Is ’Death in service’ payment treated as captial?

I am currently working with someone who is likely to receive a death in service payment following her husbands death and currently receives HB, CTC, WTC, (as well as CB which I assume is not affected). Would this payment be treated as capital, or income, or in the same way as personal injury compensation (ie disregarded for 52 weeks)?

Also, if it is treated as capital, and she uses part of the payment to clear her debts (both priority and non priority debts) would there be any problem with her applying for these benefits again in future, or could it be seen as depriving herself of capital in order to claim?

Any words of wisdom appreciated!

I’m not an expert on this Lucy but in the absence of other answers I’ll have a stab…other contributions welcome…

I’m assuming this is a payment from the occupational pension of her late husband? I’m also assuming it’s not due to a personal injury in which case those rules cannot apply. I cannot find anything to say it is exempted so I think it must count as capital (if it is a one off payment?) so therefore if it takes her savings over £16,000 it will stop her getting housing benefit. The savings rules are much more generous for tax credits of course as they take into account actual income from savings (after a £300 disregard) and with the poor interest rates currently it may be that it doesn’t affect her tax credits much if at all.

As far as using the capital to pay off debts it all comes down to her intention behind it - see CPAG page 366 onwards. Always a tricky area to advise on because the more the claimant knows about the system the more it might be argued she is trying to take advantage of it. Has she got a good reason to show she would have cleared the debts anyway - to secure things for her and her children?

NB I’m moving this thread to ‘Other benefit and tax credit issues as doesn’t really fit in universal credit