Cashing in a Pension Pot at 55 to buy a house while on benefits

[antone]

OK, there are a few issues here. I'm not going to say whether or not I think it's wise to do what you propose, because I simply do not know the ins and outs of these things. But from a benefits point of view, here are the main things you need to consider.

 

1) You current entitlement to PIP and CA will not be affected, as you correctly note.

 

2) Your IS might be affected. You would need to declare the £80k sum to the DWP, and if you spent it on a house you would have to tell them that as well. They would then consider whether "Deprivation of capital" should apply in your case. If it did apply, they would treat you as still having the money and, since it's clearly more than £16k, would stop your IS. So the key question is "Is it deprivation of capital to use a lump sum payment to buy a house that will be your primary residence?" I'm not 100% sure.

 

You could ask the IS department. If they tell you that it's OK then it is OK because the rules state:

 

52843 Claimants or partners have not deprived themselves of capital for the purpose of getting benefit or more benefit if they

 

1. say exactly what they are going to do with their capital and
   
2. are told by the DWP it will not affect the amount of benefit they can get and
   
3. do what they said they were going to do with their capital.
   

 

Otherwise each case is considered on its merits. They will look at how you spent the money, and whether you did so with the intention of securing or increasing entitlement to means tested benefits. That's the part of the rule that's often forgotten - it does not sound to me like you are considering buying a house solely so that you can continue to receive IS, but I'm not and never was a Decision Maker, and that's the person who makes the call. Considering worst case scenarios, you should plan for the possibility that your IS will stop and decide whether you could manage without it if necessary.

 

3) Future pension entitlement. Your contributory State Retirement Pension will not be affected. State Pension Credit is not likely to be affected either. They'd have a hard time claiming that you bought a house specifically to increase your SPC entitlement when 10 years have passed since the purchase. If they applied deprivation rules there and you appealed, the Appeals Tribunal would laugh the DWP right out the door and find in your favour.

[antone]

Sure, yes - your own home is not counted as capital for IS purposes if you own and live in it prior to the start of the claim.

 

But if you live in a rented home, come into some money and use that money to buy a home, it's not obvious how that would be considered. I mean, the sensible thing to do would be to think of how that would reduce HB payments in future and allow the expenditure, but deprivation of capital rules aren't always that sensibly obvious.