ESA And Private Pension.

xsunnysuex

I've been on income related ESA (Wrag) for about 3yrs now. When I used to work before I had my daughter I paid into a pension fund.
My daughter is getting married. I would dearly love to give her some money towards the cost.
I decided to look into cashing my pension in so I can maybe give her £1000. Due to the pension changes I can do that as I am now 55yrs old. It isn't a great amount. I have received a quote from the pension holder of just over £4000 if I take a lump sum. Then this apparently will give me £600 per year pension.
Does anyone know how this would affect my ESA and housing/council tax benefits?
I don't know what to do. My daughter hasn't had an easy life. So I would like to help her with her wedding. But I don't know if I can do it without getting into trouble myself.
Any help appreciated.

pmlindyloo

xsunnysuex wrote: »

I've been on income related ESA (Wrag) for about 3yrs now. When I used to work before I had my daughter I paid into a pension fund.
My daughter is getting married. I would dearly love to give her some money towards the cost.
I decided to look into cashing my pension in so I can maybe give her £1000. Due to the pension changes I can do that as I am now 55yrs old. It isn't a great amount. I have received a quote from the pension holder of just over £4000 if I take a lump sum. Then this apparently will give me £600 per year pension.
Does anyone know how this would affect my ESA and housing/council tax benefits?
I don't know what to do. My daughter hasn't had an easy life. So I would like to help her with her wedding. But I don't know if I can do it without getting into trouble myself.
Any help appreciated.

Two sides to this - the capital and the income.

You are allowed capital of up to £6000 before your income related ESA is reduced. Any amount over £6000 will reduce your ESA by a £1 a week for every £250 over the £6000. If you have savings above £16000 your entitlement to ESA will stop.

If your £4000 lump sum takes you over the £6000 then giving away £1000 will be treated as deprivation of capital and you will be assessed as if you still have it.

Any income from your pension is deducted £1 for £1 from your income related ESA each week.

All the time you are entitled to some income related ESA your HB and CT support would not be affected.

So, in short, ignoring the capital sum you are still going to be getting less ESA each week because of the pension income. However, you will have your pension so money wise you will be the same.

So basically it depends on whether you currently have any savings which would take you over the £6000 threshold (I am guessing not)

One other thing, is this making good use of your pension 'pot'? Are you being penalised for early release?

There is a government set up called PensionWise (google for more information) where you can make a free appointment to discuss your pension. CAB has the contract for running this. It might be a good idea to make an appointment.

xsunnysuex

Thank you. No, I don't have any savings at all. So it would be possible to do it and not have me benefits reduced? Well apart from the pension payments I recieve anyway. Wouldn't my housing benefit and council tax be affected at all?

pmlindyloo

xsunnysuex wrote: »

Thank you. No, I don't have any savings at all. So it would be possible to do it and not have me benefits reduced? Well apart from the pension payments I recieve anyway. Wouldn't my housing benefit and council tax be affected at all?

Sorry, bit confused by this

If you have no savings then the £4000 won't have any effect on your ESA.

But your pension would be deducted from your ESA so you would receive reduced ESA.

As long as you are receiving some ESA then your HB and CT will not be affected.

Are you receiving another pension at the moment and already having it deducted? Or have I misunderstood?

xsunnysuex

No I'm not receiving any pension at the moment. Just ESA. The company I used to work for has now closed. My pension is being held by Sun Life. I meant if I receive the pension I have been quoted. Sorry, I didn't explain it right.

xsunnysuex

I phoned the local council to enquire about housing and tax benefit. I was told it will be taken into account. And my benefits for both will be reduced.
The person I spoke to couldn't tell me how much it would affect these benefits. So I'm a bit stuck now without know that information. I don't know whether I can go ahead and apply for the lump sum.
I did read on here that it shouldn't affect the amount I get unless it amounts to more then £6000. But I don't know. Help.

pmlindyloo

xsunnysuex wrote: »

I phoned the local council to enquire about housing and tax benefit. I was told it will be taken into account. And my benefits for both will be reduced.
The person I spoke to couldn't tell me how much it would affect these benefits. So I'm a bit stuck now without know that information. I don't know whether I can go ahead and apply for the lump sum.
I did read on here that it shouldn't affect the amount I get unless it amounts to more then £6000. But I don't know. Help.

As long as you entitled to some income based ESA then this mean you are 'passported' to HB and CT support up to your eligible level.

Your pension of £600 per year means you will still receive some ESA so your HB and CT support will not change,

You can put your details into the benefit calculator on https://www.entitledto.co.uk to see what I mean.

Perhaps you didn't make it clear when you phone the council that your were on income based ESA.

xsunnysuex

Thank you. What about the £4000 lump sum? The person I spoke to said they will take that as "income" and that will reduce my benefit?
Thank you so much for your help. I really appreciate it.

pmlindyloo

xsunnysuex wrote: »

Thank you. What about the £4000 lump sum? The person I spoke to said they will take that as "income" and that will reduce my benefit?
Thank you so much for your help. I really appreciate it.

Perhaps I am missing something about how you are intending to take your pension pot.

Rather than give you the wrong advice I suggest you make an appointment with PensionWise. See here

https://www.pensionwise.gov.uk/

Once you know exactly what options you have with your pension then you can visit CAB and ask them how your benefits would be affected.