they are not married but in a civil partnership . I have advised they will be eligible
If anyone can help , I would be grateful.
The regular monthly payments will be taken into account as income.
The lump sum should be treated as capital as it is a one-off payment. Note you can withdraw up to 25% of the total value of a pension pot tax free but anything over this is subject to income tax. If they need more guidance on this, I’d suggest contacting Pension Wise.
Our factsheet Pension Freedom and benefits explains more about his, see section 5.
Hi BakerK,
As far as I am aware, the income received from a private/occupational pension are not earned income (and only earned income has the UC 55% taper applied), so the pension will be taken into account pound for pound in calculating UC. Also, the level of capital you describe (and it is recognised as capital and not income because it is a lump sum payment from the pension pot-potentially tax-free as Paul identified) is less than the £6,000 disregard limit and will not affect any UC payments.
You didn’t ask but the private/occupational pension payments also do not affect Carers Allowance entitlement, which will also continue to be taken into account pound for pound in the UC assessment.
Best Regards
Chris
Also note that pensions are counted as unearned income and deducted in full £ for £ in UC - no work allowance or 55p tapering etc.
Hi
I thought it was only same sex couples who could have a civil partnership? If they are just living together as a couple then the partner will not be entitled to bereavement support payment unless he has dependent children. Hope that helps.
hetrosexual couples can choose to have a civil partnership since 2019
a couple can claim Breavement payments if the are married or in a civil partnerships.
The payments are disregarded for UC purposes
He can withdraw a lump sum but does not have take regular income. It does depend on the rules of the scheme. He may very well be better off taking irregular drawdowns of capital which, as long as he keeps below the £6k will not affect his benefit.
Thanks for all the iinformation and help , much appreciated . I was concerned that UC may take lump sum into account as income . Your advice regarding being treated is capital was helpful
i will tell them to contact Pension Wise