Pension included as household incomeWatch
This year we had the worst experience with Student Finance, and it has just culminated in a letter stating that we owe over £4000 immediately as a repayment for loan "overpayment". Please let me tell you our story. I feel that it is important for other people applying for student finance to know this information as well, which is my reason for writing on this forum.
For our confidentiality, I will refer to the loan recipient as X.
Last year X applied for Student Finance for their third and final year of University. X's parent (Y) retired this year and their income went to £0, not including Pensions. Y has a State Pension and a workplace pension.
In X's second year, the SFE forms were filled out based on the assumption that Y's income would drop significantly as they were retiring. This meant that X recieved a large Maintenance loan for that year.
Y decided to take out a Lump Sum State Pension, and so had a higher household income in the third year than estimated in the second year. Y filled out the SFE forms including all of this information.
SFE read this and deduced that Y's household income was very high and decided to take the entirety of X's maintenance loan away. SFE said that this was partly to return overpayment from the previous (second) year. According to SFE, X was paid too much Maintenance loan on the assumption Y's income would be lower in the second year than the Lump Sum made it appear.
SFE's letter stated they would pay X's Tuition fees and give her £0 Maintenance loan. X and Y complained to SFE stating that although the Lump Sum made it appear that household income was high, the following year's income would be significantly reduced as Y would not be receiving any more Lump Sum payments.
In addition, X and Y asked SFE to divulge (on the Freedom of Information Act) how they deduced the figures for X's maintenance loan over the three years. SFE refused on the grounds that they could not reveal the other parents' financial information, despite having been sent letters from both parties consenting to the sharing of their information between them. X's parents have sent another letter to SFE asking for this information to be released, but have received no response to date.
Eventually, SFE took the Lump Sum situation into account and stated that X would get a maintenance loan. She received a fair amount.
However, X finished university and has suddenly been sent a letter from SFE stating that X was overpayed in third year and should immediately repay over £4000 to SFE. Another letter was recieved from SFE stating that Y was required to give proof (a P60) of their taxable income for third year. Y was not asked to pay tax last year by mistake on behalf of HMRC. Y rectified this recently and HMRC stated that they will be deducting the tax from the workplace pension for this taxable year. Therefore, whilst it appears no tax was paid on the Lump Sum in the third year, this tax IS to be paid and will be seen on next April's P60.
Student Finance, why are you demanding money like a loan shark? Why have you suddenly sent a fear-mongering letter to X demanding repayment without any prior communication with Y and no explanation to X? Why aren't you investigating for yourselves? Why aren't you communicating with HMRC and other government bodies? Why have you not kept a record of your communication with X and Y? Did you know your poor organisation in this case has also resulted in X being unable to recieve a bursary?
Most importantly, why is a pension considered household income in the first place? A state pension is there to support a retiree so that they can live. A workplace pension is money which has already been taxed and saved so that a retiree can live and eat and breathe. It is saved money, not income. Do you really expect an old aged pensioner to give up their pensions?
Please explain. Thank you.