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How to treat funds left in an occupational or personal pension
I have a client who forgot he had a personal pension and had moved house several times so he has only now found out that he has a pension pot of c£15000.00. He is now 72.
He has been claiming Housing Benefit and CTR for about 3 years. I note in CPAG p 331 “that you are treated as having notional income based on the annuity that those funds could yield” if you leave funds in a pension past the normal retirement date. Does anyone know how that yield is calculated? Is it the normal tariff income or is a client required to get an illustration of the potential yield that the company would provide (or are they required to check with the entire market what the best provider would give as an annuity)?
He actually wants to draw down the entire amount in his pension pot in one go - he understands that this will have tax implications but he says that he wants as much money as possible as he wishes to repay a debt to a relative.
I would be grateful for any comments and advise that you can give.
I am thinking that he may have had an overpayment of Housing benefit/CTR for the past 3 years but have no idea how they would calculate it.
The Council will ask the pension provider to supply an income figure based on the amount that he would have obtained if he had drawn the pension as soon as he claimed HB. There might be an overpayment (depending whether income already exceeds the HB applicable amount), although the weekly income from a £15,000 pot for a notional 69 year old will probably not be very much - rough guess £20 a week (maybe one for Gareth Morgan - I think he might have some more sophisticated calculation methods at his disposal). Probably looking at an HB/CTR overpayment in the £1,000-£2,000 range max - assuming income was already over the applicable amount.
although the weekly income from a £15,000 pot for a notional 69 year old will probably not be very much - rough guess £20 a week (.
OP said £150K, not £15K…...
reads 15 grand to me claire?
It’s based on the Government Actuaries Department (GAD) tables for notional annuities and the 15 year Gilt returns (found in the Financial Times, every WRO should subscribe).
On today’s Gilt rates the 15 year figure is 1.74%, so that’s rounded down to 1.5%.
A 72 year old man is expected to get £64 per £1000 of savings per year, so that gives £960 a year or £18.46 a week;
BUT,
When he was 71, the figure would have been £62 at 1.5% - but it wouldn’t necessarily have been 1.5%. At 70, it would have been £59 etc. etc.
This is going to be a fun over-payment to calculate (if there is one). We have a calculator which does all these sums if the LA would like to subscribe. 😊
As for the tax on taking it all as a lump sum, it will depend on what other pension savings he has and what other taxable income. He may still have a 25% tax free element and if he splits it, taking some before April and some later he can shift the liability across 2 tax years which might mean he has nothing to pay.
I am rather impressed by my £20 guess!
I forgot to say that the £15,000 figure would also have been different historically as it’s the result of some investment process.
reads 15 grand to me claire?
stupid zeros…...do i need to go to specsavers?
stupid zeros
Don’t worry Claire, it’s nothing really.
stupid zeros
Don’t worry Claire, it’s nothing really.
lol.