Pension lump sums and Universal Credit

[NoEffingWay]

DH is currently very unwell and unable to work. He claims universal credit. He has today been told that he will receive his ill health pension which is great news and a relief.

He will receive a pension lump sum-I'm unsure how much but it's likely to be circa 20K. We would use this money to clear all debts and buy a car-does anyone know if this will mean he is no longer eligible for UC? His monthly pension payment will be fairly small and certainly not enough to live off.

AFAIK there are no rules in UC about disposing of capital so basically as soon as the lump sum arrives clear your debts and pay for the car

Not an expert - I believe you have to tell them about it but the reason that you are using the money ie to repay debt is allowed.

It could be that the week the money hits your account, any means-tested benefits will not be paid as you're over the threshold, but once your money is spent and again under the threshold they will start again.

Have a list of it all so they can see what you spent it on and it's all debt.

You need to declare the money as soon as it arrives, even if you plan to spend it. If you spend it quickly it could be seen as deprivation of capital. Keep a record of what you spend it on as UC will want to know.

I believe that he will lose eligibility for UC for that assessment period or periods where you have above £16k. Once his savings go below £16k then he will be eligible the following assessment period. But if savings are above £6k then there will still be a reduction.

Reducing debt or making contributions towards improving their quality of life (such as purchasing a car or refurbishing a kitchen) would not count as deprivation of capital. Neither would paying for any medical expenses or adapting the house in any way.

I'm sure you're aware of this but your DH will have to pay income tax on some of that pension lump sum.

The first 25% of any pension lump sum is tax free but then the rest is treated as though it was income (for tax purposes - not UC). This should be deducted before he receives the money.

However, this may mean that too much tax has been taken if your DH is currently only in receipt of UC. At the end of the tax year he will be able to claim a refund of the over paid income tax.

https://www.gov.uk/claim-tax-refund

Thank you all, the deprivation of capital is a concern-it's not like we are swimming in cash and there are a lot of expenses associated with being ill.

He's going to be getting an NHS pension, and the lump sum I think is tax-free.

Some of his benefits are non means tested, but I receive the carers element of UC and he receives LCWRA due to ill health. We are so bloody grateful for the help the government has given us, it has meant we could survive as he did not receive sick pay beyond SSP.

If we are not eligible, it is more than fair. The benefits system is not perfect but I will say that the DWP worked quickly and saved our bacon in a time of need.

"He's going to be getting an NHS pension, and the lump sum I think is tax-free."

OK, that makes sense. He's taking the 25% tax free and then using the rest to provide a pension

Please don’t give advice unless you’re legally qualified In the field that someone’s asking about….and they shouldn’t be asking on message boards either!