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Chapter H5: Unearned income

Contents
H5001:What is unearned income
H5004:Retirement pension income
H5005:Retirement pension
H5008:Occupational pensions
H5009:Meaning of occupational pension scheme
H5019:Personal pensions
H5020:Meaning of personal pension scheme
H5030:Overseas arrangements
H5031:Meaning of overseas arrangement
H5032:Retirement annuity contracts
H5033:Meaning of retirement annuity contract
H5034:Foreign annuities or insurance policies
H5035:Retirement annuities purchased on divorce
H5036:Civil list pensions
H5038:Equity release schemes
H5039:Meaning of equity release scheme
H5050:Financial Assistance Scheme
H5060:Benefit income
H5062:Jobseeker's allowance
H5063:Employment and support allowance
H5064:Carer's allowance
H5065:Bereavement allowance
H5066:Widowed mother's allowance
H5067:Widowed parent's allowance
H5068:Widow's pension
H5069:Maternity allowance
H5070:Industrial injuries benefit
H5071:Foreign benefits
H5080:Spousal maintenance
H5081:Employment and training payments
H5082:Sports awards
H5085:Living expenses
H5086:Certain insurance payments
H5087:Income from an annuity
H5088:Income from a trust
H5090:Income deemed to yield from capital
H5100:Capital treated as income
H5110:Other income that is taxable
H5120:Personal injury payments
H5121:Regular payments
H5122:Payments under an annuity
H5123:Award held in trust
H5124:Award administered by the court
H5125:Other cases
H5140:Special compensation schemes
Relatives of Creutzfeldt-Jacob disease sufferers or persons infected
H5145:from contaminated blood products
H5150:Notional income
H5151:Income upon application
H5154:Notional retirement pension income upon application
H5156:Retirement pension - notional income
H5158:Deferring retirement pension
H5160:Deferring retirement pension whilst an overlapping benefit is in payment
H5170:Occupational pension schemes - notional income

Personal pensions
H5171:General

Personal pensions/occupational pensions where income withdrawal is
H5172:allowed - notional income
H5173:Amount of notional income
H5174:From what date should the DM take notional income into account

Personal pensions/occupational pensions where income withdrawal is
H5175:not allowed - notional income
H5176:Amount of notional income
H5177:From what date should the DM take notional income into account
H5178:Meaning of money purchase benefits
H5179:What is a pension fund holder
H5180:Who is a person who derives entitlement
H5182:Information and evidence
H5185:Lump sums on retirement
H5190:Actual income
H5191:Provision under a retirement annuity contract
H5192:Retirement annuity contract - notional income
Calculation of unearned income
H5200:General
H5210:Fluctuating income
H5211:Meaning of identifiable cycle

Chapter H5: Unearned income

H5001 What is unearned income

This chapter provides guidance on unearned income. ADM Chapters H3 and H4
provide guidance on employed earnings and on self-employed earnings. ADM
Chapter H6 provides guidance on student income.

H5002

A claimant's unearned income means (1) any of their income consisting of
1. retirement pension income
2. benefit income
3. foreign benefits
4. spousal maintenance
5. student income (see ADM Chapter H6 for guidance on student income)
6. employment and training payments paid
6.1 as a substitute for UC or
6.2 for a person's living expenses
7. sports awards
8. certain insurance payments
9. income from an annuity
10. income from a trust
11. income deemed to yield from capital (sometimes also known as "tariff
income")
12. capital treated as income
13. any other income which is taxable.

1 UC Regs, reg 66(1)

H5003

Unearned income also includes unearned income which the claimant is treated as
having (1). This is also referred to as "notional income".
1 UC Regs, reg 66(1) & reg 74

H5004 Retirement pension income

Retirement pension income includes RP, occupational and personal pensions and
certain other pension related income as explained at ADM H5005 et seq (1). The
meaning of "retirement pension income" has the same meaning as it does in SPC
legislation. It also includes increases in RP for a person's partner. All retirement
pension income should be taken fully into account for UC.
1 UC Regs, reg 67; SPC Act 02, s 16(1)

H5005 Retirement pension H5004

RP has to be taken fully into account. For UC this includes either
1. contributory (Category A or B) RP (1) or
2. non-contributory (Category C or D) RP (2).

1 SPC Act 02, s 16(1)(a); 2 s 16(1)(d)

H5006

RP also includes the following elements
1. a SAP payable as a result of divorce (1)
2. GRB earned between 1961 and 1975 under the graduated pension scheme (2)
3. age
additions (3).

