Hi, my name is dollsy! Cashing in lump sum on UC

dollsy
dollsy Community Member Posts: 3 Listener
edited May 9 in Universal Credit (UC)

Cashing in lump sum and monthly pension whilst on UC

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  • dollsy
    dollsy Community Member Posts: 3 Listener

    Hi im currently on UC i was let go by my employer of 19 years due to ill health approx 3 years ago, i have a gmpf pension, im under pension retirement age but im 56 so am eligable to cash my lump sum in of 11000 and a monthly payment if 180, i have debts, 1 of which is 4180 to my daughter who paid for my council property to be decorated and replace items of furniture she paid on her credit cards and kept spreadsheets and details of all purchases, ive been paying her back monthly but she wants to put a deposit down for a house so asked would i consider cashing in my lump sum etc im well aware i will have a reduction in benefits which is rightly so. Im just not very clued up as to the whys and wherefores of making this decision and what the implications will be as this period of my life is the only time ive been in a position where im unable to work and im not very as my mother used to say "good with money" or understanding how pensions etc and UC work and i want to be upfront with UC if i have to make this decision, some advise would be welcome, thank you.

  • OverlyAnxious
    OverlyAnxious Community Member Posts: 5,969 Championing

    Hi,

    A lump sum from a pension will count as capital (savings).

    For every £250 you have in savings above £6000, there is a deduction of £4.35 from your monthly UC payment.

    You should declare the amount of savings you have on the last day of your UC Assessment Period. (These dates are shown on the statement if you don't already know them).

    There is a maximum of £16,000, at which point your UC claim would end. So make sure you never go over that number.

    Ideally you would take your lump sum and pay off your debt during one AP. That way your savings will be lower by the time you declare them on the final day of the AP. You will most likely be asked to send bank statements and proof of the debt repayment, but it sounds like daughter is already keeping good records for that.

    The ongoing pension payment is treated differently to the lump sum. That gets counted as income instead. That will generally create a deduction from UC of £1 per £1, so you will not be any better off by getting a regular pension payment while still on UC. If you have the option not to take the regular payment while still on UC, that would be worth considering.

  • 66Mustang
    66Mustang Community Member Posts: 15,430 Championing
    edited May 9

    Some pension lump sums are counted as income for HMRC, I don't know if DWP does the same

    Some trustees give the option, and it can be advantageous to do so, to take income once a year instead of every month … so you'd lose your benefits for one month and then your income for the other 11 months can be legitimately declared as zero. You often have to ask for this, they don't always ask you if you want it

  • dollsy
    dollsy Community Member Posts: 3 Listener

    Thank you for your comments, really appreciate them, i will try and talk to the gmpf so far they have not been that clear in explaining my options, but thank you again your comments have been really helpfull.

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