BENEFITS EXPERT: Planning on taking a private pension early to clear mortgage arrears

Q. I am currently receiving Universal Credit as a job seeker, my claim does not include housing costs as my property is mortgaged. I have the option of taking a private pension early and this will release a small lump sum of about £6,200 which I plan to use to clear some mortgage arrears and pay off the balance in full.

The pension will also provide a small monthly income of about £80.
The pension will also provide a small monthly income of about £80.

This will likely use the bulk of the pension lump sum. The pension will also provide a small monthly income of about £80.

How will, if at all, my proposed course of action affect the Universal Credit claim?

A. As Universal Credit is a means tested benefit any income and capital you receive must be disclosed to the DWP and will potentially lead to a recalculation of your monthly payment.

Turning firstly to the capital sum any savings above £6,000 will generate tariff income similar to the rules to the legacy benefits UC replaced.


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For every £250 of savings you have above this limit will be deemed to generate weekly income of £1 and your UC will drop by this amount.

UC also has similar rules to legacy benefits concerning deprivation of capital i.e. if the DWP think you have deliberately spent money to increase your UC then you will be treated as still having the money.

Given your particular circumstances in that you have arrears for a mortgage and as this is a priority debt it is unlikely the DWP will see this as a deliberate deprivation of savings.

It is always recommended that you disclose the savings to them as well as your plans.


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As for the monthly pension this will be classed as income and your UC will be reduced on a £1 for £1 basis, as your pension will generate a weekly income of approximately £20/week then your UC will drop by the same amount.

If you receive Council Tax Reduction then the savings from the pension and monthly pension will not reduce the amount you are paid. You should still however disclose this to your local authority.

We can all face problems that seem complicated or intimidating. At Citizens Advice we believe no one should have to face these problems without good quality, independent advice.

That’s why we’re here: to give people the knowledge and the confidence they need.