Pension Income draw down effect on income related benefits.

[abc123def]

If someone has an income draw down pension and decides to draw down a large amount to buy a new car, say £15,000 as an example. The day it arrives in their account they pay the garage having pre-ordered the car; how does that 15,000 they had in their account for less than a day affect their income related benefits?

 

Thank you to anyone who can advise. Thank you.

[Old Cogger]

they usually look to 3 months statements I believe so in out should not be a problem, but say a large amount sat there then suddenly moved out as you apply for a benefit would start alarm bells + I may be wrong, but after applying for council tax benefit and others all asked for was last bank statement then another months> sure others will comment also

 

income pension drawdown use to be tax free not sure if it is now?>

[honeybee13]

The tax-free cash part of drawdown, OC, usually 25% of the fund/s. After that, what you draw is taxed as income, I believe.

 

HB

[honeybee13]

Information from the Telegraph.

 

http://www.telegraph.co.uk/finance/personalfinance/special-reports/11445291/The-tables-that-reveal-your-tax-bill-on-pension-withdrawals.html

 

HB

[abc123def]

Information from the Telegraph.

 

http://www.telegraph.co.uk/finance/personalfinance/special-reports/11445291/The-tables-that-reveal-your-tax-bill-on-pension-withdrawals.html

 

HB

 

Thanks for that honeybee, that's made me realise I was entirely muddled. I'd thought you could draw down 25% of your whole pension pot tax free, but that clearly demonstrates that 25% of any tax year's withdrawals are tax free, the rest is taxed at your normal rate. So withdrawing 15,000 would be silly. That would be why the IFA recommended getting an interest free deal on a new car. So I could drawn down 5,000 and pay that as a deposit then a month later draw down 4,000 or whatever to pay the year's monthly installments. That would mean at any one time the amount I held would be beneath the savings limit for income related benefits.

 

So my new question then is, do income related benefits and PIP count as taxable income? If not, then I could draw down up to a single persons tax free annual income of 11,000 without paying any tax? As income related ESA and PIP are my whole income.

 

Thanks again.

[honeybee13]

Here's the government list of taxable and non taxable benefits. I didn't see PIP on it, but your ESA is OK.

 

https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

 

HB

[honeybee13]

And this website says PIP isn't taxable.

 

http://disabilitytaxguide.org.uk/being-a-carer/benefits-you-can-claim/disability-and-ill-health-benefits

 

HB

[abc123def]

Thank you. I should be okay to do that then.

[ericsbrother]

Thye pension pot is not capital so that doesnt get taken into consideration and the purchase of a car would not be seen as deliberately depleting ones capital unless you bought something like a Ferrari that cost more than a house would. they will certainly get asked about it though so keep invoice/receipt handy to show this was a predetermined purchase.