ESA, DLA & Ill health retirement pension

tealtastic

This is really complicated so I don't know if anyone can help me...

I had to leave my beloved profession four years ago after I had a rather spectacular nervous breakdown. I haven't worked since and the prospect of me ever holding down a proper job again is pretty remote.

I currently receive DLA, ESA (Support Group plus severe disability payment), Housing Benefit and Support for Mortgage interest.

My home is shared ownership (I own 40%, which is mortgaged) - I bought it before the breakdown when I was earning £50k a year.

Equity in my share is now roughly about 50%. The property is a noose around my neck as it is horrifically expensive. I have ongoing mental health problems (depression & anxiety) and the stress of owning this property doesn't help - I live in constant fear of being evicted should one of my benefits be stopped. I have tried several times to give it up but have been told that to surrender it would be making myself intentionally homeless and ineligible for rehousing. No-one will rehouse me while I have a home and I cannot rent privately because I have no job and secondly, the benefit cap means I could not rent within 20 miles of here (where my care/support team is).

So effectively I am trapped here. I am sorry if that sounds ungrateful as I am lucky to have a roof over my head given the circumstances but being reliant on state benefits is terrifying - not knowing if the rug is going to be pulled from under you at any minute. If my benefits are stopped I would be repossessed as I have no savings to pay the rent/mortgage.

My only option, as I see it (and please correct me if I am wrong) is to sell the property, take the equity from the sale and use that to buy a property outright in cheap part of the country. I am not sure but I suspect this would involve coming off all the benefits as as soon as I sold the house they would class it as capital? The money would go on a new, cheaper property which I would obviously have to buy at the same time.

The added, rather urgent complication is that I have just received a letter to confirm that I have been permanently retired from my profession on ill health grounds and have been awarded a very small pension as a result. It's about £3700 per year pension plus a lump sum of £11,000.

The pension people are waiting for me to confirm details of how to pay my pension and whether or not I want to commute any of the pension to a lump sum (I think that would take the lump sum to just under £19,000).

Am I right in thinking that if I accept the lump sum (either the £11k or the £20k amount) I will have my benefits stopped?

Could someone please suggest what to do?

Do I just say I don't want the pension and turn it down?

I am really panicking now that this pack of cards is about to come crashing down.

Sorry for such a negative post. I'm a tad stressed.

Indie_Kid

DLA won't stop. It has nothing to do with savings or earnings.

pmlindyloo

tealtastic wrote: »

This is really complicated so I don't know if anyone can help me...

I had to leave my beloved profession four years ago after I had a rather spectacular nervous breakdown. I haven't worked since and the prospect of me ever holding down a proper job again is pretty remote.

I currently receive DLA, ESA (Support Group plus severe disability payment), Housing Benefit and Support for Mortgage interest.

My home is shared ownership (I own 40%, which is mortgaged) - I bought it before the breakdown when I was earning £50k a year.

Equity in my share is now roughly about 50%. The property is a noose around my neck as it is horrifically expensive. I have ongoing mental health problems (depression & anxiety) and the stress of owning this property doesn't help - I live in constant fear of being evicted should one of my benefits be stopped. I have tried several times to give it up but have been told that to surrender it would be making myself intentionally homeless and ineligible for rehousing. No-one will rehouse me while I have a home and I cannot rent privately because I have no job and secondly, the benefit cap means I could not rent within 20 miles of here (where my care/support team is).

So effectively I am trapped here. I am sorry if that sounds ungrateful as I am lucky to have a roof over my head given the circumstances but being reliant on state benefits is terrifying - not knowing if the rug is going to be pulled from under you at any minute. If my benefits are stopped I would be repossessed as I have no savings to pay the rent/mortgage.

My only option, as I see it (and please correct me if I am wrong) is to sell the property, take the equity from the sale and use that to buy a property outright in cheap part of the country. I am not sure but I suspect this would involve coming off all the benefits as as soon as I sold the house they would class it as capital? The money would go on a new, cheaper property which I would obviously have to buy at the same time.

The added, rather urgent complication is that I have just received a letter to confirm that I have been permanently retired from my profession on ill health grounds and have been awarded a very small pension as a result. It's about £3700 per year pension plus a lump sum of £11,000.

The pension people are waiting for me to confirm details of how to pay my pension and whether or not I want to commute any of the pension to a lump sum (I think that would take the lump sum to just under £19,000).

Am I right in thinking that if I accept the lump sum (either the £11k or the £20k amount) I will have my benefits stopped?

Could someone please suggest what to do?

Do I just say I don't want the pension and turn it down?

I am really panicking now that this pack of cards is about to come crashing down.

Sorry for such a negative post. I'm a tad stressed.

I will try and help.

First of all, if you sell your property the capital received from the sale is disregarded for 26 weeks (or longer - it is discretionary) when you are buying another house. So you could certainly do this. You may have to prove that you are actively seeking to buy another house.

As regards your pension. If you took your pension yearly then the income received would be deducted from your ESA £1 for £1. so you would be no worse off as your pension would make up the difference.

A lump sum of £11000 would mean that £5000 of it could mean a deduction of £1 a week for every £250 so £20 a week deducted from your ESA.

Plus you are allowed to spend some of this money in a reasonable way. Removal expenses, carpets for your new place etc. An expensive car or holiday would probably be seen as deprivation of capital

Since you are so worried then moving does seem a sensible option if your place is becoming a financial burden. Less stress is always a good move.

