Retirement savings on PIP: How can I provide a pension for my daughter who is applying for a PIP | Personal finance | Finance

“I have a 40 year old daughter who is autistic (high scale) currently on PIP. I would like to provide him with a pension without affecting his benefits and saving the ISA. Can you advise how this could be done to ensure that she has good financial support in the future.”

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Andy Baker, Partner and Certified Financial Planner at Equilibrium Financial Planning, responded: “Firstly, it’s important to note that PIP (Personal Independence Payment) is not means tested, so any savings in child support that is made in your daughter’s name should not affect this Support However, if your daughter receives other support, there might be a means test, so this should be considered.

“You mention providing your daughter with ‘good financial support for the future’, but it would be useful to explore exactly what this means in order to establish how much is needed to do so and when it is needed.

“For example, do you need to provide a monthly income or a lump sum? Is access to a property necessary? .

“State pensions are often a big part of retirement income once people are in their late 60s. It can be helpful to explore what entitlements your daughter has accrued so far and whether any contributions Additional National Insurance contributions are required, as National Insurance contributions are not paid on your behalf when you receive the PIP.

“Anyone under 75 can fund a private pension, but the annual amount is limited to £3,600 (including tax relief) if you have no earned income. This contribution could be made by you as a method of financial support for the future. For example, a payment of £2,880 would receive tax relief of £720, even if your daughter does not pay tax. This is a contribution that could be made each year, benefiting from £720 each time and increasing growth on the larger gross amount Higher contributions could be made if your daughter is working and earning more than £3,600.

“Given that the pension money is only available at age 58, which is around 18 years from now, it is worth considering investing the money to generate better returns. Although it is important to be aware that any investment can, and will, go down as well as up. For amounts above this amount, you may want to consider funding an ISA or even placing money in a trust where a trustee could be appointed to provide support for your daughter. A vulnerable person trust receives special tax treatment and can hold assets, including property.

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Certified Financial Planner Kay Ingram replied: “Eligibility for the Personal Independence Payment (PIP) is not affected by the amount of savings an individual has.

“PIP is payable to people aged 16 to 65 with two or more years of residence in the UK, who require long-term support with tasks of daily living and/or mobility due to a health problem.

“The PIP is tax-free and paid in four weekly instalments. From retirement age, the attendance allowance replaces the PIP.

Other benefits and income during PIP application

“You can work while receiving PIP and get other benefits, including Housing Benefit and Universal Credit, if the eligibility criteria are met.

“These benefits take into account an individual’s savings, so while PIP payments are not affected by their savings, it is important to know what matters if other benefits are claimed.

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“Universal Credit does not take into account the first £6,000 of savings, but then applies a reduction in the benefit once savings are higher. When savings reach £16,000, Universal Credit is lost. But all savings don’t count.

“Savings held in a private pension are not taken into account until the claimant reaches statutory retirement age (currently 66, but likely to reach 68 for your daughter). You can make payments to third parties in a pension for her.

Pension savings

“Non-employees can save up to £2,880 a year in a pension and receive a taxpayer grant of 25% of their savings, giving a total of £3,600 a year saved. The pension provider receives the tax relief from HMRC and adds it to their savings so that every £8 saved is worth £10 invested.

“A 40-year-old man who invests £300 a month can expect to grow to a fund of £72,000 after 20 years, rising to £110,640 after 30 years of saving, assuming moderate growth in a fund medium-risk investment level is reached. It is not guaranteed. , and the sum accumulated will depend on the returns of the investments and the fees charged and may therefore vary.

“If your daughter is employed and earns £10,000 a year or more, she is eligible to join her employer’s self-enrollment pension scheme and should automatically get an employer contribution to a private pension of three per cent of her annual earnings between £6,240 and £50,270 She needs to save four per cent with tax relief on that per cent, so a total of eight per cent would be saved, half of which is funded by her employer and the taxpayer.

“If they earn less than £10,000, joining the employer scheme is not automatic. Where earnings are £6,240 a year or more, the employee can apply to join the scheme.

“Many employers offer more than the minimum contributions required under auto-enrollment pensions and paying more to maximize the employer contribution and tax relief makes sense.

“The self-employed can save up to 100% of their profits in a pension, capped at £40,000 a year, with tax relief on their savings.

“Private pensions are available from age 55, and are expected to increase to age 57 from April 2028. Up to 25% of the accumulated pension fund may be considered tax-free. Withdrawals above this amount are taxed as income but can remain tax exempt if their total taxable income is below the personal allowance (currently £12,570).

Other savings options

“If you are only applying for PIP, further savings may be realized without any PIP deductions, but keep in mind that their circumstances and eligibility for other benefits may change, so it may be a good idea to maintain short-term savings below £6,000.

“Up to £20,000 a year can be saved in an individual savings account with growth and income tax exemption. Non-ISA deposit accounts generally pay more interest than ISA accounts. With an allowance tax-free savings of £1,000 a year, if income is less than £50,270 the Cash ISA tax relief is less relevant.

“As your daughter is 40, she is too old to open a Lifetime ISA available from 18-39. Up to £4,000 a year can be saved with 25% added by HMRC, which makes £5,000 per year.

“If she has already opened one, her savings and taxpayer subsidy can continue until she turns 50. The savings grow tax-free and can be withdrawn tax-free if used to purchase a first home or after age 60. Withdrawals for any other reason carry a 25 percent penalty and these savings will count if other benefits are claimed.

“If you can contribute a larger amount to your daughter’s future financial security, it may be helpful to establish a trust fund. You could appoint yourself and others as trustees to act on her behalf at the I would recommend taking regulated financial advice from a member of the Society of Later Life Advisers (SOLLA) www.societyoflaterlifeadvisers.co.uk They have specialist knowledge of taxation, trusts and benefits which should all Many offer a free, no obligation initial discussion. You can check the SOLLA website to find an adviser near you. Free advice is available from Citizens Advice and www.moneyhelper.org.uk .”

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