Does my mum have to spend all her pension?

Alice86

Hi,

My mum is due to receive a lump sum for a pension she took out in her 20s. I think around £15-20k. She receives PIP (not sure if she received ESA). My dad is telling her she has to spend it all because she's not allowed to have large amounts in her account and it could effect what she receives welfare wise. I don't feel like this is accurate and I'm worried she will be mislead in to blowing all the money and having nothing for later on if needed. She's very naive and impressionable and if told something is likely to believe it. Any advice greatly appreciated.

Kind regards
Alice

MallyGirl

I think you might get better responses on the benefits board

JGB1955

I'm fairly sure that if she's getting a lump sum then she will also be getting a regular pension payment too. Could be wrong of course.... If she spends it all, she will still be considered as having received it, so may well receive lesser benefits.

Mojisola

Alice86 wrote: »

My mum is due to receive a lump sum for a pension she took out in her 20s. I think around £15-20k.

She receives PIP (not sure if she received ESA).

Does she have to take it as a lump sum?

PIP isn't means tested so a lump sum won't affect that.

You will need to find out what other benefits your parents claim to get definite answers.

Aretnap

It's not that she's not allowed to have savings - that's looking at it from the wrong angle. It's that she may not be able to claim certain benefits if she is capable of getting by without them - for example if she has savings above a certain threshold. PIP is not one of those benefits, she could still claim that if she had a million quid in the bank. ESA comes in several types and her eligibility may or may not be affected by her savings depending on which type she is claiming. ( https://www.gov.uk/employment-support-allowance/eligibility )

Be aware that if she receives a large chunk of money, and then spends it very quickly in order to qualify for benefits, that can be treated as deprivation of capital, and it may prevent her from getting the benefits anyway.

It is also a good point that if she is getting a lump sum then she is probably also entitled to receive an income from the pension (hooray) and this may affect her entitlement to some benefits (not PIP, possibly ESA). It is worth looking into exactly what is happening with the pension as she probably has a number of options, and the default one of converting the rest of it to an annuity with the existing provider is not necessarily the best one. A lump sum of £15-20K implies a total pension worth up to £80K, so it's worth a bit of time and effort to make sure she makes the best choices she can.

Agree that you will get more detailed answers to some aspects of your question on the benefits board.

xylophone

It is also a good point that if she is getting a lump sum then she is probably also entitled to receive an income from the pension

Unless the pension is being taken in full under the triviality rules?

It is not clear whether the OP's mother is receiving any means tested benefits as well as the PIP (which is not means tested).

Below may be worth a look.

https://www.gov.uk/government/publications/pension-freedoms-and-dwp-benefits/pension-freedoms-and-dwp-benefits

Alice_Holt

1) PIP will not be affected. PIP is not means tested.

2) We need to know exactly what other benefits she receives.
If she receives ESA and it is contribution-based this will not be affected.
Is the ESA a joint claim with her husband?
If she receives ESA and it is income-based this will be affected.
Do they receive any other means-tested benefits?

3) The effect of savings on means-tested benefits:
https://www.entitledto.co.uk/help/savings
Note that the important thresholds are £6k and £16k.

4) If she does spend money in order to maintain benefits, the DWP will view this as deprivation of capital and will apply notional capital rules (i.e. assume she still has that money). Not a good plan, at all.
http://england.shelter.org.uk/legal/benefits/housing_benefit/calculation_of_housing_benefit/capital_and_income

5) I would strongly suggest she takes all benefit paperwork to her local CAB and establish how they will be affected.
https://www.citizensadvice.org.uk/about-us/contact-us/contact-us/contact-us/
Also she should book an advice session with Pension Wise before taking the lump sum.
https://www.pensionwise.gov.uk/en?gclid=CjwKCAjwmNzoBRBOEiwAr2V27Sr0A-avh2QlBD1zMxR6zMjZAHwgf6YzwqeuPCwbr6SR7DosNu6rthoCQVIQAvD_BwE