PENSION PLANNING OPPORTUNITIES AND IDEAS
Synopsis: Guidance on when pension income or capital is taken into account for means tested state benefits
Further to our previous bulletin looking at means tested benefits and the effects of pension flexibility, the DWP have issued further guidance.
Pension income or notional income affects income related state benefits such as:
• Employment and Support Allowance (income-related)
• Housing Benefit
• Income Support
• Jobseeker’s Allowance (income-based)
• Pension Credit
• Universal Credit
If the individual has not reach the qualifying age for pension credit and funds have been drawn from a pension fund then this is taken into account as either income or capital, depending on how frequently the funds are accessed.
If funds have not been accessed and the individual has reached their qualifying age for pension credit then notional income is taken into account.
On reaching the qualifying age for Pension Credit, it is expected that the pension fund will be used to help support living costs so if an annuity or income is not drawn, an amount of ‘notional’ income will be taken into account when benefit are calculated. ‘Notional’ income is an amount equivalent to the income that could have been purchased via an annuity.
If income is taken in the form if drawdown or annuity the actual amount will be compared to notional income and the higher amount will be used. If a lump sum is drawn, the actual amount will be taken into account as capital.
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