How does a pension lump sum payment effect benefits in Scotland?

*Kat*

Hi all
My mum is unable to work due to disability and has been told she can take out her pensions from previous employment as a lump sum payment. The lump sum payment would be £14,000. For her ESA, her total income-related amount is: £131.30 per week (this is based on living expense, extra money because of the disability income guarantee and extra money because she's in the support group). She also gets PIP and Housing Benefit / CTax support. 
Does anyone have any advice? She has called the council and they are going to call her back in a few days but wondered if anyone here had any info. 

molerat

https://www.turn2us.org.uk/Jargon-buster/Means-tested-benefits

The lump sum will count as capital.  Capital above £6K affects the benefits listed above. Also if she is in receipt of any taxable benefits a lump sum could be part taxable.

https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

calcotti

You could try putting the numbers into a benefits calculator https://www.gov.uk/benefits-calculators
PIP is unaffected as it is not means tested.
If any of the ESA is contribution based it will also not be affected.
Does she have any capital before taking the £14,000. If her capital goes over £16,000 she loses ESA, HB and CTR.
For ESA £14,000 of capital would reduce the weekly ESA payable by £32/week (if the ESA is all income based).

superbigal

I would also be checking if 14K looks a good offer.  Only you can work out the chances of far exceeding that by whatever the monthly pension would be for rest of life.

calcotti

Another thing to bear in mind is that if she takes regular pension payments these will be deducted in full from income based ESA. For contribution based ESA the first £85/week of any pension income would be ignored.

If there is any uncertainty about whether he ESA is entirely income based or is contribution based with an income based top up she needs to get this clarified as it makes a big difference to the possible outcomes.

[Deleted User]

The first 25% will be tax free the remaining 75% taxed at her notional rate (if she has taxable income) but some or all of the taxed can be easily repaid on request (if she doesnt have taxable income)