Client receives Pension Credit. She is looking to effect an equity release re her property to pay off her son's debts (payment would be direct to Building Soc and other creditors).
Would she have to disclose this to Pension Service/DWP?
Further if she releases a little extra for her would she have to disclose this if it was below £3000.?
Any help much appreciated, Thank you.

During any "Assessed Income Period" (AIP), changes in "retirement provision" (capital/investments, annuities, and private and occupational pensions) do not have to be reported.

Should someone experience an increase in capital during their AIP, but doesn't report it, as their Pension Credit is only reassessed from the end of their AIP, it would only have an effect if they still have the capital at that time.

However, there could be possible deprivation/notional capital issues (see earlier discussion thread:
Pensions Credit

In addition, isn't there also an issue of your client getting independent financial advice and her son getting debt advice, before taking the releasing equity step?

Thank you very much. Client has received financial advice...and this step appears to have been recommended.

Colleauges,

Because of the wording of s15(1)(d)of the SPC Act, it looks like income that is gradually released from equity release schemes should only be counted as income if it is actually annuity based. There is scope here for skillful financial advisers to assist claimants, if a better off scenario arises (comparing losses because of non annuity release arrangements to gains from PC awards).

Presumably capital that is gradually paid as part of a “phased” equity release scheme, should be treated as capital in the normal way.

I think we're all agreed that equity release as described is capital. The claimant would then be depriving herself of that capital (and its resultant tariff income) by giving it to her son to clear his debts. But, reg 18(6) says that notional income applies only if this was done with a view to getting or increasing PC. This is clearly not the situation here; capitalising equity and passing it on will have been done with the sole purpose of helping the son. Clt is already getting PC and this will not increase, so there's absolutely no purposive link.

Jim

If there is a deprivation of income I think that there may be problems with notional income.

The annotations to reg 18(6) state that the reg is expressed in the same way as that in the IS regs so the same principles apply. So that availing yourself of, or increasing entitlement to, benefit only has to be "a" significant operative purpose and not "the sole" operative purpose.

Therefore, the IS case law would be relevant to any dispute.

I'm not sure if a PC claimant's position who uses capital to "help out" a close relative, is always automatically straightforward.

If someone's capital does significantly reduce during an Assessed Income Period (AIP), then they may become entitled to increased PC on its expiry.

PC Reg 51(1) on notional capital is similar to IS Reg 51(1) on the same issue.

Both refer to deprivation purpose of securing or increasing entitlement to PC/IS.

However IS case law on notional capital holds that "purpose" does not only mean "sole" purpose, but can include "significant operative purpose", which is not exactly the same thing.

In addition, unlike the IS Regs, Reg 21(2)(a) of the PC Regs states:

"(2) Without prejudice to the generality of paragraph (1) a person who disposes of a capital resource shall be regarded as-
(a)depriving himself of it if the disposal was by way of gift to a third party"

May factors such as how close someone was to the end of their AIP, or whether any money given to a close relative is accepted to be a loan and not a gift,influence whether PC notional capital decisions are made in the future?

Nevip, Ken - I really can't see what's worrying you about this aspect of the case. Yes, it will be deprivation - no argument. The clt will have briefly come into capital which would (no doubt) have affected her PC assessment in due course, but she would then have disposed of it to her son, pretty quickly I assume. But, to fall foul of the regs, PC will have had to be obtained or increased (or, perhaps, maintained) as a significant operative purpose of her action, as you say. I think the clt's action would reveal no operative purpose at all of this kind, let alone a significant one.

In short, how could anyone say that she released her home's equity to help her son, but also, significantly, to safeguard her already existing PC entitlement?

Jim

Age Concern have a range of factsheets that cover issues relating to income (including benefits), financial matters, housing, community care etc for older people.
This link is to "Raising income or capital from your home" - which discusses equity release -
http://www.ageconcern.org.uk/AgeConcern/media/FS12Final.pdf

The list of the factsheets is at http://www.ageconcern.org.uk/AgeConcern/information_127.htm

The updated 2004 versions should be available from after Easter

Alban Hawksworth

Thank you very much for all replies. Client is coming in again at the beginning of May for further advice.

Hi
The updated version of our adviser's information sheet on "Equity release and income-related benefits" has just been posted to the Age Concern website

it includes
- brief explanation of different sorts of equity release scheme, producing lump sums or income and whether annuity-based
- possible effects of receiving (and spending) a lump sum on PC, depending on assessed income period
- effects of income on PC, HB and CTB

it's available at http://www.ageconcern.org.uk/AgeConcern/information_1538.htm

Alban