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Pension pot as capital

Pete at CAB
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I think I have over-thought this one so I would be glad if someone could clarify.

Cl is getting a state pension and HB but has over £100k in a pension pot which they can , and do, draw on from time to time.

The amount they can draw down is limited to about 8% of the total per year.

For Housing Benefit Is the;

i) Entire value of the pension pot treated as capital.

ii)  The maximum draw down at 8% pa treated as notional capital ( even if they don’t draw it down).

iii) Is the drawdown treated as notional income at 8% pa.

iv) Just the actual amount they draw down treated as either income or capital

Sorry if this is obvious,  I think I have got buried in the details and missed something simple.

Paul_Treloar_AgeUK
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That’s a very good question Pete and not one that’s easy to answer - CPAG is virtually silent from what I can see on notional income for HB in this situation and we don’t cover it in our pension freedom factsheet.

You could try and work through Occupational/personal pensions: money purchase benefits and annuities from P2.684 onwards https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/236963/hbgm-bp2-assessment-of-income.pdf

Stuart
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HB Circular A7/2015 has some helpful guidance on what should happen for HB under the notional income rules in regulation 41 of the HB SPC Regs. Includes guidance on when funds are left in a pension pot this leads to a notional income calculation based on what an annuity purchased with the funds could yield - if income draw downs also occur the two amounts are compared and the higher figure is used as income. Also looks at effect of capital withdrawals on the calculations of notional income.

I suppose the key question left is the nature of your client’s draw downs - whether regularity or other aspect of them make them income or capital?

Pete at CAB
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Childrens Centre Adviser, CAB, Camborne

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Thanks both, I feel slightly less bothered that I didn’t understand it!

Paul_Treloar_AgeUK
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Stuart - 09 August 2019 02:05 PM

HB Circular A7/2015 has some helpful guidance on what should happen for HB under the notional income rules in regulation 41 of the HB SPC Regs. Includes guidance on when funds are left in a pension pot this leads to a notional income calculation based on what an annuity purchased with the funds could yield - if income draw downs also occur the two amounts are compared and the higher figure is used as income. Also looks at effect of capital withdrawals on the calculations of notional income.

I suppose the key question left is the nature of your client’s draw downs - whether regularity or other aspect of them make them income or capital?

Nice one Stuart, hadn’t seen that one, thanks.

Gareth Morgan
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I’ve scribbled quite a lot about this in my blog at http://www.benefitsinthefuture.com and you might find the demo (last years) version of the notional income from pensions reckoner at http://www.ferret.co.uk/reckoners/demo/not_inc/notional helpful.