Forum Home  →  Discussion  →  Pension credit & other benefits for older people  →  Thread

Maintenance payments from occupational pension by court order - are they disregarded?

 

 

Paul_Treloar_AgeUK
forum member

Information and Advice Resources, Age UK

Send message

Total Posts: 687

Joined: 7 January 2016

Can’t see the wood for the trees with this query. Client has court order requiring payment of £60 a week from a personal pension to his former spouse. Pension Service has raised overpayment against him as they say this is a “gift” and cannot be ignored when calculating his income.

CPAG 2016/17 page 310 states “If you pay maintenance to a former partner, your payments are not disregarded for the purpose of calculating your income for PC or HB” and references a decision CIS 683 1993. Have checked that decision and it is pretty unequivocal. Also looking at sec.15(1)(c) and sec.16 State Pension Credit Act 2002, these do allow for “income” from occupational/private pensions to be taken fully into account.

However,. I’ve also come across this post in respect of child maintenance payments where HB Anorak cites R(IS)4/01 which does allow payments to be disregarded if they are made under an attachement of earnings order. Commissioner Angus, in that case, accepts the argument of a certain Mr Poynter that:

“CIS/683/1993 was not in point.  There the maintenance payments were being made by the claimant out of income paid to him.  Had there been in that case an attachment of earnings order under which the payments bypassed the claimant that decision would have been wrong. “

In the case we’re dealing with, the payments are made directly to the former partner, and reading on through R(IS)4/01, Commissioner Angus finds that even with a new clause in the relevent regulation about third party payments, because the claimant never actually has the money in his hands, it cannot be held that the payment is made “in respect of the claimant” as required by the new paragraph. The pension provider in our case say they cannot divert the payments back to client without another court order.

Regulation 24 of the State Pension Credit Regs 2002 deals with similar (but not the same) provisions as the IS regs insofar as third party payments are concerned - they do require “any payment of income to a third party in respect of the claimant” to be included but they don’t include any reference to occupational/private pensions.

I’ve looked through the DMG and there’s nothing dealing with this situation that I can see. Any thoughts as to who is correct here? Is the CPAG Handbook right or wrong? All help gratefully received.

      [ Edited: 10 Jan 2017 at 10:52 am by Paul_Treloar_AgeUK ]
Paul_Treloar_AgeUK
forum member

Information and Advice Resources, Age UK

Send message

Total Posts: 687

Joined: 7 January 2016

Just to add, I have now found the guidance Chapter 85 - Income other than earnings  from para 85500 onwards and this certainly takes the view that the third party payments in question would be taken into account.

     
HB Anorak
forum member

benefits consultant/trainer, hbanorak.co.uk, east london

Send message

Total Posts: 1083

Joined: 12 March 2013

CH/1672/2007 suggests that CIS/683/1993 might well have proceeded on an incorrect concession: it was common ground in CIS/683/1993 that the pension paid from A (the pension provider) to B (the IS claimant) was as a matter of law B’s income and argument in that case was concerned with whether there was any way in which the payments of maintenance to C (the ex spouse) could be disregarded from that income (there wasn’t).  But was the claimant correct to concede that the income was his in the first place?  From para 54 of CH/1672/2007:

I also note that the only authority cited to me that directly involved argument that a payment from B to C could reduce the weekly income of B in an analogous situation and in which the point was argued was found to be one where the income of B in the ordinary sense was net of the sum required to be paid to C (CIS 22 1993).
I agree with Miss Robertson that CIS 683 1993 does not consider the correctness of the concession made during the case in the opposite direction. Most of the authority [Morrell, Leeves] is concentrated on another issue, namely whether payments made by A to B that B then has, or may have, to pay back to A are B’s income.

The background to CH/1672/2007 was that the couple had opted for the unusual mechanism of judicial separation as opposed to divorce.  One consequence of this was that the court did not have available to it the remedy of a pension splitting order in which part of the pension becomes the legal property of the ex spouse and is deducted at source by A, the pension provider.  It is settled law that the deducted amount under a splitting order is not part of B’s income at all, so disregarding it doesn’t arise (this was the issue that CIS/683/1993 didn’t consider).  The best the court could do for C in 1672/2007 was order B to pay part of his pension regularly by direct debit with automatic adjustment each time his pension was uprated.  The Commissioner decides that the amount paid to C is not part of B’s income.

Does this reasoning extend to other more conventional cases that do not involve judicial separation but also do not involve a pension splitting order?  If a claimant has been ordered by a court to pay from his/her earnings, pension or whatever a sum of maintenance, and duly does so, can s/he rely on CH/1672/2007 to say it simply isn’t part of his/her income in the first place?  It seems to me s/he can indeed.

On the payments to/by third parties obo claimants/third parties, the way I interpret those provisions is as follows:

- a payment to the claimant obo a third party is directed at cases where the claimant acts as a kind of trustee.  The classic case would be dealing with someone else’s DLA claim and managing the payments on their behalf.  Many carers by agreement with the DLA claimant keep some or all of the DLA as a kind of thank-you for the care and if they keep the money for themselves it then becomes their notional income to the extent that they use it on the things means tested benefits are supposed to be for

- the reverse of this is a payment to a third party obo the claimant.  The classic here would be maintenance payments by your ex direct to the landlord or mortgage account.  Again these count as notional income if used to pay for the expenses that the claimant is claiming benefits towards in the first place

I don’t think either of these provisions is relevant in a case where the claimant has been ordered to pay maintenance.  The originator of the payment (A in the case law discussed above) is not making the payment on behalf of C: C’s right to maintenance has got nothing to do with A.  A payment “on behalf of” another person to me means the intention of originator is that the payment should benefit C.  So in the case of maintenance that leaves us with two extreme options and no middle ground: either it’s not B’s income at all as per CH/1672/2007 or it is B’s income in full with no disregard, as per CIS/683/1993.  I prefer 1672/2007.

      [ Edited: 10 Jan 2017 at 11:29 am by HB Anorak ]
Paul_Treloar_AgeUK
forum member

Information and Advice Resources, Age UK

Send message

Total Posts: 687

Joined: 7 January 2016

So at the very least arguable then? It feels to me like this “income” should be disregarded as he doesn’t ever have sight of it, and on the facts as presented, has no choice or control over the court order or the terms under which it was made.

Thanks again for your help on this, I’ll try to communicate this as best that I can and see where it goes.

     
Ross ORourke
forum member

Welfare rights, Financial inclusion, North Lanarkshire Council -Lanarkshire

Send message

Total Posts: 16

Joined: 14 July 2016

I think there’s an argument that the Pension service cant have their cake and eat it.

Is the partner receiving the payments claiming PC? or if they were to, then would the money received from your client be deemed as income?

     
Paul_Treloar_AgeUK
forum member

Information and Advice Resources, Age UK

Send message

Total Posts: 687

Joined: 7 January 2016

Ross ORourke - 10 January 2017 05:48 PM

I think there’s an argument that the Pension service cant have their cake and eat it.

Is the partner receiving the payments claiming PC? or if they were to, then would the money received from your client be deemed as income?

That’s actually rather a moot point at the moment Ross, as there seems to be some confusion as to whether the ex is receiving payments - there seems to be some indication that she doesn’t, so there are further questions we’ve pushed back to the adviser to seek answers to from the client.

But if we can resolve these, then yes I would agree with your latter point. You couldn’t have a situation whereby both PC-recipients were having the same income taken from both of their entitlements.