Annuity and Benefits

[rumpole2018]

Hi, my aunty has asked me to help her.
She is married and has benefits like PIP and a small works pension and other things like housing benefit and council tax reduction.
Her husband gets similar benefits.
12 months ago she was made aware by letter that 2 annuity's had matured.
The values are £1900 and £23,000.i
She has never declared these annuities to the relevant agencies.
She is not well (serious car accident) and genuinely did not know
For 12 months she has not decided what she should do.
The letter states that she can draw down 25% on the £23,000 and it mentions something about the tax on the remaining amount would be about £3000 because they do not know her tax status because she is not working and is retired.
She would have to reclaim the £3000 tax back from HMRC.
Sorry about the basic details.
So the problem here is that the Housing benefit and Council tax and other benefit people will want to take this money into account. From what date or what amount I do not not know.
I know that she is allowed £10,000 savings but any amount after that is calculated at say £1 in every £250 that is in excess of £10,000.
If she has in excess of £16,000 cerrtain benefits will stop altogether until the savings amount drops below the £16,0000 threshold.
To make matter more complicated if she decides to reduce the amount by say buying a new car, washing machine. beds. television, holiday etc, it can be seen as deprivation of capital.
So you will be viewed as having notional capital.
1: She has known about the maturity of the annuity for 12 months. What position does this put her in.
2: Can someone explain to me the criteria that would be used to calculate how far certain benefits people will go back in time with regards to these annuity's.
3: What should be her next move?
4: Is there some organisation that can advise her because she went to the C.A.B for advice and she felt that the person there did not know what do to with regards to her next move. I can understand that because this is why I am asking for advice on this forum.
Thanks in advance.
If more details are required please ask and i will post on here.

[Wylderose]

Hi Rumpole

From reading your post it would appear that you have been misinformed.

To start with, even though your aunt is not very well, the fact that she knew about the annuities maturing 12 months ago, would not lead anyone to believe that she genuinely did not know about them.

The annuities will not affect her PIP. They will affect the amount of Housing Benefit and Council Tax Support that her and your uncle are entitled to. If she is receiving Pensions Credits Saving Credits, they may also reduce the amount of her PCSC too, so she does need to contact both Housing Benefit and the Pensions Service because failure to declare a change in circumstances will always be retrospectively applied and may cause a claim over payment.

Capital

As a pensioner your aunt and uncle may hold a combined capital value on their claim of £10000 without tariff income being applied. Tariff income for pensioners is applied at the rate of £1 for every £500 pounds held over £10000 up to £16000 capital, at which point they no longer qualify for Housing Benefit.

Capital comprises, the total value of all bank, building society, savings and ISA accounts and any stocks and shares they hold.

Draw down from Annuity

Your aunt can take a percentage draw down on her annuity without incurring a tariff income provided that the value of the draw down plus her normal capital holdings does not exceed £10000

The Annuities

1. Are the annuities paying your aunt a monthly income? - If the answer is Yes, then the amount of the income being received will be applied to your aunt's housing benefit claim as a "late notified" change of circumstances. The income will be applied as income received from the date that she started to receive it. Depending on how much it is and how much your aunt and uncle's combined income is against their applicable amount, this may or may not create an over payment of benefits.

2. Is the Annuity still waiting on a decision from your Aunt before being paid on a monthly basis? - If the answer is Yes, then the value of the annuities will not be applied as notional income or deprived income because it is essentially being held in trust pending a decision as to whether to take a draw down before payments begin. As the money is being held in trust it is not physically in your aunt's possession and therefore cannot be deemed to be capital

What is Deprivation of Capital?

Deprivation of capital is the deliberate disposal of capital holdings by a claimant in order to bring themselves below the income threshold so that they then become eligible for more benefits.

If your aunt were to take a lump sum of money from her annuity and then:
1. Give it away to you, someone else, to donate it to charity, then this IS deprivation of capital
2. Buy for example a car, then six months later give it away to someone, then this IS deprivation of capital

If your aunt were to take a lump sum and
1. Take a holiday, replace her car, furniture, television, washing machine etc - This IS NOT deprivation of capital

The fact that your aunt has a bit of money to spend does not mean that the Benefits services would presume to dictate to her how to spend it.

As far as we are concerned, reasonable expenditure, backed by receipts if they are requested is NOT deprivation.

I hope this helps

[rumpole2018]

Sorry being so late with a reply but thank you for your advice

[Arres]

government payments are very much controlled by the government.

[Arres]

From what I've heard are plans to revise benefits and payments from the budget