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Thread: Pension Lump Sum and Income Related ESA

  1. #1

    Pension Lump Sum and Income Related ESA

    I am in receipt of IR ESA. I am also aged 56 and have the option to cash in part of my small pension.

    I have tried to research the answer to my query but would really appreciate some advice. I have no other income other than ESA - I receive HB and CTR. I have no savings. Am I correct in thinking that I can cash part of it in without it affecting my benefits as long as the amount is less than £6000? I am a recent widow and am really struggling financially.

    If possible, could someone kindly post a swift reply?

    Many thanks

  2. #2
    Senior Member nukecad's Avatar
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    Quick reply is that any savings/capital that you have above £6k will reduce your payments of IR ESA.

    Any savings/capital above £16K will stop it altogether.

    Between those two figures IR ESA payments will be reduced by £1 for each £250 (or part of £250) above £6K.

    ie. £6,001 = £1 reduction, £6251 = £2 reduction, £6501= £3 reduction, and so on.

    The ammount that counts is the total of all your savings/capital.
    I don't know everything. - But I'm good at searching for, and finding, stuff.

    Migration from ESA to Universal Credit- Click here for information.

  3. #3
    Thank you Nukecad,

    I have been given the option of either automatic tax free cash sum of £8897 or another option of £14648, or any sum I wish between the two. I thought if I chose to ask for a tax free lump sum of £6000 this would be totally acceptable by the DWP and not affect my income related benefits. Do you know that if I take the £6000 lump sum am I able to withdraw other lump sums in future tax years? I do not want to take lump sum with a pension income, simply a lump sum to help me out with matters after my husband's death.

  4. #4
    Senior Member nukecad's Avatar
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    If you take £6k or more you should inform the DWP, and they may want to see regular bank statements from then on.

    The first lump sum you draw down is treated as savings and follows the savings/capital rules as above.

    Any further drawdowns depend on how they are taken.

    If they are ad-hoc, ie, taken as and when necessary then they are treated as savings/capital again.

    If they are taken at regular intervals then they may be regarded as income instead.
    eg. If you draw down on the same date every year they can say it's regular income, divide the amount by 52, and say that's so much income per week.

    One problem is that they don't seem to be consistent in this, and often treat regular yearly drawdowns as capital again.

    The main problem is that the rules on pension drawdowns are even more complicated than other ESA rules and even the Decision Makers get mixed up with them. (I certainly do).
    I don't know everything. - But I'm good at searching for, and finding, stuff.

    Migration from ESA to Universal Credit- Click here for information.

  5. #5
    Once again nukecad I would like to thank you for your quick reply.
    I do not intend to take more than £6k. I am hoping not to have to make any further lump sum withdrawals for some time to come. If I understand correctly, any further drawdowns will not be tax free anyway. However, I am not sure if this is correct as the information is, as you say, complex. Do you happen to know if this would be the case nukecad?

  6. #6
    Senior Member nukecad's Avatar
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    Sorry I don't know.

    The problem is that over the last 45 years or so they have messed about with different private pension schemes, all with different rules, so much that nobody realy has a clue what applies to which anymore.
    (And the pension providers are making a fortune out of the confusion).
    I don't know everything. - But I'm good at searching for, and finding, stuff.

    Migration from ESA to Universal Credit- Click here for information.

  7. #7
    Well nukecad I have made the decision that I can't see into the future like everyone else and have to do what is right for me in the here and now. I will ask for £6.000 lump sum now as that is what I need for now. I know this may not be a great decision for my future pension projection but given that sadly all my family have passed away and there is only myself left I do not look into the future too much and try to live in the here and now.

    Thank you to you and other members of this forum as you provide invaluable advice. None of us are absolute experts but we can share what knowledge and experience we have to help as many people as possible.

  8. #8
    Just about to sign and date my form and having re-read it I can now see that the minimum cash lump sum I can take is the £8897 figure!!!! I still think I need to claim this. I have read how much my benefit will be reduced £1 for every £250 over the £6000.
    One final question. Is the reduction taken from my ESA only ie I have worked out they could reduce my weekly income by £11.59. What I am not clear about is will my housing benefit and council tax relief be reduced as well meaning that I will actually lose more than £11.59 as I receive full CTR and HB? I will clearly manage and can take the weekly deduction of £11.59 but if further heavy deductions are made I am not sure if this is the right decision. If £11.59 is the total of deduction from ESA, CTR and HB I will go ahead.

  9. #9
    Senior Member nukecad's Avatar
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    It won't affect Housing Benefit, having an entitelment to IR ESA automatically passports you to maximum Housing Benefit.
    When you are passported then any income and savings/ capital are counted as nil.

    https://cpag.org.uk/welfare-rights/r...ousing-benefit

    CTR is also passported to maximum in Scotland, but in England/Wales it depends on your councils rules.

    Each council has it own responsibility for CTR and it's own rules, so you would have to check on your particular councils website how savings/capital may affect it.
    Last edited by nukecad; 31-03-20 at 12:58.
    I don't know everything. - But I'm good at searching for, and finding, stuff.

    Migration from ESA to Universal Credit- Click here for information.

  10. #10
    I have tried looking up rules for CTR for my local council but haven't found it yet but will persevere. I forgot to mention nukecad that I am in the support Group of ESA and get the Enhanced Disability Premium. Do you think DWP would deduct this EDP AND £11.59 if I take the Pension Cash Lump Sum? Once you have legitimately spent some of the PCLS and your savings drop to 6K in time do the DWP reinstated your full entitlement if your circumstances remain unchanged?

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