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Forum Home  →  Discussion  →  Other benefit issues  →  Thread

Council Tax Support and calculation of notional income from a deferred occupational and/or private pension

Jacquie R
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Macmillan Project, Citizens Advice Cornwall

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Hi,
Does anyone know how “notional income” from a private pension is calculated for Council Tax Reduction purposes?
e.g. X is aged 68, gets State Pension and has private (or possibly occupational) pensions savings of £19K.

He has taken two lump sums from a private pension in the last three years, which I understand would be treated as capital, but to date has not taken any regular income. CPAG p. 482 “If you leave funds in your pension pot, you are treated as having notional income based on the annuity those funds could yield.”

I can’t find any reference explaining how the notional income is calculated - any pointers would be appreciated.

Gareth Morgan
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CEO, Ferret, Cardiff

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Jacquie R
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Macmillan Project, Citizens Advice Cornwall

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That could not be more helpful - even down to providing the authority. Thank you very much indeed, Gareth.

Paul_Treloar_AgeUK
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Information and advice resources - Age UK

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Hi folks,

We’ve received an enquiry about exactly the same thing - how does an unclaimed private pension pot (defined contributions scheme) affect a claim for Council Tax Support for someone aged over State Pension age?

I’ve read Gareth’s articles and I’ve checked CPAG WBH and Council Tax Handbook, as well as Shelter’s Council Tax Handbook, as well as the CTS default scheme regulations and I can’t see a single thing on this.

My assumption is that, in the same way as for PC, there would be a notional income applied to the excess pension pot over £10,000 but I can’t identify the legislative basis for this assumption - does anyone know where I might find it please?

With PC it’s slightly strange as the rules governing notional income for unclaimed pension pots are in the primary legislation, the State Pension Credit Act 2002, rather than the regulations but that doesn’t seem to work for CTS either as it’s the Local Government Finance Act 1992 that provides the basis for the default scheme regulations so drawing a bit of a blank.

Any pointers gratefully recieved.

Jon (CANY)
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Doesn’t the £10K rule only apply to capital once it is held outside the pension pot?

Our local scheme points to this. I don’t have an amended version:
https://www.legislation.gov.uk/uksi/2012/2885/made

Reg 22 has the rule about forgoing pension income.

Paul_Treloar_AgeUK
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Jon (CHDCA) - 14 March 2022 03:37 PM

Doesn’t the £10K rule only apply to capital once it is held outside the pension pot?

Our local scheme points to this. I don’t have an amended version:
https://www.legislation.gov.uk/uksi/2012/2885/made

Reg 22 has the rule about forgoing pension income.

Thanks for this Jon - so these regs also apply as well as the default scheme regs for people over SPA (I’d assumed they were only for working-age CTS schemes).

I can see that it looks like para.22 of Sch.1would be applying notional income for a person over SPA with an unclaimed pension pot but isn’t that in the context of a working-age scheme?

I might well be wrong, haven’t done a lot with CTS so any clarification would be useful.

HB Anorak
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The CTR prescribed requirements and the default scheme are two different things.

The prescribed requirements is the SI that Paul’s link points to.  This is amended and uprated every year and it contains the detailed scheme rules that all English councils must use for pensioners.  Some of the prescribed requirements apply to working age claimants as well (manner of making an application and reporting changes, also certain groups excluded from CTR) but all the content about means testing applies to pensioners only.  Therefore the notional income from untaken private pensions affects pensioners.

The default scheme (SI 2012/2886) was the one that applied from April 2013 in any area where the Council either failed or chose not to make their own scheme.  It has never been updated, it was just the year one baseline.  Many councils adopted it without modification, some used it as a design template and added their own bells and whistles, others started from scratch and wrote their own.

There is no prescribed means-testing content for working age CTR cases

Ianb
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Macmillan benefits team, Citizens Advice Bristol

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Paul_Treloar_AgeUK - 14 March 2022 02:27 PM

My assumption is that, in the same way as for PC, there would be a notional income applied to the excess pension pot over £10,000 but I can’t identify the legislative basis for this assumption - does anyone know where I might find it please?

That isn’t the way pension pots are treated for PC. A DM has to calculate the annuity income that would be available if the pension pot were converted into an annuity and that figure is then used as the notional income figure.
SPC Regs regulation 18(2)

I have never understood the calculations involved (despite Gareth’s best attempts to teach us through his posts).

[ Edited: 14 Mar 2022 at 05:00 pm by Ianb ]
Paul_Treloar_AgeUK
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HB Anorak - 14 March 2022 04:31 PM

The CTR prescribed requirements and the default scheme are two different things.

The prescribed requirements is the SI that Paul’s link points to.  This is amended and uprated every year and it contains the detailed scheme rules that all English councils must use for pensioners.  Some of the prescribed requirements apply to working age claimants as well (manner of making an application and reporting changes, also certain groups excluded from CTR) but all the content about means testing applies to pensioners only.  Therefore the notional income from untaken private pensions affects pensioners.

The default scheme (SI 2012/2886) was the one that applied from April 2013 in any area where the Council either failed or chose not to make their own scheme.  It has never been updated, it was just the year one baseline.  Many councils adopted it without modification, some used it as a design template and added their own bells and whistles, others started from scratch and wrote their own.

There is no prescribed means-testing content for working age CTR cases

Thanks for the clarification, much appreciated (and thanks to Jon for putting me on the right path in the first place).