1 SPC Act 02, s 16(1)(b); 2 s 16(1)(c); 3 s 16(1)(e)

H5007

Any increase in a Category A or Category B for RP in respect of a person's partner
has to be taken fully into account (1).
1 UC Regs, reg 67(2); SPC Act, s 16(1)(a)

H5008 Occupational pensions

Income from occupational pension schemes should be taken fully into account (1). This
includes any payment (other than a payment ordered by a court or made in
settlement of a claim) made by or on behalf of a former employer on account of early
retirement on grounds of ill health or disability (2).
1 SPC Act 02, s 16(1)(f); 2 s 16(1)(l)

H5009 Meaning of occupational pension scheme

An occupational pension scheme is a pension scheme defined under specific
pensions legislation (1) that provides benefits to, or in respect of, people with service in
a particular employment or may provide benefits to, or in respect of, other people.

1 SPC Act 02, s 17; PS Act 93, s 1

H5010

Occupational pension schemes are set up by employers to provide pensions for
employees and their dependants. Payments under the
1. British Coal Voluntary Redundancy Scheme or
2. British Coal Industrial Death and Retirement Scheme or
3. British Coal Redundant Mineworker's Pension Scheme or
4. Police and Fire-fighters' disablement or special widow's pension schemes are
included.

H5011

Occupational pension payments do not include discretionary payments from a fund
set up to relieve hardship. This type of payment is a charitable or voluntary payment
and is ignored as income for UC.

Example

Angela retired early from the nursing profession. Every three months she receives a
payment of 300 from a charitable trust for nurses. The DM decides that the
payment is a charitable payment and is not included as income for UC purposes.

H5012

The DM should take payments into account as an occupational pension if a
pensioner who has been in employment that was contracted out of S2P is entitled to
1. GMP instead of additional pension through an occupational pension scheme
and
2. increments to an occupational pension and GMP if retirement was deferred.

[H5013-H5018]

H5019 Personal pensions

Income from personal pension schemes should be taken fully into account (1).
Personal pension schemes provide pensions on retirement for
1. S/E people or
2. employees who are not members of occupational pension schemes.
1 SPC Act 02, s 16(1)(f)

H5020 Meaning of personal pension scheme

A personal pension is a pension scheme that (1)
1. is not an occupational pension scheme and
2. is established by a person within specified finance legislation (2).
1 SPC Act 02, s 17; PS Act 93, s 1; 2 Finance Act 2004, s 154(1)

[H5021-H5029]

H5030 Overseas arrangements

Income from an overseas pension arrangement should be taken fully into account (1).
1 SPC Act 02, s 16(1)(g)

H5031 Meaning of overseas arrangement

An overseas arrangement is (1) a scheme or arrangement which
1. has the effect (or is capable of having the effect) of providing benefits to or in
respect of employed earners on the termination of employment, death or
retirement and
2. is administered wholly or primarily outside the GB and
3. is not included in the description of an appropriate scheme and
4. is not an occupational pension scheme.
1 SPC Act 02, s 16(3)

H5032 Retirement annuity contracts

Payments from this type of personal pension should be taken fully into account (1).
Before 1.7.88 people could take out retirement annuity contracts. These are similar
to a personal pension and were usually taken out by S/E people. People with these
pensions are entitled to buy an annuity between the ages of 60 and 75. They are not
allowed to take an income from the fund before an annuity is purchased.
1 SPC Act 02, s 16(1)(h)

H5033 Meaning of retirement annuity contract H5191

Retirement annuity contract means (1) an approved contract or scheme that allows a
person to buy an annuity from the age of 60.
1 SPC Act 02, s 16(3)

H5034 Foreign annuities or insurance policies

Income from annuities or insurance policies that were bought or transferred to
provide income under a personal pension scheme or other overseas pension
arrangement (1) should be taken fully into account.
1 SPC Act 02, s 16(1)(i)

H5035 Retirement annuities purchased on divorce

Income received from an annuity purchased or transferred to meet an ex spouse's
liability on divorce (1) should be taken fully into account.
1 SPC Act 02, s 16(1)(j)

H5036 Civil list pensions

Income from a civil list pension (1) should be taken fully into account.

1 SPC Act 02, s 16(1)(k)

H5037

A civil list pension is awarded for distinguished service to the nation in the arts,
science or literature. It is
1. paid at the discretion of the Queen and
2. voted annually by Parliament.

H5038 Equity release schemes

Any payment made at regular intervals under an equity release scheme should be
taken fully into account (1).
1 SPC Act 02, s 16(1)(m)

H5039 Meaning of equity release scheme

Equity release scheme means (1) a loan made between a person ("the lender") and the claimant
1. by means of which a sum of money is advanced by the lender to the claimant
by way of payments at regular intervals and
2. which is secured on a dwelling in which the claimant owns an estate or
interest and which he occupies as his home.
1 SPC Regs, reg 1(2)

[H5040-H5049]

H5050 Financial Assistance Scheme

Income from the FAS should be taken fully into account (1). The FAS provides financial
help to some people who have lost out on their non-state pension because
1. the scheme they were a member of was under-funded when it started to wind-
up and
2. the employer is insolvent or no longer exists.

