Will pension contributions impact on my benefits?
Belfast Telegraph Digital's Personal Finance Forum offers expert advice from ASM Horwath directors Alan Curry (left) and Keith Storey.
Question: I heard about your article on setting up a pension arrangement for a family member and wondered if you can help me. I am registered blind and receive Disability Living Allowance and some Income Support. My mum wants to make pension contributions for me. Will this have an impact on the benefits I receive? KMC, Bangor
Answer: Thanks for the query and apologies for taking some time to reply to you - I contacted various government departments to try to get the right answer for you.
It seems that your mum can fund a pension for you. By making pension contributions your mum will receive 20% tax relief on the payments she makes. Therefore if she pays £80.00 per month, £100 is saved for your future.
Your Income Support is a means tested benefit. Any savings (over prescribed limits) or income can reduce the level of Income Support you receive. According to my research, there are provisions in the Income Support Regulations which state that any funds held under a Personal Pension or Stakeholder Pension can be disregarded when assessing you claim for Income Support.
However, if under the terms of your pension plan you become entitled its benefits at a certain age, for example 55, they could be taken into consideration as you are entitled to take the benefits from this time.
I would suggest, therefore, that you find out what the age is for you particular plan. If, for example, it is 68 then you set up your pension benefits with a retirement age of 68. Your entitlement to Income Support will be reviewed and probably replaced by your State Pension and any top up income provided by your own pension.
The complication is that if you reach state pension age and have a little or no additional income, you may qualify for Pension Credit, which would uplift you income to a minimum level. Pension Credit is a means tested benefit.
So, if your mum is planning to save in a pension for your future benefit, you need to make sure that the pension fund will be large enough to give you a reasonable level of income, when taken in to account with your weekly state pension. You may qualify for any additional means tested benefits.
You need to check my comments with your local Social Security Office and then sit down with a suitable qualified advisor who can provide a pension forecast based on the amount your mum is willing to save before you do anything further. KS
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Keith Storey is a Director in ASM Horwath. He is experienced in providing advice to both private and corporate clients. His areas of expertise include pre and post retirement planning, developing individual investment strategies, inheritance tax planning, and life and illness protection plans. ASM Horwath, 20 Rosemary Street, Belfast BT1 1QD (NI 37083) is a company registered in Northern Ireland and is authorised and regulated by the Financial Services Authority, FSA registered number 193758.
Alan Curry is Director of Tax at ASM Horwath. He is a member of both the Institute of Chartered Accountants in Ireland and the Chartered Institute of Tax and his areas of expertise include tax compliance & planning, employment & personal tax, VAT, trusts & estates, retirement planning, inheritance tax, divorce & separation, and capital taxes planning.
Alan and Keith can be contacted at tel: 028 9024 9222.
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