Should my MIL start collecting her pension?

fiisch

Does anyone else get lumbered with family members' financial quandaries because you having a passing interest in personal finance?! I thought I'd share the wealth and seek some pointers from the hive mind please... 

My Mother-in-law had a major stroke 7 years ago, such that she was left unable to work (mobility/speech impairment). They were tragically very young for this type of stroke, and will turn 60 this year.  They struggle with financial matters, such that my wife has to help her manage her bank account, but she is afforded a reasonable standard of living from the Personal Independence Payment and Employment Support Allowance they currently receive - she's not extravagant, and is now able to save a small amount each month.

She has a modest pension with L&G worth a small 5-figure sum which is currently still invested/not being paid out - should they collect the pension or leave it to invest?

I am of the opinion she should start receiving payments and enjoy the small (I imagine it'll be <£100/month) extra income, rather than leave it to vest further - my thought process is predicated on the assumptions:

1). This won't impact the benefits (PIP/ESA) they currently receive;

2). When ESA stops, it'll be replaced by state pension (i.e.: it won't leave them worse off after the age of 65);

3). Without wanting to be callous, after this type of stroke life expectancy can often be shortened, and therefore it may be better to enjoy the additional income and fruits of when they were in full-time employment while they still can.

4).  Inheritance isn't really a factor - she has 4 (grown-up) children, but I don't think she will leave much/anything behind.

My Mother-In-Law has asked her daughter (my wife) for guidance, and she's generously deferred to me!  How would you advise someone in this situation?  Any factors I've missed?

TIA!

xylophone

Rather confused with the mixture of pronouns.

Is MIL still living with FIL or is she divorced/widowed?

Has she/have they checked state pension age and situation?

https://www.gov.uk/state-pension-age

https://www.gov.uk/check-state-pension

PIP is not means tested.

Re ESA

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

fiisch

Thank you for the reply.  Apologies, pronouns is a difficult one to navigate these days!  MIL is single (no FIL/partner in the picture).

From the links, assuming inheritance not a factor, it would implicate drawing down pension sooner rather than later (won't impact existing benefits).

leosayer

I would suggest you (and/or your wife) become Power of Attorney for your MIL.

This should make the administration a lot easier if she develops further problems in the future.

kaysdee

Does your MIL receive income related or contributory ESA as drawing down her pension will have an effect on the latter.

Kim1965

kaysdee said:

Does your MIL receive income related or contributory ESA as drawing down her pension will have an effect on the latter.

Indeed, if mil takes her pension as income, above£85 a week, she will lose some of her esa. If she takes the tax free part as a lump sum, she will not.
You would be best to verify this on the benefits board, but i think this is correct. 

xylophone

Indeed, if mil takes her pension as income, above£85 a week, she will lose some of her esa. If she takes the tax free part as a lump sum, she will not.
You would be best to verify this on the benefits board, but i think this is correct. 

See link in my post above.

badmemory

If she is saving now & savings do affect her ESA (?) then having more income will make her likely to save more which could, depending on the type of ESA, be a problem.

Brie

Sounds like she doesn't need the money unless she wants to get a bit extravagant on presents to the family.  Or get in more care to help her when she needs it.  

If she is already in receipt of care from the local authority you might want to find out if a TFLS from the pension will affect this.  No point in getting a lump only to have to pay more out of one's own pocket - better to get a higher regular payment that won't affect things so much.  

Is there any restrictions on her talking the pension at 60?  Also state pension won't kick in until 67 I believe.  Have you done a forecast for that to check how much she'll get?