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Benefits and pension lump sum

homeworkgirl
Posts: 373 Forumite
One of my small occupational pensions will become due shortly on my 60th birthday. I have the option to take a max lump sum of about 15k which would really help me financially to pay off debts, pay off some of mortgage etc. If I take the lump sum that will leave me with a weekly pension amount of approx. £45 per week. However, at the moment I am caring for my father so my income consists of carers allowance which is topped up by income support. I would be delighted to be able to come off benefits and live off my pension alone but obviously this will not be possible without some kind of top up. I have read somewhere that the lump sum would be counted as an income so am worried that I might end up worse off than I am now. I would be grateful for any advice please.
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homeworkgirl wrote: »One of my small occupational pensions will become due shortly on my 60th birthday. I have the option to take a max lump sum of about 15k which would really help me financially to pay off debts, pay off some of mortgage etc. If I take the lump sum that will leave me with a weekly pension amount of approx. £45 per week. However, at the moment I am caring for my father so my income consists of carers allowance which is topped up by income support. I would be delighted to be able to come off benefits and live off my pension alone but obviously this will not be possible without some kind of top up. I have read somewhere that the lump sum would be counted as an income so am worried that I might end up worse off than I am now. I would be grateful for any advice please.
You really need to think carefully about not only your current situation but your future.
You say this is is just one of your occupational pensions. When are the others due to be paid? How much ? When do you receive your state pension?
You really need to do a forecast of what your income will be in the future and how best to use the lump sums/monthly pensions.
You need to take into account other things too.
Are you likely to be able to get a full time job in the future?
Could you take a part time job now? (less than 16 hours and earning under £102 per week after various expenses - google Carer's Allowance for more info. - and you can keep your CA)
Are you receiving Support for Mortgage Interest as you are claiming Income Support?
Even if you took the lump sum you would still be left with £45 per week which would probably wipe out your income support.
Any lump sums spent on debts/mortgage repayments may be classed as deprivation of capital if you want to continue to claim income related benefits. They may treat it as if you still have it (notional capital and you would not get the income related benefit.
What are your plans regarding your house if it is still mortgaged? Do you intend to downsize? How are you going to pay off the mortgage?
Sorry, if I've bombarded you but in situations like this you really do need to think long term as well as how wonderful it sounds to have a lump sum to pay off debts and some of the mortgage.
Does this pension offer any other options?0 -
pmlindyloo wrote: »You really need to think carefully about not only your current situation but your future.
You say this is is just one of your occupational pensions. When are the others due to be paid? How much ? When do you receive your state pension?
You really need to do a forecast of what your income will be in the future and how best to use the lump sums/monthly pensions.
You need to take into account other things too.
Are you likely to be able to get a full time job in the future?
Could you take a part time job now? (less than 16 hours and earning under £102 per week after various expenses - google Carer's Allowance for more info. - and you can keep your CA)
Are you receiving Support for Mortgage Interest as you are claiming Income Support?
Even if you took the lump sum you would still be left with £45 per week which would probably wipe out your income support.
Any lump sums spent on debts/mortgage repayments may be classed as deprivation of capital if you want to continue to claim income related benefits. They may treat it as if you still have it (notional capital and you would not get the income related benefit.
What are your plans regarding your house if it is still mortgaged? Do you intend to downsize? How are you going to pay off the mortgage?
Sorry, if I've bombarded you but in situations like this you really do need to think long term as well as how wonderful it sounds to have a lump sum to pay off debts and some of the mortgage.
Does this pension offer any other options?
Hi, thanks for your reply Lindyloo.
I have two more occupational pensions to come, one I think may be due now (I am waiting for details) and the other one which is much smaller is not due until I am 65. I will not get state pension until I am 67..the one that I think is due now should be about the same as the one I have been talking about with a similar lump sum I would imagine. Would a lump sum from a second pension be tax free also?
The first pension does have the option of taking a higher amount of pension (about £66 pw) if I don't take the lump sum.
Returning to work full or even part time is not really an option due to my full time caring commitment of my dad and also the fact that I have health problems.
I still have £48,000 o/s on my interest only mortgage and have no plans in place to pay this off at the end of the term in 6 yrs so would probably have to sell and downsize.
Regarding the notional capital I have read up a bit on that and it says I would not be classed as depriving myself of capital if I were to pay off debts but I guess that wouldn't include some of the mortgage?
I have just used the benefits calculator and if I took the lump sum of 15k, it assumes this as an income of about 40 pw. The results (which I have always found to be spot on in the past) are that I would no longer be entitled to income support which means that I would lose help with mortgage interest (102.00 per month at present) but would still be entitled to carers allowance and council tax support.0 -
from April next year you will be able to take the cash from all your pensions,on the basis of 25% tax free and 75% taxed at your notional tax rate(20% for most people)it might be an idea to wait until then?0
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