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Benefits and Pension
Please I have a client who is 55 and has requested 25% of his pension. He is currently on ESA and PIP. He will get between 30 to 40k.The reason why he requested the lump sum is because he wish to give the money to his daughter as a gift towards deposits for the property. He wish to know if this will criminalise him and would his benefits be stopped.
it would very likely be depravation of capital once he gave the capital away.
While the £ is im n the pension pot, it is disregarded. If he chooses to release some of that money, it becomes capital and remains as capital while he has it.
But giving it away would very likely be classed as deprivation of capital, and he would be treated as still having ithe amount he had deprived himself of.
For it to be treated as deprivation of capital a motivating consideration for giving away has to be a intention to increase benefit entitlement. I would argue that in this case that cannot apply as the claimant was under no obligation to request the pension lump sum, if they wanted to maximise benefit they would simply leave the pension fund intact. The motivation for taking it out in this case is clearly in order to pass it on and therefore it should not be treated as deprivation of capital
[ Edited: 25 Sep 2020 at 10:53 am by Ianb ]The motivation for taking it out in this case is clearly in order to pass it on and therefore it should not be treated as deprivation of capital
Afraid not, I would expect it to belikely to be deprivation. He’s clearly aware that it can affect his benefits. Once he got it, his benefits would be reduced and once he disposed of it, they would increase again.
The motivation for taking it out in this case is clearly in order to pass it on and therefore it should not be treated as deprivation of capital
Afraid not, I would expect it to belikely to be deprivation. He’s clearly aware that it can affect his benefits. Once he got it, his benefits would be reduced and once he disposed of it, they would increase again.
It’s for a Decision Maker to decide. I cannot see how accessing money which is currently disregarded in order to give it away can be seen as the actions of someone seeking to increase their benefit entitlement. If that was their goal they would simply leave the pension pot alone. That is the argument i would put to the DM..
The legal test is whether securing or increasing ESA is a significant operative purpose in a decision to give capital away. So it’s not just whether he obtains an increase in his ESA, it includes action with the purpose of preserving his ESA award as it is. But as others have pointed out, this claimant could have left his pension pot untouched and his ESA would have been unaffected. It seems to me the DM has to consider what would have happened if the opportunity to help his daughter in this way had not arisen and whether the decision to help, and so reduce his occupational pension in the future, would make any difference to his future entitlement to means-tested benefits. If the claimant had kept his full entitlement to his occupational pension would he have been able to dispense with means-tested benefits when he drew it down? If so, will the position be different because his pension will be less? If not, there is no evidence to my mind of a significant operative purpose to secure entitlement - because there wouldn’t be any, either way.
The legal test is whether securing or increasing ESA is a significant operative purpose in a decision to give capital away.
I don’t think so, The pension savings are capital. They are being held in a specific form which is disregarded because the government want to encourage saving for retirement, partially, at least, because that will reduce the need for the state to provide support in old age.
As soon as it ceases to be held in that way, it becomes a resource which is taken into account, and which is available to meet the owners needs. I’ve had a lot of queries from people wanting to know why money in a pension s treated differently from money in an ISA or some other form.
Arguing that it can be transformed into a gift is no different in essence from transforming it into any other form. You could argue that selling the home in which you live, and renting it back (assuming that you can clear the various hurdles involved) should allow you to keep the equity, as it would have been disregarded.
Doesn’t work.
Here’s what the DMG has to say:
52825 DMs have to show the claimant’s or partner’s purpose was to get benefit or more benefit if they decide claimants or partners have deprived themselves of capital. Getting benefit or more benefit may not be the claimant’s or partner’s predominant purpose but it must be a significant one1. So when claimants give away all their capital to a relative just before claiming benefit their
1.
main, or predominant, purpose may be to benefit the relative and
2.
intention, or significant purpose, may be to reduce their capital so they can get benefit or more benefit.
1 R(SB) 40/85
So effectively the DM must establish the primary purpose is to get benefit or more benefit or that this is a significant purpose. Practically, we all know what the DM will decide, but a tribunal may look at it differently. The test, as I understand it is (and I am paraphrasing, so please forgive me) a “but for” one i.e but for being on benefits would the claimant have acted this way. If he would have acted this way in any case, the predominant purpose can not be to remain entitled to benefit and it realistically is not a significant purpose. If it has always been his plan that when he was able to he was going to draw on his pension pot to give his daughter enough money for a deposit, again it would be difficult to argue a significant purpose was related to benefits. However, if he was aware of the pension pot rules and was seeking to reduce his pension pot ahead of retirement. that is a different matter. The pension pot rules allow you to retain your pot, but once you draw on it, it becomes available as income or capital so is subject to the deprivation rules, but as stated it is also subject to the predominant / significant purpose rule. which implies there must be some form of intention there.
I can see the argument from both sides and have no doubt the DM will try the deprivation route, but this is challengeable.
Agreed, the onus is on the benefit agency to make a decision about operative purpose. It can be valid to take differing views on the facts of a case like this (the first 2 replies here make me wonder if Bristol sees a lot of HB appeals ....). There’s plenty of caselaw on the point. An example on the equivalent Income Support reg is CIS/4086/2014, in which a claimant borrowed against their house and gave the money to his children:
...The approach seems to have been that if the claimant owned the capital beneficially and factually deprived himself of it, reg. 51 was satisfied.
30. This appears also to have been the approach of the tribunal, which, as the Secretary of State says, “appears to have done no more than accept that a natural consequence of the deprivation was that entitlement to the benefit was secured”. There are no findings of fact as to the claimant’s purpose, no express statement that the claimant had the necessary purpose and inevitably no reasons for any such conclusion. In failing to deal with the purpose element of reg. 51, the tribunal was in error of law.
Just to add: the original question was about PIP and ESA - to be clear, contributory-ESA and PIP are not affected by capital, whether actual or notional. Capital is only relevant to income-related ESA, and also if there is any HB or CTS. If you wanted to delve into the pension pot consequences, then contributory ESA can be affected by pension income.
There is a separate question to consider, which I’m not going to answer here, about in the event that capital is held long enough to end means-tested benefits - would he be able to try a claim for the same benefits once the capital is disposed of, or would he need to try a UC claim at that point.