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Pension pot as capital
Client has a pension pot of £41,000 and has set up an income draw down arrangement of £350 p.m (and not bought an annuity) . She was advised by LCA that she could apply for HB i.e. that capital does not count for MTB
Advisernet seems to say the pension pot is treated as notional capital . This would therefore appear to rule her out from getting HB however CPAG P. 479 refers to ‘notional income’ and not capital in its section on Occupational and personal pension options so unsure what to advise
See section 6 of our factsheet Pension freedom and benefit
Although we concentrate on PC in this section, I think the rules for HB are the same essentially.
For PC, any income, such as annuity or income drawdown, that you receive that is not disregarded is taken into account. Your entitlement to PC is reduced by an amount equivalent to income you have coming in. This includes deemed or notional income as described before.
So I think it should be treated as regular income for HB.
Client has a pension pot of £41,000 and has set up an income draw down arrangement of £350 p.m (and not bought an annuity) . She was advised by LCA that she could apply for HB i.e. that capital does not count for MTB
Advisernet seems to say the pension pot is treated as notional capital . This would therefore appear to rule her out from getting HB however CPAG P. 479 refers to ‘notional income’ and not capital in its section on Occupational and personal pension options so unsure what to advise
2 separate issues really.
The income is income, as it’s regular. If it was drawdown taken irregularly then it would be capital, with the usual disregards.
The untaken pension. if the claimant is over SPA, is assessed as notional income using the GAD table rules; 15 year Gilt rates, age etc determining the amount and being revalued after every withdrawal. If under SPA it’s disregarded.
Are you sure Gareth? The guidance that I’ve seen states:
17. Where the pension pot is held by the provider and notional income is assumed, but the claimant also draws down income from their pension pot, then you should decide how much income is to be taken into account. If the actual income received by the claimant is less than the notional income amount, then the higher (ie. the notional) figure should be taken into account, and vice versa.
18. For the purposes of notional income, the claimant’s pension pot should be revalued after:
• every drawdown of capital;
• every drawdown of income which exceeds the notional income amount; or
• upon the claimant’s request.
Housing Benefit Circular A7/2015
That implies to me that it’s actually the higher of the actual income drawdown and the notional income drawdown from the remaining pension pot that should be taken into account.
More from Gareth on how to work out the GAD tables here.
That implies to me that it’s actually the higher of the actual income drawdown and the notional income drawdown from the remaining pension pot that should be taken into account.
No implled, that’s exactly it; sorry, I should have added that.
That’s why when you look at better-off calculations charts from pensions income, you see a higher / steeper real gain at the beginning and then the slope levels off. Until you reach the point at which the income taken is higher than the notional figure, every extra pound is a gain because the whole of the GAD income has already been included in the calculation, so once you pass that amount, the extra is taken into account, reducing the net gain per pound.