If you go out and blow your hard earned pension fund the Department of Work & Pensions (DWP) you will not be allow you to claim additional benefit. This announcement has been made just over a week before the changes to pension legislation will allow freedom of access to pension funds from age 55 onwards.
The DWP have issued a factsheet informing pension investors who intend to spend their pension fund or give it away to others would still be treated as having the money when calculating benefit entitlement. This is a very big warning to those tempted to live to the limit until the funds have run out.
The DWP have said “If you spend, transfer or give away any money that you take from your pension pot, we will consider whether you have deliberately deprived yourself of that money in order to secure (or increase) your entitlement to means-tested benefits”.
The DWP continued “If it is decided that you have deliberately deprived yourself, you will be treated as still having that money and it will be taken into account as income or capital when your benefit entitlement is worked out”.
The DWP could not have made themselves any clearer on how they will treat benefit claim cases where people gave either purposefully or unwittingly spent their entire pension fund and intend to fall back on means-tested state benefits.
Everyone should be fully aware of the consequences of blowing their pension fund, just because the legislation will now allow you to do that.
Very careful consideration must be given before deciding to make substantially withdrawals from pension funds which are likely to have life-long affects on your standard of living.
Always consult a qualified financial adviser before making any tax or investment decisions. The above article is only for guidance and should not be taken as advice.
Contact Martin Dodd on 01902 742221 or email him at martin.dodd@miadvice.co.uk if you would like talk about money issues.
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