Lump sum pension withdrawal

berry61

Hi everyone, 

I asked a week ago about withdrawal of a lump sum from my private pension pot instead of taking a weekly/monthly amount.
 I read the reply  from poppy123456 about a lump could be taken that would be considered savings.
Am I correct from the reply given that a lump sum upto £6000 would be considered as savings ?

When I have made a withdrawal in the past before we were claiming U.C  the pension company has to automatically Inform HMRC about  this amount and they take it into account regarding whether tax will be deducted from the lump sum  depending on current earnings for that tax year.

So can I assume that if I take a lump sum of £6000 and have no other savings at all in bank accounts etc then this wouldn't affect our U.C

Also are there any special circumstances that U.C allows regards the use of a lump sum pension withdrawal.....say  if I took a lump sum from my pension pot and immediately used that full amount to pay off my debt such as credit cards and i could provide the  proof the money was used for that.

Myself and my wife are in receipt of U.C as a couple over 25, receiving the carers element and Transistional protection from WTC.
We both receive the standard daily living and standard mobility of PIP.

I am currently on week 2 of  long term ssp after surgery and my wife works 16 hours per week.

Any advice would be appreciated 
Thanks

poppy123456

berry61 said:

So can I assume that if I take a lump sum of £6000 and have no other savings at all in bank accounts etc then this wouldn't affect our U.C

Yes, that's correct. 

berry61 said:

Also are there any special circumstances that U.C allows regards the use of a lump sum pension withdrawal.....say  if I took a lump sum from my pension pot and immediately used that full amount to pay off my debt such as credit cards and i could provide the  proof the money was used for that.

Capital of up to £6,000 are ignored anyway. Even if you had more than £6,000 paying off debt is also allowed when claiming UC and will not be treated as deprivation of capital. 

berry61

Thank you for your reply Poppy,  your a god send on this forum ..

So could I withdraw more than the £6000 then if i told and proved to UC that i have used it to paid debts off ?

Also how would I actually  inform UC about it, either before i was going to do it or when the mo ey has actually landed in my bank account, and how would i word it say on my journal, or would they automatically be notified via HMRC or maybe via  PAYE whilst I'm still receiving ssp.

I just want to do it correctly without getting into trouble with triggering overpayments etc 

Thanks 

woodbine

Have you considered getting an appt with "pension wise" via CAB they give excellent advice on pensions including their affect on benefits.

berry61

Hello woodbine, thanks for the reply. I did see pension wise when I had options with my pension once I was 55 but not since. I wasn't sure they would have the knowledge regards how pension would affect benefits 

woodbine

berry61 said:

Hello woodbine, thanks for the reply. I did see pension wise when I had options with my pension once I was 55 but not since. I wasn't sure they would have the knowledge regards how pension would affect benefits 

I can only go from personal experience when I say that they did.

berry61

Ok thanks for that help

poppy123456

Yes, you can withdraw more than £6,000. You will need to report it once the money goes into your bank. UC can't action something before it happens. Report a change of circumstances and then click, money, savings and investments. 

Your UC entitlement is based on your circumstances on the last day of each assessment period. If the money goes into and out of your bank before the last day of your assessment period then there will be no affect on your UC. Paying off debt is allowed so just tell them what you did with the money, if they ask, which they may if it's more than £6,000. 

berry61

That's great poppy thanks again

berry61

Poppy would a withdrawal as above affect any council tax reduction. As we are now on UC and I am get ssp we have applied for a council tax reduction to see if we are entitled to any, not had the result yet.

Thank you 

poppy123456

All local Authorities have their own rules and some have a maximum savings limit of £6,000 before entitlement to Council Tax reduction ends. You will need to check their website to see what the rules are in your LA. 

berry61

Thanks for the advice poppy I will look into that.

poppy123456

You’re welcome ☺️ 

berry61

I have just downloaded a pdf of the council tax reduction scheme from my LA website. Its very complex to understand to be honest, written in legal jargon so I will contact the help line after the Easter break and ask the relevant question.

Thanks

berry61

Hi Poppy123456,

Just to update you on the council tax reduction we applied for at our Local council. After completing and providing all the information requested we are not entitled to any discount.
They take into account my wife's 16 hours work per week, my ssp, and the amount of universal credit entitlement and we are above the earnings threshold.
They don't take into account our PIP amounts we receive.

Thanks

poppy123456

This is one thing I can't advise on because all local Authorities have their own rules for CTR. 

berry61

Thanks i understand poppy