Universal Credit UK: The pension rule which over 55s ‘need to be aware of’

Spending Review: Sunak on temporary uplift in Universal Credit

The coronavirus pandemic has has a terrible impact across the world, with there now having been more than 1.54 million deaths. In the UK alone, the COVID-19 death toll now sadly stands at 61,245.

With lockdown measures and other covid restrictions having been announced throughout the year, the pandemic has had a financial impact too.

It’s something which has been reflected in the UK in the number of claims made for Universal Credit.

Official statistics published by the Department for Work and Pensions (DWP) has shown that from March 12 to October 8 this year, 3.7 million people on claims made for Universal Credit.

This is more than one-third of the 10.6 million claims made to Universal Credit since it was introduced in April 2013.

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During the same time frame, there has been 3.6 million starts to Universal Credit.

On October 8, 2020, compared with March 12, 2020, there had been an increase of 2.7 million people (90 percent) on Universal Credit.

Chancellor of the Exchequer Rishi Sunak delivered a Spending Review last month, during which he said the number of unemployed people is expected by the Treasury to increase next year to 7.5 percent of the workforce, followed by a fall in subsequent years reaching 4.4 percent by 2024.

He said: “Despite the extraordinary support we’ve provided, the OBR expects unemployment to rise to a peak in the second quarter of next year, of 7.5 percent – 2.6 million people.

“Unemployment is then forecast to fall in every year, reaching 4.4 percent by the end of 2024.”

With many adults potentially facing a period of unemployment, Kay Ingram, Director of Public Policy at national financial planning group LEBC, has issued a warning.

She explained those who are fearful of job losses or who have already been made redundant should be aware a number of eligibility rules surrounding the means-tested benefit Universal Credit.

Among them was a point which could have great relevance to those who are over the age of 55, and hence can access their pension savings due to pension freedom rules.

Pension freedom was introduced by the government in April 2015.

Ms Ingram said: “Savings above £16,000 make them ineligible to receive UC which is reduced once savings are in excess of £6,000.

“Every £250 of savings between these limits reduces the UC claim by £4.35 per month.”

The chartered financial planner added: “Over 55s need to be aware that money in pension pots is not counted for the Universal Credit means test unless they are over state pension age ( 66), but if money is withdrawn then it will count towards the savings taken into account for the means test with each £250 of cash reducing the UC claim by £4.35 per week.”

For those who file Self Assessment Tax Returns, another warning was issued.

According to Ms Ingram, these people may look to ring fence any money they owe for their 2018/19 tax bill.

She continued: “If they have completed a tax return and know how much tax they owe, this amount can be disregarded when taking the means test for UC eligibility.

“Those who have not yet filed their tax return should do so as soon as possible to establish what they owe.

“Tax is usually payable by January 31 but those who are struggling with their finances due to job losses can agree with HMRC a time to pay agreement which enables the tax due to be paid over a longer period.

“This is only available if the return is filed and the tax due agreed with HMRC before January 31, so those needing time to pay should file as soon as possible.

“Filing after January 31 will incur a penalty of £100 which increases until the return is completed.”

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