1 SPC Act 02, s 16(1)(n)

H5051

Awards under the FAS top up the amount payable (subject to a maximum amount)
under the qualifying pension scheme to a level broadly equal to 90% of the amount
that would have been received had the pension scheme not started to wind-up. Tax
is deducted at source. In most cases FAS payments for individuals commence at
age 65. The terminally ill and survivors may qualify for payments earlier.

[H5052-H5059]

H5060 Benefit income H5071

Certain benefits are taken into account in UC. The following paragraphs describe
those benefits. These benefits should be taken into account subject to any
adjustment to the amount payable in accordance with the overlapping benefit rules (1).
This means that the net amount of the benefit should be taken into account after the
adjustment for any overlapping benefit.
1 UC Regs, reg 66(1)(b)

H5061

H5062 Jobseeker's allowance

JSA received by the claimant or any partner should be taken fully into account (1). It is
payable to unemployed people who satisfy the contribution conditions.
1 UC Regs, reg 66(1)(b)(i)

H5063 Employment and support allowance

ESA should be taken fully into account (1). ESA is paid to people who
1. have
LCW
and
2. satisfy the contribution conditions.
1 UC Regs, reg 66(1)(b)(ii)

H5064 Carer's allowance

CA should be taken fully into account (1). It is payable to people who have caring
responsibilities for a person receiving AA or DLA.
1 UC Regs, reg 66(1)(b)(iii)

H5065 Bereavement allowance

BA should be taken into account in full (1). It replaced WP for a person whose spouse
died on or after 9.4.01. It may also be paid to a person whose civil partner dies on or
after 5.12.05. It is restricted to payment for not more than 52 weeks.
Note: Where a claimant receives a BPT it is a one off lump sum payment and is
capital.
1 UC Regs, reg 66(1)(b)(iv)

H5066 Widowed mother's allowance

WMA should be taken fully into account (1). It is paid to some widows whose husbands
died before 9.4.01.
1 UC Regs, reg 66(1)(b)(v)

H5067 Widowed parent's allowance

Surviving spouses or civil partners may be entitled to WPA. It should be taken fully
into account (1).
1 UC Regs, reg 66(1)(b)(vi)

H5068 Widow's pension

The DM should take WP fully into account (1). It may still be paid where it is claimed in
respect of a death prior to 9.4.01.
1 UC Regs, reg 66(1)(b)(vii)

H5069 Maternity allowance

MA should be taken fully into account (1). It is payable to women who can't get SMP.
1 UC Regs, reg 66(1)(b)(viii)

H5070 Industrial injuries benefit H5071

Industrial injuries benefit (but not increases where constant attendance is needed or
for exceptionally severe disablement) should be taken fully into account (1). The
additional allowances
1. REA or
2. RA or
3. US
may also be paid with industrial injuries benefit. They should be taken fully into
account.
Note: US was removed from the disablement benefit scheme on 6.4.87 but may
continue in payment to people getting it before that date.
1 UC Regs, reg 66(1)(b)(ix)

H5071 Foreign benefits

Foreign benefits are (1) any
1. benefit
2. allowance or
3. other payment
which is paid under the law of a country outside the UK and is in the nature of the
benefits described in ADM H5060 - H5070. These payments have to be taken fully
into account.
1 UC Regs, reg 66(1)(c)

[H5072-H5079]

H5080 Spousal maintenance

Maintenance payments for the claimant or partner made by a spouse, civil partner,
former spouse or former civil partner (1) should be taken fully into account. This
includes payments made
1. under a court order or
2. under an agreement for maintenance (which can be voluntary).
Note: Spousal maintenance is not the same as maintenance paid in respect of a
child. Child maintenance is not taken into account as income.
1 UC Regs, reg 66(1)(d)

H5081 Employment and training payments H5085

Payments made under relevant legislation (1) which are
1. a substitute for UC or
2. for a person's living expenses (see H5085)
are taken fully into account (2).
1 E & T Act 73, s 2; Enterprise and New Towns (Scotland) Act 1990, s 2; 2 UC Regs, reg 66(1)(f)

H5082 Sports awards

Sports award means an award
1. made by one of the Sports Councils named in the National Lottery legislation
and
2. out of sums allocated to it under that legislation (1).

