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