Capital disregards
- Personal possessions
- Houses and land
- Earmarked capital
- Life insurance policies
- Funeral plans
- Far Eastern Prisoners of War Payment
- Second World War Compensation Payments
- Lump-sum personal injury (including vaccine damage) payments
- Lump-sum payments from certain special trusts and MFET Limited
- Arrears and late payment of benefits
- Lump-sums from deferring State Pensions
- Health in Pregnancy Grants
- Payments from local authorities under the Supporting People scheme
- Money in a trust
- Business assets
When we calculate capital we ignore certain types of capital assets and lump-sum payments, either for a period of time or for good.
The following paragraphs show examples of disregarded capital.
Personal possessions
Personal possessions, for example a car, furniture and fittings in the home, family belongings, are ignored.
Houses and land
If your customer owns the home they live in:
- the value of the home (property, garage and outbuildings) is ignored unless any part of the property could be reasonably sold off separately
- money raised through a loan on the property or through equity release is not ignored (unless it is for necessary repairs and improvements),
- money received by sub-letting part of the property or taking in lodgers or boarders is treated as income (What counts as income for Guarantee Credit?).
If your customer or their partner own a property but do not live in it.
The value of the property can be ignored if it is occupied by:
- their or their partner’s close relative, such as a child or partner’s sister, if that person has reached the Pension Credit qualifying age or is sick or disabled,
- a partner or former partner from whom they are not estranged or divorced (for example, if your customer is in a care home and their husband, wife or civil partner is living in the property).
The value of any property recently bought and which your customer intends to move into within 26 weeks of the purchase is ignored. We may ignore it for longer than this if something serious happens which means the move cannot take place as planned.
The value of the property may also be ignored for 26 weeks – or possibly longer if there are real difficulties – if your customer:
- is trying to sell it [Legislation 24a]
- is carrying out essential repairs or alterations so they can live in it, [Legislation 24b]
- is taking legal action so they can live in it. [Legislation 24c]
The value of the property may also be ignored if your customer has left home after the breakdown of a relationship – in which case we will ignore the value of the property that was their home if the former partner still lives in it and is a lone parent. In other cases we will ignore its value for 26 weeks after your customer has left the property.
Earmarked capital
Certain types of capital needed for a specific purpose may be ignored.
We will ignore the following earmarked capital for up to one year:
- capital from the sale of your customer’s property – if it is earmarked to buy another home
- money from an insurance policy – if it is for damage to, or loss of, a property or personal possessions and is to be used for their repair or replacement,
- capital, such as a loan – if it is to buy a home or pay for essential repairs or improvements.
Life insurance policies
We ignore the surrender value of life insurance policies. If your customer chooses to cash in a policy early, or it matures, the money they get is counted as capital.
Funeral plans
We ignore the value of any pre-paid funeral plan for your customer or their partner, even if they could ask for the money to be refunded. If they choose to cash in the plan, the money they receive is counted as capital.
Far Eastern Prisoners of War Payment
We ignore the special payments made to:
- former prisoners of war and internees of the Japanese or
- their widows or widowers
Second World War Compensation Payments
If your customer or their partner received a lump-sum payment because they were a slave or forced labourer, or lost property, during the Second World War we will ignore an amount equal to their lump-sum payment from their capital.
Lump-sum personal injury (including vaccine damage) payments
If your customer or their partner received a lump-sum payment, which is not held in a trust fund, because of a personal injury we will ignore an equal amount of capital. If the payment was used to set up a trust fund we will ignore all capital in the trust – which may be more or less than the original payment – and any income gained from it.
Lump-sum payments from certain special trusts and MFET Limited
There are a number of special trusts set up by Government to help people who contracted HIV or Hepatitis C from blood products or who suffered from variant Creutzfeldt-Jakob disease (CJD) or who have a severe disability (for example, the Macfarlane Trusts; the Eileen Trust; MFET Ltd and the Independent Living Fund (2006)).
If your customer or their partner received a payment from one of these trusts it may be ignored, either indefinitely or, in some cases, for two years from the date of the payment or the death of the sufferer.
If your customer or their partner received such a payment, they may have been given details of the special rules at the time. (The Pension Credit rules are the same as those which apply to Income Support.)
Arrears and late payment of benefits
Arrears of, and compensation for the late payment of, the following benefits are normally ignored for a year from when they are received:
- Attendance Allowance
- Disability Living Allowance
- Housing Benefit
- Council Tax Benefit
- Income Support
- income-based Jobseeker’s Allowance
- income-related Employment and Support Allowance
- Pension Credit
- War Widow’s Supplementary Pension
- Child Tax Credit
- Child Benefit,
- Social Fund payments (including Cold Weather Payments and Winter Fuel Payments).
Special rules
There are special rules if the amount of arrears or compensation is £5,000 or more and is to put right an earlier official error:
- if your customer received the payment less than a year before they started to get Pension Credit it will be ignored for a year from the date they received it
- if they receive the payment while they are getting Pension Credit it will be ignored for as long as they continue to get Pension Credit,
- if they were getting Income Support, Jobseeker’s Allowance or Employment and Support Allowance immediately before they started to get Pension Credit, and the payment was ignored in that benefit, it will be ignored for as long as they continue to get Pension Credit.
Lump-sums from deferring State Pensions
If your customer or their partner had deferred (put off claiming) their State Pension and chose to take a lump-sum payment rather than increased State Pension when they did claim it, we will ignore an equal amount of their capital, unless they change their mind and opt to receive the increase in State Pension instead. (This also applies if they get a lump-sum payment because their late spouse or civil partner had not claimed their State Pension.)
Health in Pregnancy Grants
If your customer or their partner receives the Health in Pregnancy Grant we ignore the full amount.
Payments from local authorities under the Supporting People scheme
Any lump-sum payments made under the Supporting People scheme will be ignored for a year from when they were received.
Money in a trust
We ignore any capital held for your customer in a trust fund, but any income they get from it may affect their Pension Credit.
There are special rules for payments made at the trustees’ discretion or if the money in trust came from a personal injury payment (income received because your customer or their partner suffered a personal injury).
Business assets
We will ignore the value of your customer’s assets in a business if they are the owner (or one of the owners) and they:
- do some work in that business
- are unable to work in the business because they are ill or disabled but plan to return as soon as they can,
- no longer work in the business and are trying to sell or realise their assets – in which case we will ignore the assets for such period as may be reasonable.