1 UC Regs, reg 66(1)(g); National Lottery etc Act 1993, s 23(2)

H5083

The Sport Councils named in the National Lottery legislation (1)are the
1. English Sports Council (2)
2. Scottish Sports Council
3. Sports Council for Wales
4. Sports Council for Northern Ireland
5. UK Sports Council (3).
1 National Lottery etc Act 1993 s 23(2); 2 National Lottery etc Act (Amendment of s 23) Order 1996,

art 2; 3 art 2

H5084 H5085

Where the payment of the Sports Award is for a person's living expenses (see ADM
H5085) then it has to be taken fully into account (1). Any other element of a Sports
Award (for example, sporting equipment costs) is ignored.
1 UC Regs, reg 66(1)(g)

H5085 Living expenses H5081 H5084

In ADM H5081 and ADM H5084 living expenses means (1)
1. food
2. ordinary clothing or footwear
3. household fuel
4. rent or other housing costs
5. council tax
in respect of the claimant, partner or any child or qualifying young person for whom
the claimant is responsible.
1 UC Regs, reg 66(2)

H5086 Certain insurance payments

Payments received under an insurance policy which is insuring against the risk of
1. losing income due to
1.1 illness
or
1.2 accident or
1.3 redundancy or
2. being unable to maintain payments on a loan in respect of owner occupier
payments which would qualify as housing costs for UC
are taken fully into account (1).
1 UC Regs, reg 66(1)(h)

H5087 Income from an annuity

Income from an annuity - but not retirement pension income - should generally be
taken fully into account (1). However, see ADM H5122 for guidance on income from an
annuity which can be disregarded.
1 UC Regs, reg 66(1)(i)

H5088 Income from a trust

Income from a trust should generally be taken fully into account (1). However, see
ADM H5123 for guidance on income from a trust which can be disregarded.
1 UC Regs, reg 66(1)(j)

H5089

H5090 Income deemed to yield from capital

Claimants are treated as having an income where their capital is above a certain
level (1). In the legislation, it is called "Income deemed to yield from capital". It is also
often referred to as "tariff income".

1 WR Act 12, Sch 1, para 4(3)(d), UC Regs, reg 66(1)(k)

H5091 H5092

Where a claimant's capital is over 6,000 but does not exceed the 16,000 limit for
UC then it is treated as providing a monthly income (1) of
1. 4.35 for each 250 over 6,000 and
2. 4.35 for any excess over 6,000 which is not a complete 250.
1 UC Regs, reg 72(1)

Example 1

Mohamed has savings of 6,740. For the purposes of UC, this is treated as
providing a monthly income of 13.05 which falls to be taken into account.

Example 2

Tom has a cash ISA. When he claimed UC, the ISA was worth 6,000. For the
purposes of UC, this is treated as providing a monthly income of nil because the ISA
is not worth over 6,000.

H5092

ADM H5091 does not apply where (1)
1. the claimant's capital is disregarded or
2. the actual income from that capital is taken into account as income from an
annuity or
3. the actual income from that capital is taken into account as income from a
trust.

1 UC Regs, reg 72(2)

H5093

Where a claimant is treated as being in receipt of income yielded from capital then
any actual income derived from that capital has to be treated as capital from the date
it is due to be paid to the claimant (1). It cannot be treated as income.

1 UC Regs, reg 72(3)

H5094

The types of income which might be derived from capital include
1. interest
2. dividends and
3. rental income.

Example

Tony has savings of 8,000 held in a bank account. This means, that for the
purposes of Tony's award of UC, the 8,000 is deemed to yield a monthly income of
34.80. At the end of the financial year, the bank credits Tony with 170 interest on
the savings. The DM treats this 170 as a payment of capital. Tony now has 8,170
in capital yielding a monthly income of 39.15.

[H5095-H5099]

H5100 Capital treated as income

Any sums that are paid
1. regularly and
2. with reference to a period of time
have to be treated as income even if they would normally be regarded as capital or
as having a capital element (1).
1 UC Regs, reg 46(3)

Example

Emily is the beneficiary of payments under an annuity. The payments are paid to her
once a year. The payments are treated as payments of income and are taken fully
into account when calculating Emily's award of UC.

H5101

Where capital is payable by instalments the DM should decide if the payments
should be treated as capital or income. Capital can be payable by instalments in
situations where
1. a person lends another person a lump sum of money and the borrower repays
that money in regular or irregular payments
2. a person receives payments from an investment bond with a life assurance
company.
The above is not exhaustive.

Example

Susan has an investment bond with a friendly society. The bond is worth 20,000 but
is disregarded by the DM because it has a policy of life assurance attached to it. The
terms of the bond allow Susan to withdraw money on a monthly basis which reduces
the surrender value of the bond. The DM decides that the money Susan receives is
capital payable by instalments.

