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Potential HB and PC overpayment due to unclaimed workplace pension?

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  • Potential HB and PC overpayment due to unclaimed workplace pension?

    My father retired in 2015 and started claiming his state pension, as well as HB and PC. While he was working he paid into a private pension until 2005, when he was made redundant. Soon after he cashed this in as a lump sum, and we believed that was the end of his private pension. My parents didn't even think of private pensions, at least until recently, since as it turns out this was only one of two private pensions he had, the other (the one in question here) being as much as £50000 if cashed as a lump sum. Nice surprise we thought when we found this out, but it seems very likely Dad might be liable for all payments of Housing Benefit and Pension Credit he may have received from between 2015 and now.

    Most frustratingly, it seems Dad was receiving annual statements from the pension provider for this fund, but never took any notice of them, believing they were relating to the pension he had cashed in in 2005!

    So my very simple question is - will the DWP and local council try to claim this money back when he gets his lump sum, and will this be classified as benefit fraud (my parents and I were genuinely unaware of the existence of this pension)?

    I realise this seems like an unusual situation but I would appreciate some answers/guidance.
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  • #2
    Throughout your dad's working life if he was paying into 2 pension schemes, then he would have been aware that this was the case. Therefore when cashing his pension following his redundancy it would follow that he ought to be aware that he only cashed one pension as to cash both pensions, he would have had to deal with two pension scheme providers, so receiving annual statements since then should have rung alarm bells, because pension companies don't send out statements if there is no money to be had.

    That however is by the by.....

    Up until your dad decides/d to take a lump sum from the remaining pension, the money remains as "owned by the pension company". In other words it is not your dad's money until it is paid to him and would not be an issue as technically he does not have access to it.

    So, if your dad takes the pension as a lump sum £50000 as you suggest then in the first instance he needs to contact the pension service as the type of assessment phase that your dad is in with his Pension Credits, will affect how the pension service treat his lump sum.

    Your dad is currently receiving pension credits because his state pension is insufficient for him to live on.

    If he receives Pension Credits and is in a fixed assessed income period,and the pension service will not be reassessing his claim before a specified date, then it is possible that the lump sum will have no effect on his pension credits and thereby no knock on effect on his housing benefit and council tax support.

    But if he is not in a fixed assessed income period then his pension credit will change from the date that he receives the lump sum. This however is something that only the pension service can explain and answer by reviewing the specifics of your father's case file.

    If his pension credits stop and he then only receives his ordinary state pension, he will need to provide proof of his capital holding to housing benefit and his housing benefit and council tax support will end from the date that his pension credit ends and his capital is taken into account because he will be over the £16000 capital limit and therefore no longer entitled to housing benefit and council tax support. £50000 may seem like a lot of money, but it isn't when you have to pay your full rent and council tax at your parent's age.

    Before making any decision to take the lump sum, your parents need to seek professional advice because he needs to know what level of pension this discovered pension will pay him on a weekly/monthly/annual basis if he were to let it take it's natural course and pay out as and when it is due to. Only then will he be able to make an informed decision about whether it is worth taking the payout and losing his housing benefit, council tax support and pension credits or whether it is worth taking the pension as weekly/monthly payments, being transferred to Savings Credits or just his normal state pension and retaining some housing benefit and council tax support.

    Ultimately it is his decision, so he needs to speak to the Pension Service first and foremost before making any decision.

    As to clawback of benefits, I don't think this will happen as there is no fraud involved and your father has not had the pension.

    Good luck

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