Am happy to be corrected about any of the above and you could go to CAB for further advice or wait and get some other opinions from the good folk on here.

It may be sensible to look into whether taking a yearly pension and lump sum rather than the larger lump sum is financially sound.

Not my area of expertise so will leave others to comment on the pension aspect.

Indie_Kid

pmlindyloo wrote: »

As regards your pension. If you took your pension yearly then the income received would be deducted from your ESA £1 for £1. so you would be no worse off as your pension would make up the difference.

Isn't that only income based? I seem to remember there's an £85 a per week disregard for pension if on contributions based benefits and then for every £1 over, 50p is deducted.

BigAunty

The Shelter website has excellent information for homeowners at risk of arrears and repossession.

You are correct that if you leave a property when you had no need to, you can be deemed as making yourself intentionally homeless but this is complex (at least in England anyway, not sure about rules in Scotland and in NI, the rules are again very different and much more generous as the council will house those who struggle to afford rent or mortgage payments).

It is still worth double checking your rights with Shelter under homeless legislation regarding voluntary repossession (simply giving up the property) or if the council could classify you as 'intentionally homeless' when it is clear that you simply cannot afford the property.

Or book an appointment with the council homelessness department showing evidence of your finances that indicate repossession is inevitable and see if they can act at all (usually they won't act until tenure of accommodation is actually at threat in the next 28 days, the law doesn't require them to be particularly proactive). Not sure they will do much, though.

At some stage, x years down the line when your mortgage term expires, the lender will expect you to pay the capital but if you have no realistic prospect of returning back to employment, the lender won't extend the term. When the term expires, you face repossession of the property because the balance of the capital is due but if you are only paying the interest on it (are you, or is the mortgage on a repayment basis?).

Note the risks and issues that come from voluntary repossession - the capital you owe does not magically disappear the moment you post the keys back to the lender. They may sell it cheap at auction and then come after you as a debtor for any negative equity, sales/legal fees, repairs, insurance etc). Read about this on the Shelter website.

You've pitched it as a solution but remember that while you have 50% equity on the normal market, repossessions often get sold off on the cheap and the owner can be deducted steep costs, including the remaining mortgage payments until sold. Could be the start of a new nightmare. Do you have any other debts?

Do some research on the general allocation policies of local social housing landlords (housing associations, the council, etc).

Some bar home owners from applying for housing on their general lists (you've investigated the emergency homeless route but haven't mentioned general waiting list/choice based bidding allocations).

Others will accept homeowners on their general lists and may take into account disabilities/health issues when allocating the priority. You will simply need to check on a case by case (landlord by social housing landlord) basis if they will accept you despite owning a home. For example, I recall a thread on the social housing forum where an overcrowded home owner got a social housing tenancy.

I understand the Mortgage Rescue scheme closed within the last year (in England anyway, you'd need to check the position if you live elsewhere). Worth keeping your eyes open in case it reappears. This is where homeowners with dependents or disabilities at risk of repossession used to be able to sell the property to a local social housing landlord and continue to live in the property as a tenant. Did noone suggest this to you before the scheme closed in the spring? Perhaps it wasn't available to shared ownership people, don't know really.

pmlindyloo

Indie_Kid wrote: »

Isn't that only income based? I seem to remember there's an £85 a per week disregard for pension if on contributions based benefits and then for every £1 over, 50p is deducted.

You are right.

However, if she is on contribution based ESA and income based ESA then I am not sure how this would work. Perhaps someone would clarify.

I was presuming the OP was on income based ESA as she has the premiums, HB and SMI.

GirlFromMars_2

As has already been said, Capital from the sale of a home can be disregarded for 26 weeks (or longer if appropriate) so long as you can prove you are using the money to buy somewhere else. If you sell/buy as part of a chain this wouldn't even be necessary, or were you planning on selling first then buying somewhere else later?

You should write to the DWP to let them know what you are intending to do, so that a Decision Maker can okay it in advance.

Are you planning on using the pension lump sum to add to your housing fund?

Is your ESA wholly Income based? I'm assuming you had contributions from before you became ill, so I'm assuming a fair portion is contribution based, which would continue even with a large sum of capital. DLA isn't means tested so would continue as well.

There are a number of different Shared Ownership housing schemes, it may be worth looking into a more affordable scheme and a more affordable home if you cannot buy outright.

The shared ownership scheme I am with specifically works with individuals with learning difficulties, mental health problems and physical disabilities, and are used to dealing with benefits claimants. The rental portion of my scheme also covers maintenance and repairs to the property structure, and is covered by Housing Benefit.

Good luck with whatever you choose to do. Hopefully your health will improve when you aren't so stressed about losing your home.

pmlindyloo

Perhaps the OP could look on her award letter and tell us whether her ESA is contribution based with an income based top up or whether it is solely income based?

pmlindyloo

OP, try putting different scenarios into the benefits calculator on here:

http://www.moneysavingexpert.com/family/benefits-check

sheeps68

I believe from the advice I've been given if you used your lump sum towards paying off your mortgage you would not receive any financial penalties as that would be a reasonable use of money. I'm looking towards ill health retirement too!

tealtastic

Indie_Kid wrote: »

DLA won't stop. It has nothing to do with savings or earnings.

I saw a newspaper article the other day about a teacher who had been ordered to pay back £100k of DLA money because he had been receiving an ill health pension at the same time. DWP argued that he couldn't receive both.