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  • FIRST POST
    • JudyN
    • By JudyN 16th Jun 17, 2:21 PM
    • 3Posts
    • 0Thanks
    JudyN
    ESA and pensions
    • #1
    • 16th Jun 17, 2:21 PM
    ESA and pensions 16th Jun 17 at 2:21 PM
    My son is 27, on Income-Based ESA, and living with me. If he took out a personal pension - which seems wise as his future is insecure because of his inability to work - would this affect his benefit? Could it count either as savings, or intentional reduction of capital (if that's the right term)?

    Thanks in advance
Page 1
    • pmlindyloo
    • By pmlindyloo 16th Jun 17, 2:37 PM
    • 10,507 Posts
    • 12,423 Thanks
    pmlindyloo
    • #2
    • 16th Jun 17, 2:37 PM
    • #2
    • 16th Jun 17, 2:37 PM
    My son is 27, on Income-Based ESA, and living with me. If he took out a personal pension - which seems wise as his future is insecure because of his inability to work - would this affect his benefit? Could it count either as savings, or intentional reduction of capital (if that's the right term)?

    Thanks in advance
    Originally posted by JudyN
    Yes, it might affect his ESA.

    First of all check his ESA award letter and see if he is receiving totally income based ESA or contribution based ESA with an income based 'top up' - possibly because of premiums he is receiving if he gets DLA/PIP.

    If his ESA is totally income based then if he receives the pension as a weekly sum it will be deducted £1 for £1 from his ESA.

    If he takes a lump sum then any savings over £16000 will mean his ESA will stop. Any savings over £6000 will be deducted from his ESA at a rate of £1 for every £250 above £6000.

    I hope I've understood what you mean by taking out a personal pension. Since he's young you might mean 'if he started a personal pension'!

    Please confirm and ask any other questions if you have them.
    • TELLIT01
    • By TELLIT01 16th Jun 17, 2:59 PM
    • 3,609 Posts
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    TELLIT01
    • #3
    • 16th Jun 17, 2:59 PM
    • #3
    • 16th Jun 17, 2:59 PM
    I think the OP means her son contributing to a personal pension rather than currently receiving one. If he is currently in receipt of Income Related ESA then paying a large lump sum into a pension scheme could certainly be considered to be deprivation of capital. For example, if he had savings of £15k and paid £10k into a pension scheme, it's almost certain the DWP would continue to reduce his ESA payment as if he still had £15k.
    • Alice Holt
    • By Alice Holt 16th Jun 17, 3:05 PM
    • 1,210 Posts
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    Alice Holt
    • #4
    • 16th Jun 17, 3:05 PM
    • #4
    • 16th Jun 17, 3:05 PM
    If he is starting to contribute to a pension - this will only affect benefits at the point at which he can access this pension (10 yrs before SPA).

    I think it's unlikely regular pension contributions would be regarded as deprivation of capital.
    However if he was intending to contribute a lump sum, with the intention of reducing his capital in order to maintain benefit payments - then it is likely the DWP would indeed view this as deprivation of capital.

    Edit: As Tellit01 has explained
    Last edited by Alice Holt; 16-06-2017 at 3:06 PM. Reason: Cross posting
    • JudyN
    • By JudyN 16th Jun 17, 3:44 PM
    • 3 Posts
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    JudyN
    • #5
    • 16th Jun 17, 3:44 PM
    • #5
    • 16th Jun 17, 3:44 PM
    Thank you so much folks - that's very helpful. Sorry I wasn't clear in my first post - he would indeed be starting to contribute to a pension rather than drawing one.
    • xylophone
    • By xylophone 16th Jun 17, 3:51 PM
    • 21,977 Posts
    • 12,677 Thanks
    xylophone
    • #6
    • 16th Jun 17, 3:51 PM
    • #6
    • 16th Jun 17, 3:51 PM
    The OP's son should first check with HMRC on whether he has "relevant earnings" for the purpose of making a tax relieved pension contribution.

    http://www.pruadviser.co.uk/content/knowledge/technical-centre/tax_relief_members_contributions/

    It may be that if his only income is income based ESA (which is is not taxable?), he would be confined to a net contribution of £2880 per tax year to a personal pension to which would be added TR of £720, claimed by the pension provider.

    As to whether a pension contribution would be regarded as "deprivation", I think not.

    There are those who make pension contributions to enable them to continue to receive CB ( a means tested benefit) or tax credits (also means tested)?

    http://forums.moneysavingexpert.com/showthread.php?t=3249494

    Once the OP's son came to want to access the pension, current guidance here

    http://www.justadviser.com/documents/means-tested-benefits-and-pension-flexibility-1312231.pdf


    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417473/pension-flexibilities-dwp-benefits.pdf
    Last edited by xylophone; 16-06-2017 at 3:53 PM.
    • JudyN
    • By JudyN 16th Jun 17, 4:28 PM
    • 3 Posts
    • 0 Thanks
    JudyN
    • #7
    • 16th Jun 17, 4:28 PM
    • #7
    • 16th Jun 17, 4:28 PM
    Thanks xylophone :-)
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