“I have a 40-year-old daughter who is currently autistic (high grade) at PIP. I would like to provide her with a pension without affecting her benefits and ISA savings. You can advise me on how to do this to ensure that he has good financial support in the future. “
Do you have a question that financial experts would like to answer? Email your question to firstname.lastname@example.org. Unfortunately, we are unable to respond to every email.
Andy Baker, Partner and Authorized Financial Planner at Equilibrium Financial Planning, replied: “First of all, it is important to note that PIP (Personal Independence Payment) is not tested for funds, so any savings on pensions that are made on behalf of your daughter would should not affect. Support. However, if your daughter receives any other support, a financial test may be performed, so this should be considered.
“You mention that you provide your daughter with ‘good financial support in the future’, but it would be useful to examine what this means exactly, so that it is possible to determine the amount that is needed and when it is needed.
“For example, do you need to provide a monthly income or a lump sum? Is access to real estate necessary? These are important issues to consider, because ISA can be obtained at any time, but retirement can only be obtained at the age of 58.” .
“State pensions often make up an important part of your retirement income when people are over 60. It may be worth exploring what claims your daughter has accumulated so far and whether additional national insurance contributions are required, as national insurance contributions are not paid on your behalf when receiving a PIP.
“Anyone under the age of 75 can fund a private pension, but the annual amount is limited to GBP 3,600 (including tax breaks) if you have no earnings. You can provide this contribution as a way of financial support in the future. For example, a payment of £ 2,880 would receive a tax credit of £ 720 even if your daughter does not pay the tax. This is a contribution that could be made each year, benefiting from GBP 720 each time and increasing the growth of the larger gross amount. Higher allowances could be made if your daughter works and earns more than £ 3,600.
“Given that you can only get money in the pension system at the age of 58, ie about 18 years of age, it is worth considering investing money in better returns. Although it is important to realize that any investment can and will go down as well as up. For amounts above this amount, you may want to consider financing the ISA or even depositing money in a trust where an administrator could be appointed to provide support to your daughter. The Vulnerable Trust shall be subject to special tax treatment and may hold property, including property. “
READ MORE: ‘Eating is a luxury!’ A double mother at Universal Credit “can’t live” because accounts are rising
Kay Ingram, an authorized financial planner, replied: “Entitlement to Personal Independence Payment (PIP) is not affected by the amount of savings an individual has.
‘The PIP is paid to persons aged 16-65 with a two-year or multi-year residence in the United Kingdom who need long-term support in carrying out everyday life and / or mobility tasks due to their medical condition.
“The PIP is exempt from tax and is paid in four-week installments. From the state retirement age, the PIP replaces the attendance allowance.”
Additional benefits and revenues when applying PIP
“You can work on receiving a PIP and get other benefits, including Housing Benefit and Universal Credit, as long as the eligibility criteria are met.
“These benefits take into account the individual ‘s savings, so while PIP payments are not affected by their savings, it is important to be aware of what counts when other benefits are required.
DO NOT OVERLOOK
“Universal Credit ignores the first £ 6,000 in savings, but after exceeding the savings, it applies a reduction in the benefit. When the savings reach £ 16,000, Universal Credit is lost. But not all savings count.”
“Savings held in a private pension are not taken into account until the applicant reaches the state retirement age (currently 66, but is likely to increase to 68 for your daughter). Third party payments for her can be made by you.
“Non-profit people can save up to £ 2,880 a year on retirement and receive a taxpayer subsidy of 25 per cent of their savings, giving a total of £ 3,600 a year saved. The pension provider collects tax credit from HMRC and adds the savings, so every £ 8 the saved becomes £ 10 invested.
“A 40-year-old who invests £ 300 a month can expect to reach £ 72,000 after 20 years, which will rise to £ 110,640 after 30 years of savings, provided there is modest growth in a medium-risk investment fund. guaranteed. ” and the amount generated will depend on the return on investment and fees charged, so it may vary.
“If your daughter is employed and earns £ 10,000 a year or more, she is entitled to join her employer’s automatic pension scheme and should automatically receive an employer’s private pension contribution of three per cent of her annual earnings between £ 6,240 and £ 50,270. She has to save four percent with tax breaks at that one percent, so a total of eight percent will be saved, with half being funded by her employer and taxpayer.
“If she earns less than £ 10,000, membership in the employer program is not automatic. If the income is £ 6,240 per year or more, the employee can apply for membership in the program.
“Many employers offer more than the minimum contributions required under automatic supplementary pension insurance and additional payments in order to maximize the employer’s contribution and tax relief is reasonable.
“The self-employed can save up to 100 percent of their retirement profits, limited to £ 40,000 a year, with tax breaks on their savings.
“Private pensions can be used from the age of 55, from April 2028 they should increase to 57. Up to 25 percent of the accumulated pension fund can be taken as a non-taxable amount. Withdrawals above this amount are taxed as income, but can remain tax-exempt if its total taxable income less than personal contribution (currently GBP 12,570).
Other savings options
“If you only require a PIP, further savings can be made without any deduction from the PIP, but keep in mind that its circumstances and entitlement to additional benefits may change, so it may be wise to keep short-term savings below GBP 6,000.
“Up to GBP 20 000 per year can be deposited in an individual savings account with growth and income tax exemption. Non-ISA deposit accounts usually earn more than ISA accounts. With an untaxed savings discount of GBP 1 000 per year if the income is less than £ 50,270, the Cash ISA tax credit is less relevant.
“Because your daughter is 40 years old, she is too old to open the Lifetime ISA available between the ages of 18-39. Up to £ 4,000 a year can be saved, with 25 per cent adding HMRC and earning £ 5,000 for year.
“If she has already opened one, her savings and subsidies per taxpayer can continue for up to 50 years. Savings grow tax-free and can be withdrawn tax-free if used to buy the first house or after the age of 60. Withdrawals for any other reason they carry a 25 percent penalty and these savings are credited if additional benefits are required.
“If you can contribute more to your daughter’s future financial security, it might be worthwhile to set up a trust fund. You could appoint yourself and others as trustees to act on her behalf in the future. I would advocate that you use regulated financial Advice from a member of the Society of Later Life Advisers (SOLLA) www.societyoflaterlifeadvisers.co.uk They have expertise in taxes, trusts and benefits to consider, and many provide a free, non-binding introductory discussion. SOLLA, where you can find counselors in your area. Free counseling is available at Citizens Advice and www.moneyhelper.org.uk. “