How UC deal with a Lump sum pension payment into my bank account.

whatif

If I receive a pension lump sum payment into my bank account that has had tax deducted at source. How will those funds be categorised as by DWP in relationships to my UC monthly award. Will the funds be categorised as Capital or Earned income. Should my Universal Credit award during the period that the deposits were made into the bank account be reduced. 

durhamjaide2001

hi and welcome to the community

poppy123456

A pension lump sum withdrawal is treated as capital, not income. If the amount brings your total capital to more than £6,000 your UC will be reduced by £4.35/month for every £250 or part thereof over that amount. More than £16,000 and UC would end.

You must report with withdrawal even if your capital is under £6,000 because it’s from a pension.

If you have a weekly/monthly income from a pension it will reduce UC £1 for £1.

whatif

Hi poppy123456

Thank you for your very prompt Response to my post and the information their in.

The full explanation for me posting on scope is as follows. 

I contacted my pension provider from an earlier employer and redeemed my pension from them on I’ll-health grounds (I am 49). The 1st 25% of the amount that I received as the pension redemption was tax free the rest of the sum had taxed deducted at 20%. The resulting funds made up of the tax free and after-tax sum (£2434) came to approximately £3449. The £3449 was deposited into my bank account in December. 

I forgot to declare the deposit was from a lump sum pension redemption, via my journal and it was only when I received my January UC award of a reduced amount (approximately £60 compared to the normal amount of £1100) that I contacted Uc via my journal.

 I was advised the the reduced award was correct as the taxed part of the deposit was income. The information DWP received was via RTI (real time information from HMRC).

Treating the taxed sum as income they subtracted a (work allowance of £404). UC then applied the tapper rule of 55% To it and then deducted the resulting amount from my UC award paid in the December to January period, resulting in the UC award of approximately £60.

I questioned why the deposit had been categorised as earned income and not capital via journal enters and while I was waiting for a response via the Journal, I called the UC Service Center on the 0800 number provided on UC site.

The information I received was in direct contradiction between the two. The service Center advised the deposited amount should have been categorised as capital being a one-off lump sum from pension redemptions and not affect my UC award, where as the DWP journal reply said it had been correctly categorised as earned income and delt with accordingly and that had resulted in my UC award being reduced. 

When I questioned via the journal why the difference in opinions the journal response suggested the service Center was outsourced from DWP and they were wrong and had advised me incorrectly.

The last reply in my journal was the the issue had been referred to RTI despite decision maker. 

I am now in limbo now you are aware of the full story dose this change your advice or opinion how the lump sum should have been categorised?

whatif

Hi durhamjaide2001

Thank you for your welcome message

poppy123456

No, that doesn't change my advice. It should not have been treated as earned income, it's capital because it was a lump sum. The person you spoke to at the call centre was correct. (unusual)

The person that left the message on your journal from the service centre is incorrect. (not unusual) They often give incorrect information.

The RTI dispute being raised is correct. Hopefully it will be sorted out soon.

whatif

Hi poppy123456

Thank you once again for your very prompt response. 

The last reply in my journal was the the issue had been passed to RTI decision maker. 

The reply from the coach went on to say she would not enter into any further discussions on the dispute as it had been referred. I summarised the information you so kindly replied to me with and posted that as a journal enters to my coach and asked if the decision maker could be made aware of all the. Thank you once again for your guidance and help. I will post when I receive any further information.