H5102

Where
1. the amount of instalments outstanding and
2. the amount of any other capital held by the claimant or partner
exceeds 16,000 treat each instalment received as income. If the total is less than
16,000 each instalment is capital (1).
1 UC Regs, reg 46(4)

[H5103-H5109]

H5110 Other income that is taxable

Income that is received and which is taxable under certain legislation (1) has to be
treated as income to be taken fully into account (2).

1 Income Tax (Trading and Other Income) Act 2005, Part 5; 2 UC Regs, reg 66(1)(m)

H5111

The types of taxable income which a claimant may receive include
1. receipts from intellectual property (for example, royalty payments)
2. income from films and sounds recordings
3. certain telecommunication rights
4. income received as a settler
5. income from estates in administration.
Note: A "settler" is a person who has settled or transferred property into a trust.
Where the settler has an interest in the trust, then the income received may be taken
into account.

[H5112-H5119]

H5120 Personal injury payments

There are rules to cover where an amount of money has been
1. awarded to or
2. agreed by or on behalf of
a person as a result of a personal injury to that person (1).
1 UC Regs, reg 75(1)

H5121 Regular payments

Where the person receives regular payments as a result of a personal injury
1. by order of the court or
2. by an agreement
then those payments are disregarded when calculating that person's unearned
income (1).
Note: The agreement referred to in 2. must be reached after the date that the injury
occured (2).
1 UC Regs, reg 75(2); 2 Malekout v. Secretary of State for Work & Pensions [2010] EWCA Civ 162

H5122 Payments under an annuity H5087

Where an annuity has been bought with the personal injury award, payments under
the annuity are disregarded when calculating that person's unearned income (1).
1 UC Regs, reg 75(3)

H5123 Award held in trust H5088

Where the personal injury award is held in trust any
1. capital of the trust and
2. income from the trust
is fully disregarded. The capital in 1. does not count as part of that person's capital
and the income in 2. does not count as part of that person's unearned income (1).
1 UC Regs, reg 75(4)

H5124 Award administered by the court

Where a personal injury award
1. is administered by the court or
2. can only be disposed by direction of the court
then it is fully disregarded when calculating that person's capital. Any regular
payments of income from that award are fully disregarded when calculating that
person's unearned income (1).
1 UC Regs, reg 75(5)

H5125 Other cases

Where a personal injury award
1. is not held on trust or
2. has not been used to buy an annuity or
3. has not been disposed of
then it is fully disregarded when calculating that person's capital. The period of the
disregard is 12 months from the date that the award is paid (1). ADM Chapter H1
provides guidance on capital.
1 UC Regs, reg 75(6)

[H5126-H5139]

H5140 Special compensation schemes H5141

Any payment of capital or income (1) from a scheme approved by the Secretary of
State or from a trust established with funds provided by the Secretary of State for the
purpose of
1. providing compensation or support in respect of
1.1
a diagnosis of variant Creutzfeldt-Jacob disease or
1.2
infection from contaminated blood products or
1.3
the 7th July 2005 London bombings or
1.4
persons who during World War 2
1.4.a were interned
or
1.4.b
suffered forced labour or
1.4.c suffered injury
or
1.4.d
suffered property loss or
1.4.e
suffered the loss of a child
2. supporting persons with a disability to live independently in their accommodation
is fully disregarded (2).

1 UC Regs, reg 76(1); 2 reg 76(2)

H5141

The schemes and trusts covered by ADM H5140 include
1. The Fund
2. the Eileen Trust
3. MFET
Limited.

[H5142-H5144]

H5145 Relatives of Creutzfeldt-Jacob disease sufferers or persons infected from contaminated blood products

ADM Chapter H2 provides guidance on the capital disregard which applies to
payments (1) made to the
1. partner
2. parent
3. son or daughter
of the diagnosed or infected person or from their estate (including payments
received from the trust or scheme).
1 UC Regs, reg 76(3)

[H5146-H5149]

H5150 Notional income

In certain situations a person can be treated as being in possession of income which
they do not actually have (1). This is known as notional income. Notional income
should be calculated in the same way as actual income.
1 WR Act 12, Sch 1, para 4(3)(a); UC Regs, reg 74

H5151 Income upon application H5152

DMs should treat an income that
1. would be paid to a person if applied for and
2. has not been applied for (1)
as notional income. This means that the person is treated as possessing that
income.

