Taking tax free pension sum to pay off mortgage when on LCWRA Universal Credit

jolene3110

Hello

My current mortgage rate is ending and the new rate will be astronomical, taking up practically all my benefit.  I was fortunate to have a good career in my younger fit days and have a decent amount in my pension which I haven't yet touched.  The only way I can afford to stay in my home is if I pay off my mortgage, but to do that I would have to take the 25% tax free pension allowance and that would take me over the UC limit.  As I plan to use the money to immediately pay the bank does anyone know if this would be classed as savings therefore stopping my benefits?  

I'm so worried and my anxiety is raising each day as it appears that I either lose my home or my benefits. I receive LCWRA for my conditions

I hope someone can help 

Thank you in advance
Jo

chiarieds

Hi @jolene3110 - yes, a lump sum is classed as savings, so if this together with any other savings takes you over £6k you'll need to inform UC as deductions would be made; £16k or over & UC would stop, sorry.

jolene3110

Hi
Thanks for your reply. Even if I proved to DWP that the whole amount was paid directly to the mortgage company - I thought that if money was to pay off a debt then its not deprivation of assets as I wont have any savings left when its paid?

poppy123456

chiarieds said:

Hi @jolene3110 - yes, a lump sum is classed as savings, so if this together with any other savings takes you over £6k you'll need to inform UC as deductions would be made; £16k or over & UC would stop, sorry.

That’s not correct. For UC paying off debt will never be treated as deprivation of capital as it’s in the regulations.

jolene3110 said:

Hi
Thanks for your reply. Even if I proved to DWP that the whole amount was paid directly to the mortgage company - I thought that if money was to pay off a debt then its not deprivation of assets as I wont have any savings left when its paid?

You are correct. You will need to make sure you pay off your mortgage in the same assessment period that you received the lump sum. (before the last day of your assessment period)

You will still need to report that you received the lump sum and then tell them that you paid off your mortgage. Your UC will continue as normal. 

jolene3110

Thank you so much for your time and advice Poppy. That's made me feel so much better knowing I won't lose my home

poppy123456

You’re welcome. Just to add some more information.

If you’re claiming Council Tax reduction please be aware than some local Authorities have a maximum savings limit of £6,000 before entitlement ends. Paying off debt could be seen as deprivation of capital if the debt wasn’t immediately repayable.

You will need to make sure you report the changes to them once the money goes into your bank.