Deferring occupational pension past age 60

[TonyinWestWales]

Hello,

I am in ESA Support Group for my mental health problems.
I have been informed of my pension due from a former employer with options to take annuity (in monthly payments) or reduced annuity and lump sum. This can be taken from my 60th birthday in January.

Firstly in considering my options I sought advice from CAB. I was concerned that if I took the option without the lump sum then the DWP may consider that as 'notional capital' because I could have taken the lump sum. CAB allayed my fears on this informing me that this would not be the case but to write to DWP additionally. I was given a photocopy from Chapter 22 page 504 'Capital: under pension age' (not sure which publication title but it is the CAB Bible apparently) this stated:

'Failing to apply for capital

You are expected to apply for any capital that is due to you...If you would get capital if you applied for it, you are treated as having that capital'.
This rule does not apply if you do not apply for:
- capital from a personal pension scheme, or if you are under pension age (see p270), from an occupational pension scheme....'



The DWP response set out the impacts of my pension options in detail, essentially that I would keep the contributary element of my ESA but lose the Income part (my lump sum would be £26000) and monthly income about £400. However I found the final paragraph of their letter ambiguous as it stated seemingly contrary to CAB advice:

'When there is evidence that people are deliberately not exercising an option to draw their pension in order to avoid having deductions made to their ESA the potential payments may be treated as if in payment and taken into account'

At this stage I was merely concerned with which option to take, and felt this was implying that should I fail to take the lump sum option then I would be penalised due to deprivation/ notional capital rules.

I went back to CAB and the most helpful lady was a former DWP employee. She said it was indeed an ambiguous ending to an otherwise clearly laid out letter. She also brought to my attention that I may be eligible to defer my pension which I did not realise was an option, but a phone call she then made to my pension provider confirmed it was indeed the case. My CAB advisor said I could defer my occupational pension up to my state pension age (66) without it being classed as notional income or capital. She said it would be best though to seek clarification from DWP and she draughted me a letter to send to them, this contained the following:

'I have asked CAB about this. They have advised me that my benefit should not be affected if I choose not to take my occupational pension, as I am under state pension age ie there is no notional capital or income assumed (Regulation 106 ESA Regulations).

So, if I decide not to take my pension at age 60, you should have no reason to take this income and/or capital into account, as if I had taken it'

I have now received the latest DWP response which states:

'The law states that if people are treated as having capital which they could get if
1/ They applied for it and
2/ It is available for them if they apply for it.
They are treated as having capital from the date they could be expected to get if they applied for it. 1 ESA Regs 115(2) refers

52856 This does not apply to capital people get from an occupational pension scheme where the claimant has not yet attained the Qualifying age (State Pension Age)

Therefore Notional Income and Capital will not be taken into account if you decide to take out your pension anytime before State Pension Age.

So the information from the Cab is correct.'

So judging from this I would be OK to defer my pension without penalty up to age 65.

This area seems an absolute minefield if you delve into it as I have these past months in trying to make the best decision. Deferring would be beneficial as the pension would increase somewhat but I do not wish to fall foul of DWP deprivation or notional income rules that would be a disaster. My safest bet given the ambiguous and conflicting info out there (including on this most fine forum) would be to take the lump sum option would it not? A further complicating factor being that once my capital reduced below £16000 the new application is likely to involve claiming UC (for the present IR ESA element/ HB). Now it seems both CAB and DWP are in agreement that deferral of my pension past age 60 would not make me fall foul of any rules. However subsequent research delving into the quagmire that is the DMG reveals otherwise perhaps. Also my research just now has brought to attention this post on here with the valuable input from the esteemed Nukecad that further throws the Cat amongst my Pigeons:

https://www.youreable.com/forums/sho...n-and-benefits

This thread suggests that I may well indeed fall foul of the rules so any views on this would be appreciated in helping me finalise my decision. Perhaps it would have been simpler to have tossed a coin!

Many thanks,

TonyinWestWales

[nukecad]

It is a minefield, but you can find your path through with a bit of work. (You are already not doing a bad job).