1 UC Regs, reg 74(1)

H5152

ADM H5151 does not apply to the GB benefits which would otherwise be taken into
account as income (1).
1 UC Regs, reg 74(2)

Example

Ronnie is in receipt of UC and he also cares for his elderly mother. Although Ronnie
cares for his mother and may qualify for CA if a claim was made for it, the DM
cannot treat the CA as notional income.

H5153

Only take an income into account if it can be shown beyond doubt that an application
or claim for it would succeed. The DM should
1. gather evidence and
2. consider all the qualifying conditions for the income.
It should not be assumed that one or more qualifying conditions are satisfied.

Example

In the past Beth has received payments from a trust. The trustees have the
discretion as to whom they can make payments to. They are not obliged to make
payments to Beth and Beth has no power to demand payments from the trust. The
DM cannot treat Beth as being in receipt of notional income in respect of possible
payments from the trust.

H5154 Notional retirement pension income upon application

A person who has reached the qualifying age for SPC has to be treated as
possessing any retirement pension income (1) which they
1. have not applied for and
2. would be expected to be entitled to.

1 UC Regs, reg 74(3)

H5155

The circumstances in which a person can be treated as possessing notional
retirement pension income are the same as in the SPC scheme and the same rules
apply (1).
1 UC Regs, reg 74(4)

H5156 Retirement pension - notional income H5159 H5160 H5161

A person who has reached qualifying age for SPC, but who does not claim RP, has
to be treated as possessing the amount of RP which they could be expected to
receive (1), but only from the date it could be expected to be acquired if a claim was
made. This will apply in joint claimant cases where one member has reached the
qualifying age for SPC and the other member has not.
1 SPC Regs, reg 18(1)

Example

On 1 November Alice claimed UC. Her partner John is aged 68 and is not in receipt
of any RP.
On 6 November the Pension Service advised that John would be entitled to 80 a
week RP if he made a claim for it.
The DM estimates the time it would take for a typical claim for RP to be dealt with
and put into payment and decides that John should be treated as having a notional
income of 80 a week from 13 November.

H5157

For UC purposes RP includes (1)
1. contributory (Category A or B) RP including an increase in respect of a partner
2. non-contributory (Category C or D) RP
3. a SAP payable as a result of divorce
4. graduated retirement benefit earned between 1961 and 1975 under the
graduated pension scheme
5. any age additions.
1 UC Regs, reg 67, SPC Act 02, s 16(1)(a)-(e)

H5158 Deferring retirement pension

The rules on deferring RP allow people who have deferred claiming their pension for
at least twelve months from April 2005 to have the choice between taking extra RP
or a lump sum payment for the additional RP accrued.

H5159

Where a claimant to whom ADM H5156 applies
1. has deferred their RP for at least twelve months and
2. would have been entitled to make an election under specific RP legislation (1)
they have to be treated as having the amount of RP income (2) which they might
expect to be entitled to if they had elected to receive a lump sum.
1 SS CB Act 92, Sch 5 or 5A; Graduated Retirement Benefit Regs, Sch 1; 2 SPC Regs, reg 18(1B)

Example

Roger claimed UC on 12.10.12. His partner, Sally, is aged 61 and confirmed that she
is currently deferring her entitlement to RP.
Sally has deferred her RP for 18 months.
The DM received evidence that Sally would be entitled to 100 RP a week if she
opted to take a lump sum payment for the deferral period, instead of additional RP
that she would be entitled to.
The DM decides to treat Sally as having a notional income of 100 a week.

H5160 Deferring retirement pension whilst an overlapping benefit is in payment

Where a claimant to whom ADM H5156 applies is in receipt of an overlapping
benefit or allowance, the amount of RP income they are treated as having (1) is the RP
that they are entitled to minus the amount of the benefit or allowance in payment.

1 SPC Regs, reg 18(1CA)

H5161

Where a claimant to whom ADM H5156 applies is in receipt of an overlapping
benefit or allowance - which would result in an adjustment to be made to the amount
of RP payable - they are treated as having (1) the RP income minus the adjustment
which would be made to it.
1 SPC Regs, reg 18(1CB)

Example

Jack is 67 and has been deferring his RP for two years. His partner has claimed UC.
Jack receives 46.95 a week CA that is taken fully into account.
The DM receives evidence that Jack would be entitled to 80 a week RP if he
claimed it and opted to take a lump sum payment for the period he has deferred.
The DM decides to treat Jack as having notional RP income of 33.05 a week (80
RP less 46.95 CA).

