Will benefits be cancelled?

[pompomtrims]

My parents both receive benefits. They are very vague about which benefits they receive but both are unwell and they have custody of a their grandchild (my nephew who is 5) so claim some sort of sickness benefits plus child related benefits.

Since the rules changed on pensions they have been taking an annual lump sum out of a pension and spending it on Clothes/holidays/cars etc. The money usually lasts around a month. This year they took a larger lump sum and purchased their council house. House was paid for in cash and they have none of the money left.

They’ve had a letter saying that all their benefits have been stopped due to them having undeclared income/over the threshold. They’ve rang dwp and told them they don’t have any money left as they purchased the house and were told to send evidence of this to get benefits reinstated and back pay.

Does anyone know what the rules are on this? It just doesn’t seem right that they withdraw tens of thousands each year yet claim zero income but they are adamant that it doesn’t count as it’s been spent on the house.

The benefits have been stopped a few times in the past for previous lump sums (which were spent on luxuries) and they did get reinstated which I wasn’t expecting.

They are both really confident the money Stopped will get repaid and haven’t considered that they have zero income now and no savings.

These are your parents yes? And they care for your neice?
Have a word with yourself

Its perfectly legal to wipe out your pension to pay for things for now

@thequeef wtf has your comments got to do with this situation? It's the ops nephew too so learn to read before making stupid comments.

It's their pension they are using. Are you concerned they have no money or that they get benefits?

Erm TheQueef - jumping to conclusions much?

Apologies I meant nephew.
Stand by the rest of the comment.

Genuinely don’t understand the first poster’s reply. It seems overly aggressive.

I’m even more confused by replies.

Yes they have residency of nephew.

I know it’s legal to withdraw from pension but I was unsure how legal it is to not declare this as assumed it would be income? I’m worrying how they will cope if benefits aren’t reinstated As they are unprepared for this but know nothing about dwp.

They are always vague and say it’s only if you have over a certain amount in the bank and they don’t as they spend it quickly.

So many threads pretending to ask a question but really it’s ‘I want to slag off my family.’

CAB may be able to help.

www.citizensadvice.org.uk/debt-and-money/pensions/nearing-retirement/what-you-can-do-with-your-pension-pot/ this suggests what they have done can affect their benefits

That wasn't aggressive. I checked the topic first.
Your parents are spending their own pension on clothes cars holiday and nephew oh and their house.
You don't know what benefit they get but you think this is wrong.
Aye ok.

OP is worried they have buried their heads in the sand and dont realise that what they have done may mean their benefits will stop and they'll have no money to live on

Hi PopPoms

See this link: www.pensionwise.gov.uk/en/benefits

Sorry if it's not clicky. Pensionwise is the Government's advice line for DC benefits so your parents could give them a call. The treatment of funds taken depends on whether they are past SPA and on the actual benefits they are claiming

Thanks I’ve spoke to them about cab but they don’t think they need to.

I remember their pension advisor had put something in an email a long time ago about lump sums and benefits but they said it wouldn’t affect them because they were withdrawing it all.

I don’t know what they will do if benefits stop and their confidence they won’t is making me more worried,

Different benefits have different rules, but basically DWP will be looking to see if your parents have deliberately withdrawn the pension and spent it in order to get around the rules regarding savings etc. It's known as deprivation of capital.

I am hoping that buying the house isn’t seen as deprivation of capital as they don’t own other property and they were getting rent paid so it will save Dwp money in housing benefit.

I have helped them in the past when they’ve got into trouble with money but can’t afford to now, I’ve offered to help with meals but they’ve said it’ll all be sorted soon

Is it universal credit? There's a Facebook group that might be able to offer help there but I've read cases of people having benefits stopped for not declaring significant amounts of extra money and spunking to avoid it being calculated into benefits.

Someone sold a car and had £10,000 which they spent over two days on shite and were then angry the money had stopped but people were saying it's deprevation if assests, and they should have declared it because they may not have deducted that much anyway.

It depends on circumstances but they may be asked to show evidence if what they've spent the previous large chunks on.

I'd post in the universal credit survival group as the admin there will be able to give you more specific advice.

As long as they've got documents relating to the purchase I think they'll be OK on that front OP.

A lump sum of £6000 or over would mean a reduction in income based benefits, and over £16000 would stop them completely (I am assuming they are under pension age?).

Buying their home seems an odd move if they were receiving housing benefit and will now become liable for the maintenance of their home.

They have the documents and genuinely have bought the house. There is definitely tens of thousands been ‘spunked’ but that is in previous years and the letter is about the recent pension withdrawal

I don’t think they are on Universal credit yet as I know they get tax credits and I’ve read that universal replaces tax credits. They are both on disability type payments which I think are means tested as they got told before that if they have a certain amount money stops. They won’t be state pension age for a few years

Have a look here- tax credits will class the taxable part of the lump sum as income even if it’s been spent - 25% of a lump sum is tax free but if they’ve bought a house then I’d imagine that the taxable part is way over tax credit income thresholds.

Childbenefit would also be reduced if the amount is over 50000 and stopped if 60000
In addition they need to register for self assessment to pay money back that’s been over paid

I don’t know if Esa would class the lump sum as capital, so not entitled to benefit if over 16000 and a tapered amount between 16000 and 6000 but It depends if the decision maker sees the house purchase as essential

If they get dla or pip then this wouldn’t be effected as it’s not means tested.

If they claim council tax benefit I guess this will also be stopped.

Forgot link
www.litrg.org.uk/tax-guides/pensioners/what-tax-position-when-i-take-money-my-pension-flexibly

Equity in the home you live in is not counted for means-tested benefits. So I doubt they will be penalised for buying their home.

However, all the other purchases could be classed as "deprivation of assets", it's a complicated area but the main point is that they should be declaring all income and savings.

I think they know full well what they're doing which is why they're vague about it.

It's none of your business though.