Are you sitting comfortably?

First off you have to make a distinction between not taking a pension lump sum and not taking pension income.
They are two different things, so when you see something that just says 'taking your pension' it's not telling the full story.

Taking the sentence from the DWP letter that you quote above:

'When there is evidence that people are deliberately not exercising an option to draw their pension in order to avoid having deductions made to their ESA the potential payments may be treated as if in payment and taken into account'

Note that it says 'potential payments' - payments being the potential pension income and not any lump sum.
See below about the Decision Makers Guidance for more on that.

Not taking a lump sum that you possibly could is acceptable and would not be counted as notional capital.
That Chapter 22 that you cite makes that clear. That's probably from the CPAG guidance BTW, which is indeed the professional benefit advisors 'bible'.
(Unfortunately I don't have one of those, they cost a lot and you have to buy a new one every year to keep up with changes to benefits).
I won't quote the DMG on capital, that guidance you have already covers it.

So you don't have to take any lump sum from your pension if you don't want to.
If you do take any lump sum then it will be treated as capital/savings in the normal way.

The statement from the second DWP letter "Therefore Notional Income and Capital will not be taken into account if you decide to take out your pension anytime before State Pension Age." while correct is very misleading, unless you read it very carefully.

Note that it says "Notional Income and Capital".
If/when you take your pension then it becomes Actual Income and Capital so there is no 'Notional' anything if you do take your pension.
It's only things that you don't take that can be 'Notional'.

So we have covered that if you don't take the lump sum then it isn't regarded as Notional Capital.
ie. Capital that you could have taken but didn't is 'Notional'.

With regard to the pension income though the DWP's own guidance makes it clear.

The Decision Makers Guidance, volume 9, chapter 51, para 51050 states clearly: (My higlighting in red)

Occupational pensions
Treatment of occupational pensions in ESA(IR)

51050 Payments of income from occupational pensions should be taken fully into account
subject to the normal rules for calculating the amount of income to be assessed.
Occupational pension schemes are set up by employers to provide pensions for
employees and their dependants. Payments under the

1. British Coal Voluntary Employment Redundancy Scheme or
2. British Coal Industrial Death and Retirement Scheme or
3. British Coal RMPS or
4. Armed Forces Pensions

are included. Occupational pension payments do not include discretionary payments
from a fund set up to relieve hardship. This type of payment is a charitable or
voluntary payment.

So income for an occupational pension affects any IR ESA.

Then para 51551 talks about 'Notional Income' from pensions:

Notional income - schemes where income withdrawal is allowed

When should a person be treated as having notional income

51551 Treat a claimant, who has reached the qualifying age for SPC or over as having
1. any income from an occupational pension scheme, a personal pension scheme or the Board of the Pension Protection Fund which

1.1 has not been claimed and
1.2 he might expect to be entitled to if a claim for it was made

2. income from an occupational pension scheme which the claimant has elected to defer.

(The SPC used there refers to State Pension Credit, which is different to State Pension).

EDIT - See the two posts below for why this no longer matters for ESA.

You can find that guidance here:https://assets.publishing.service.go...95/dmgch51.pdf
Warning it's meant for DWP decision makers so is in semi-legal terms and has to be read very carefully because one paragraph may be modified by a different paragraph. (Legal documents do that).

All that's a bit long but I hope it helps make things clearer.

[walker]

Hello, Tonyinwestwales,

So very glad you posted this thread - and as you will probably notice, I am the person who started the thread you linked to above.

And as you can also see from that thread, I was really struggling to find out the answer - and still was until I saw your wonderful post.