[H5162-H5169]

H5170 Occupational pension schemes - notional income

A claimant who has reached qualifying age for SPC and has entitlement to an
occupational pension but who has elected to defer payment should be treated as
possessing the amount of occupational pension he could expect to receive if he
applied for it (1), but only from the date it could be expected to be acquired if a claim
was made.
Note: See ADM H5172 et seq for where a claimant fails to secure money purchase
benefits under an occupational pension scheme.
1 SPC Regs, reg 18(1D)

Example

Asif belongs to an occupational pension scheme. The retirement age for the scheme
is 60. However, it is possible to defer drawing the pension for four years after this
age in return for receiving a larger income. It is also possible to apply for the
occupational pension from the age of 55 but payments would be made at a reduced
rate.
Asif decides to take his payments at the age of 60. The DM decides that Asif has not
deferred payment of his occupational pension because he has taken the pension at
the retirement age for the scheme.
Personal pensions

H5171 General H2046

A personal pension is a fund that provides an income on retirement for employees (1)
or the S/E2. This may be done by
1. buying an annuity or
2. taking an income from the pension fund. Taking an income from the pension
fund allows the purchase of an annuity to be delayed up to the age of 75. The
amount of income paid from the fund is recalculated every three years. At the
age of 75 an annuity must be purchased.
1 PS Act 93, s 1; 2 Income and Corporation Taxes Act 1988, Part XIV, chapter IV

H5172 Personal pensions/occupational pensions where income withdrawal is allowed - notional income H5170

Treat a person who has reached qualifying age for SPC who
1. is entitled to money purchase benefits under a personal pension or
occupational pension scheme that allows income withdrawal and
2. has not bought an annuity and
2.1 has deferred taking all or part of the income from the fund or
2.2 has failed to do everything necessary to get all or part of the income
from the fund that would be payable if he applied for it
as having a notional income (1).
1 SPC Regs, reg 18(2)(a)(i) & (ii)

H5173 Amount of notional income

The amount of the notional income is the maximum amount of income that may be
withdrawn from the fund (1) (see ADM H5182 et seq).
1 SPC Regs, reg 18(3)

H5174 From what date should the DM take notional income into account

Take notional income into account from the date that the person could expect to get
the income if an application was made (1). To calculate this date
1. assume that an application was made on the date that there is sufficient
evidence to show that a notional income should be calculated and
2. add the estimated time it would take the pension fund holder to process an
application for the maximum amount of income.
1 SPC Regs, reg 18(2)

Example

Holly is in receipt of UC. Her husband, Bernard, is 61.
On 1 November the DM receives evidence that Bernard is entitled to a personal
pension but has not bought an annuity or drawn an income.
The pension fund holder states that Bernard's scheme can provide an income. In
Bernard's case the maximum amount of income, based on the Government's tables,
is 23 a week.
Once an application is made it would take the pension fund holder six weeks to
arrange for the maximum income to be paid.
The DM decides that Bernard should be treated as having a notional income of 23
a week from the first day of the assessment period in which the personal pension
would have been paid.

H5175 Personal pensions/occupational pensions where income withdrawal is not allowed - notional income

Treat a person who has reached qualifying age for SPC who
1. is entitled to money purchase benefits under a personal pension or
occupational pension scheme that does not allow income withdrawal or
2. has a retirement annuity contract
and has not bought an annuity, as having a notional income (1).
1 SPC Regs, reg 18(2)(a)(iii) & (b)

H5176 Amount of notional income H5192

The amount of notional income is the amount that a person could have received
without buying an annuity, if the pension funds or retirement annuity contract were
held in a scheme that did allow income withdrawal (1) (see DMG ADM H5182 et seq).
1 SPC Regs, reg 18(4)

H5177 From what date should the DM take notional income into account

Take notional income into account from the date that a person could expect to get
the income if an application was possible (1). To calculate this date
1. assume that an application could be made on the date that there is sufficient
evidence to show that a notional income should be calculated and
2. add the estimated time it would take a typical pension fund holder who did
provide an income from a fund, to process an application for the maximum
amount of income.
1 SPC Regs, reg 18(2)

Example

Dan is in receipt of UC His wife, Fiona, is 62. On 1 November the DM receives
evidence that Fiona has a retirement annuity contract.
The pension fund holder provides evidence, based on the Government tables, that
Fiona would receive 30 a week if the fund was invested in a pension fund that paid
an income.
The DM estimates that it would take six weeks for a typical pension fund holder to
arrange for the maximum income to be paid from a fund.
The DM decides that Fiona should be treated as having a notional income of 30 a
week from the first day of the assessment period in which the income would have
been paid.

