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Thread: How does a Lump Sum Pension Payment affect PIP and ESA

  1. #1

    How does a Lump Sum Pension Payment affect PIP and ESA

    I am in receipt of ESA - Support Group (Contribution Based) and PIP. I have now reached 55 and I have a small company pension which I plan to draw. I was offered a lump sum payment of £5,600 and £850 annually and after doing some research found out that this would not affect my benefits. Is this correct?

    However today I received a letter regarding TRIVIAL COMMUTATION OF DEFERRED PENSION which stated that as my pension was less than £30,000 they could offer me a one off payment of just over £61,000 and no further payments This sounds very attractive but how will it affect my benefits - ESA and PIP.

    Can anyone advise me please.

  2. #2
    New Member
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    Hi Sarah

    As your ESA is contribution based then government guidelines state:

    Pension income over a certain level can affect your entitlement to contributory benefits.

    For contribution-based Employment and Support Allowance, half your pension income over £85 per week will be taken into account.

    For contribution-based Jobseeker’s Allowance, all your pension income over £50 per week will be taken into account.

    If you do not take your pension, it will not be taken into account when your entitlement to contributory benefits is worked out. Any cash lump sum you take that is deemed to be capital will not affect entitlement to a contributory benefit.

    Additionally, PIP is not means tested and will therefore be unaffected.

    You do need to ensure that there is no income based ESA top up added to your contribution based ESA though.

    Regards Andrea

  3. #3
    Senior Member nukecad's Avatar
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    As said it should not affect your PIP at all, or Contributions Based ESA.

    However any Income Related Premiums that you have with ESA would stop if you have over £16k capital/savings.

    That is - EDP (called Disability Income Guarantee on letters), SDP, Carerer Premium would all stop.

    Also if you currently have a partner included on your ESA claim then that would stop and you would be classed as a single person for ESA.
    (A 'Contribution Based only' claim is only ever for one person).

    To be more specific then if you have savings/capital of above £16K then you can only recieve CB ESA for a single person, currently for someone in SG that is £113.55 a week.

    PS. If you take the lower offer then £850 a year is £16.35 a week which is not enough pension income to affect CB ESA.
    Whether the £5,600 lump sum would affect any IR ESA premiums would depend on if you already have some savings/capital that would take your savings to over £6,000.
    Any savings between £6K and £16K reduces IR benefits payable by £1 for every £250 (or part of £250) of savings.
    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.

  4. #4
    Thank you for your replies. I have no income related top us to my ESA and it is contribution based My husbands works full time and we do have some savings between us. Over £16,000. Im finding this so complicated to understand.

  5. #5
    Senior Member nukecad's Avatar
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    If you already have savings over £16k then the extra from the lump sum wont change anything.

    If you take a yearly amount then divide that amount by 52 and if it's less than £85 a week that wont affect CB ESA either.
    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.

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