I have asked a dwp person on phone and they said it is not counted until I reach pension age - and when I said what do you mean by pension age? - the age my pension is payable OR state pension age - and he said STATE PENSION AGE

this would concur with what you have been told

I have also found it to be an absolute quagmire of no/contradictory information
I have rung all the relevant agencies including penionwise and pension advisory service (both gov. funded)
and NO ONE knew the answer

Interestingly one of the examples in my thread is of a man having to take his pension by 62(or nearly) or it would be counted anyway
but my brother noticed that THAT example was from an older guide - when the state pension age for women was actually 62 (for benefit issues, it was the YOUNGER of the pension ages which was womens that they worked from)

so it DOES look like we can both defer our pensions, when the time comes


ed. Noooooooooooooooooooooooooooooooooooo
cant face more uncertainty, Nukecad

Although SPC AND SP are different, they both start at the same age

[TonyinWestWales]

Hi Nukecad and Walker and great to get your responses!

Nukecad- that 55551 does state:

'Treat a claimant, who has reached the qualifying age for SPC or over ' above where it mentions deferral.
To me that is clear that deferring below PC age would not be treated as Notional Income unless I am being really thick.
Not sure if I would be allowed to defer just the lump sum but that would be something as would still at least qualify for some HB and would not necessitate the eventual having to apply for UC (if I could get away with that for a couple more years then should be able to live off the Pension income plus lump sum until age 66.

Walker- I too noticed that example of the 62yo and also note that certain sections seem outdated i.e. in referring to the former PC age of 60. Just been skimming through the ESA regulations and that dates to 2008 again when PC age was 60.

It is strange that both CAB and DWP would both seem pretty certain that deferring my pension past 60 would not be penalised (although DWP seem rather tricky and may be trying to trip us up).

[nukecad]

That is a very good point which I had somewhat overlooked Walker.

The two ages used to be different, which is why they used SPC in the guidance. Because it could be lower.
SPC age used to be the age at which a female would reach SP age.
But all the recent changes to State Pension age has meant that in almost all cases they are now the same.

It does mean that my post above (and your own thread) need qualifying with the change.
(I wouldn't normally edit an old thread to update it, things change all the time so where would you stop?, but may make an exception).

So it follows that occupational pension income can now be deferred until State Pension age without it becoming Notional Income.
And as ESA stops at SPA then it will never become Notional income for ESA.
Of course if you do take it then it becomes unearned income.

[walker]

gosh I have just eaten through about 8 luxury chocolate biscuits - from the stress

ed.
OMG Nukecad - I could hug you
well
you AND tony
as this has been such a source of stress for months and months

I still need to know if I should notify them of the pension I will get from my divorce (whenever that finally happens!!!!????)
it will not be in payment, but is a percentage of hubs pension

[TonyinWestWales]

Is that now defo Nukecad!? Can I go ahead with deferral?
Why would the resources not have been updated with such important factors like the rising SPC and State Pension ages I wonder.

I dread implications of my getting tripped up if deferring to the extent that no matter what I am told/ come across on the internet I most likely will still take the Pension in January (be it just the monthly income or with lump sum). Its been a harrowing journey of discovery and false pathways since I had the Pension letter back in July

[walker]

I am totally with you there, Tony
it is such a worry
we all try so hard to do the right thing
but they don't make it exactly easy to find information

[nukecad]

Hi Tony,

Just to note that the 'Old Style' ESA regulations were first enacted in 2008, but have been updated many times.

When looking at them you should make sure that you are looking at the latest revision.
If you get the regulations up from the legislation webpage it will show you the original, look to the left and you will see a list of revised versiond as pdf files, the latest published will be at the top of the list.

You may also find the 2013 ESA regulations, those only apply to 'New Style' ESA.
They are basicly the same as the 2008 regs except that there is no reference to IR ESA.

[nukecad]

I'm in the pub for a while so am restricted what I can do from this phone.

Tony, to clarify what all the above means-

You can defer any lump sum or income until your state pension age without it affecting your ESA.

If you do take a lump sum it will be counted as capital/savings so would affect any IR ESA but not CB ESA.

If you take income from the pension then it will affect both IR ESA and possibly CB ESA.
Thats complicated again, all unearned income affects IR ESA but income from a private pension that is above £85 a week is the only income that affects CB ESA.