H5178 Meaning of money purchase benefits

The term money purchase benefits means (1) where pension benefits are determined
by the amount of the payment or payments made by or on behalf of the member of
the pension scheme rather than average salary benefits.
1 SPC Regs, reg 18(5), PS Act 93, s 181(1)

H5179 What is a pension fund holder

A pension fund holder, with respect to an occupational pension scheme, personal
pension scheme or retirement annuity contract means (1)
1. trustees
or
2. managers
or
3. administrators
of the scheme or contract concerned.
1 SPC Regs, reg 1(2)

H5180 Who is a person who derives entitlement

The term person who derives entitlement is used to describe people who may be
paid a pension at the discretion of the pension fund holder. When the original
pensioner dies the pension fund holder has discretion to decide what to do with the
fund.

H5181

People such as widows or widowers of the person who bought the pension, will only
have entitlement to payments at the discretion of the pension fund holder.

H5182 Information and evidence H5173 H5176

Pension fund holders must provide the DM with information about
1. the maximum amount of income available from the pension fund and
2. the amount of income that would be available if the funds were held in a
scheme that produces an income.

H5183

This information is based on tables prepared by the Government (1). DMs should
consider evidence from pension fund holders when deciding the amount of notional
income. Do not make a decision until the pension fund holder has been given
sufficient time to provide evidence.

1 UC, PIP & WaB (C&P) Regs, reg 41

H5184

DMs should consider the evidence of the pension fund holder but are not bound to
accept it. Consider all the evidence on the amount of notional income before making
a decision. The decision should be based on the most convincing evidence
available. See ADM Chapter A1 on the Principles of Decision Making and Evidence.

H5185 Lump sums on retirement

At the point that
1. an annuity is bought or
2. an income is taken
from the personal pension fund, a lump sum of up to 25% of the fund may be taken.
Treat this payment as capital.

[H5186-H5189]

H5190 Actual income

Take into account in full in the normal way, any income that is
1. paid under an annuity bought with funds from a
1.1 personal or occupational pension scheme or
1.2
retirement annuity contract or
2. withdrawn from a personal or occupational pension scheme.

H5191 Provision under a retirement annuity contract

Before 1.7.88 people could buy retirement annuity contracts. People with these
pensions are entitled to buy an annuity at any time between the ages of 60 and 75.
They are not allowed to take an income from the fund before an annuity is
purchased.
Note: ADM H5033 explains what a retirement annuity contract is.

H5192 Retirement annuity contract - notional income

If a claimant who has reached qualifying age for SPC fails to purchase an annuity
with the funds available under his retirement annuity contract notional income should
be taken into account (1). ADM H5176 explains how much income should be taken into
account.
1 SPC Regs, reg 18(2)(b)

[H5193-H5199]

Calculation of unearned income

H5200 General

The general rule is that unearned income has to be calculated as a monthly
amount (1). The guidance here does not apply to student income (2).
Note: Month means calendar month (3).

1 UC Regs, reg 73(1); 2 reg 73(4); 3 Interpretation Act 1978, Sch 1

H5201

Where a payment of income is made not on a monthly basis then the amount has to
be calculated as a monthly figure (1).
Note: DMs should apply the appropriate supersession rule where an income
commences or ends during an assessment period. ADM Chapter A4 provides
guidance on supersession.

1 UC Regs, reg 73(2)

H5202

This means that
1. weekly payments are multiplied by 52 and divided by 121
2. four weekly payments are multiplied by 13 and divided by 122
3. three monthly payments are multiplied by 4 and divided by 123
4. annual payments are divided by (12)4.
1 UC Regs, reg 73(2)(a); 2 reg 73(2)(b); 3 reg 73(2)(c); 4 reg 73(2)(d)

Example

Lizzie is paid maintenance from her ex-partner. He pays Lizzie 40 every week. For
the purposes of UC, this is calculated as a monthly income of 173.33 (40 X 52 /
12).

[H5203-H5209]

H5210 Fluctuating income

Where the claimant's income fluctuates, the monthly amount has to calculated
1. if there is an identifiable cycle, over the duration of one such cycle (1) or
2. if there is no identifiable cycle (2) then over
2.1 three months or
2.2 some other period which enables the income to be determined more
accurately.
1 UC Regs, reg 73(3)(a); 2 reg 73(3)(b)

H5211 Meaning of identifiable cycle

An identifiable cycle is a recurring round of events where the end of a cycle marks
the beginning of the next cycle.

Example 1

month 1 50 income received
month 2 60 income received
month 3 50 income received
month 4 50 income received
month 5 60 income received
month 6 50 income received
There is an identifiable cycle of three months (months 1 to 3 repeated in months 4 to 6).

Example 2

month 1 100 income received month 2 180 income received month 3 100 income received month 4 180 income received There is an identifiable cycle of 2 months. Example
3
month 1 100 income received month 2 85 income received month 3 90 income received month 4 20 income received
month 5 125 income received
There is no identifiable cycle.

[H5212-H5999]