Pension drawdown affecting universal credit

pabertrand

I didn’t realise receiving a monthly pension payment would be held back in its entirety by universal credit, but they’re deducting £75 per month and I only get £60 per month. Any ideas?

Albus_Scope

Hi @pabertrand and welcome to the community. I hope you're doing ok today?

I'm afraid I don't have an answer to your conundrum, but hopefully one of our regulars will be along soon with some top advice. I just wanted to stop in and say hi.

poppy123456

Yes, unfortunately it reduces your UC £1 for £1. It’s the same for all means tested benefits. 

For UC because it’s a monthly benefit and your pension is a weekly amount, they need to work out what the monthly amount will be.

To do that you times the weekly amount by 52 and then divide that by 12 and it will give the monthly amount.

How much is your weekly amount? 

pabertrand

No, it’s a monthly payment and it’s £60. I’m thinking they’re using a gross amount reported by HMRC before they deduct tax, so I think I’m giving £15 tax at source and then I’m paying the equivalent amount of tax again, Back to universal credit. Surely that’s not right?

poppy123456

A pension drawn down should be a weekly amount, not a monthly amount, although you're paid monthly. and UC will need to convert it to a monthly amount. 

It will have nothing to do with tax. What exactly does it say on your statements for the deductions for the pension?

pabertrand

The monthly statement says £75.81 gross; £15 tax deducted and £60.81 net. The statements are definitely monthly. This is a pension with West Midlands Pension Scheme and I’m\ taking it 5 years early. UC are deducting exactly £75.81, which is the pre-tax figure.

Adrian_Scope

Hi @pabertrand and a warm welcome to the community.
Unfortunately pensions are not my area of expertise but I've done a little digging and it seems, anecdotally at least, that Universal Credit use the pre-tax figure when calculating deductions for pensions. The UC decision maker guide states the following which would seem to support that: 
"All retirement pension income should be taken fully into account for UC; there are no comparable deductions for Income Tax and NI in UC."

Again, I'm not an expert when it comes to pensions but perhaps it's because in some cases it's possible to claim the tax back next year?

It would be worth clarifying it with UC so you can at least get an official decision on it. Alternatively you may be able to speak to a benefits expert who could look at your options, as it doesn't sound as though your situation is ideal. You can find services local to you on the AdviceLocal website.