A pension pot is an amount of money that is held under a personal pension scheme.
The value of this fund is disregarded when Universal Credit adds-up your capital.
If you take regular amounts from the pension pot, this counts as retirement pension income for Universal Credit.
If you take non-regular amounts, each withdrawal counts as part of your capital.
If not managed properly and a payment puts your capital into the tariff income zone, you might face questions of deprivation-of-capital or notional-capital when you spend your money.
In a mixed-age-couple, if the older partner choses not to take amounts from their pension pot, they may be treated as having notional income. The amount is calculated using government annuity value tables.
The advice that I would give to service-users is:
Don’t take regular payments from your pot, because if you do, they will knock it off your UC.
If you take irregular payments, make sure that you never have more than £6,000 in your bank account.
How to manage this:
- If you have some money, less than £6,000, in the bank, use that money before you re-fill your savings account from your pension pot.
- If you already have more than £6,000 in the bank, use that money before you dip into your pension pot – but whatever you spend it on must be reasonable in the circumstances or you might face deprivation-of-capital questions.