Capital that cannot be accessed.

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  • #39944
    owst
    Participant

    Hi,

    We have a claimant who has £50,000 in a “Term Deposit Account”. This was taken out 1 year ago, and no withdrawals or closure are permitted for another 2 years, except in the case of death.

    This is a potential new claim, and we will ask questions around the reasons for investing in this way, but the gap between investing the money and claiming benefit is 11 months, so I am not too concerned about notional capital issues.

    I am inclined to disregard the full amount until the end of the term, and just wanted to get a second opinion from people on this.

    Many thanks,

    Jon

    #114003
    Kay_Tade
    Participant

    [quote=owst]I am inclined to disregard the full amount until the end of the term, and just wanted to get a second opinion from people on this.[/quote]

    I don’t think this is one of the cases where you have no absolute access to your funds, as far as I understand it, the money can only be withdrawn before the term has ended or by giving a predetermined number of days notice if a penalty is paid. So the deposit is still capital.

    #114006
    owst
    Participant

    Thanks Kay,

    She’s actually brought in the agreement from the bank, and it states:

    “Withdrawals or early closure of the Term Deposit are not permitted under any circumstances during this term except in the event of death of the Customer.”

    Jon

    #114013
    chris harvey
    Participant

    This is capital, it is not disregarded so has to be valued. How much would you pay for a bond maturing in 2 years for say £52,000 (or whatever the maturity value happens to be). Maybe £48,000..£49,000..
    It is little different to other bonds such as government bonds that mature in the future but can be bought and sold today. The market for bank bonds is not as fluid but it is there nevertheless.
    I would take a conservative estimate that could be defended easily, maybe £45K?

    #114018
    owst
    Participant

    Chris,

    I thought about bonds from the previous post on this subject, but this is different. It’s from Lloyds TSB and cannot be sold or exchanged. My main worry was whether she had set up this sort of account purely to claim benefit, but that doesn’t seem to be the case.

    Jon

    #114023
    chris harvey
    Participant

    There may be a condition that it is not transferable but the rights to the proceeds of the investment can be traded. Traded endowments work like this (although they are disregarded because of the life insurance element the principle is the same). These are very common types of investment and if there was a rule that they can be disregarded everyone would be taking them out to avoid capital tariffs in means tested benefits.
    Remember the way our regs are framed require us to value capital that is not disregarded and tell us to use it’s current market value. The problem with these type of investments (particularly ones with limited marketability) is arriving at a value that reasonable. It is clear to me that the current market value of this investment will exceed the capital limit by some margin.I would make a decision that they fail to qualify because they exceed the prescribed capital limit

    #114025
    owst
    Participant

    Chris,

    Thank-you for your advice on this. I will call the claimant and explain that she is not eligible.

    Jon

    #114031
    Kevin D
    Participant

    [quote=owst]Chris,

    Thank-you for your advice on this. I will call the claimant and explain that she is not eligible.

    Jon[/quote]
    ————————————–
    A formal notification is still required in order that the clmt is given her rights to dispute / appeal / request a SoR. As a techie point, it’s not that she isn’t “eligible”, the LA is simply deciding she is not entitled – it’s not quite the same thing.

    #114040
    owst
    Participant

    Kevin,

    No, of course. Thank-you. I need to watch my language. :bigsmile:

    Jon

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