Pension lump sum and ESA

mazworld15

Hi all, hoping someone can help. My sister gets PIP and Income related ESA. She's had a quote of about 14k drawdown from an old pension, we were under the impression you could only have savings of 6k when you get ESA? She needs the cash, if she takes the 14k will she need to tell ESA, will her benefits reduce? She'll probably spend all but 6k right away (paying off debts, helping her son etc) will that make a difference? TIA for any replies

peteuk

Quick google suggest this (CAB 2020) 

If your total savings are:

• £6,000 or less, the DWP won’t take any money off your ESA
• over £6,000 and up to £16,000, the DWP will take money off your ESA – up to £40 each week
• £16,000 or over, you can't get income-related ESA

So if she has a £14K drawdown it will only initially trigger the up to £40 reduction (if the above info is correct) 
What is she using the £14K for?  

TELLIT01

Savings can be a maximum of £15,999.99.  Deductions are made from benefits if savings are £6k or above, but below £16k.  She cannot pay off debts or give money to other people without it probably being classed as deprivation of capital.

mazworld15

peteuk said:

Quick google suggest this (CAB 2020) 

If your total savings are:

• £6,000 or less, the DWP won’t take any money off your ESA
• over £6,000 and up to £16,000, the DWP will take money off your ESA – up to £40 each week
• £16,000 or over, you can't get income-related ESA

So if she has a £14K drawdown it will only initially trigger the up to £40 reduction (if the above info is correct) 
What is she using the £14K for?  

To pay off debts, buy furniture etc, just make things easier I think

poppy12345

mazworld15 said:

Hi all, hoping someone can help. My sister gets PIP and Income related ESA. She's had a quote of about 14k drawdown from an old pension, we were under the impression you could only have savings of 6k when you get ESA? She needs the cash, if she takes the 14k will she need to tell ESA, will her benefits reduce? She'll probably spend all but 6k right away (paying off debts, helping her son etc) will that make a difference? TIA for any replies

She can give her money away but she will still be treated as having it and it will still affect her ESA. Once the money goes into her bank she will need to report the changes to all means tested benefits.

If she's claiming council tax reduction, please be aware that some local Authorities have a maximum savings limit of £6,000 before entitlement to CTR stops.

peteuk

TELLIT01 said:

Savings can be a maximum of £15,999.99.  Deductions are made from benefits if savings are £6k or above, but below £16k.  She cannot pay off debts or give money to other people without it probably being classed as deprivation of capital.

Is ESA different from UC?  As under UC rules paying off debt is acceptable and not seen as deprivation of capital. 

poppy12345

peteuk said:

TELLIT01 said:

Savings can be a maximum of £15,999.99.  Deductions are made from benefits if savings are £6k or above, but below £16k.  She cannot pay off debts or give money to other people without it probably being classed as deprivation of capital.

Is ESA different from UC?  As under UC rules paying off debt is acceptable and not seen as deprivation of capital. 

Yes legacy benefits are different. Paying off debt unless it's immediately repayable could be treated as deprivation of capital.

mazworld15

Thinking if she takes the tax free bit (about 4k) and transfers the rest to a SIPP ? Could she then drawdown when she's used the 4k or would ESA see it as she's had the whole 14k as its in drawdown? tia

kaMelo

mazworld15 said:

Thinking if she takes the tax free bit (about 4k) and transfers the rest to a SIPP ? Could she then drawdown when she's used the 4k or would ESA see it as she's had the whole 14k as its in drawdown? tia

Does she have any earned income?

If not the maximim she can put in a SIPP would be £2880 per tax year.

mazworld15

kaMelo said:

mazworld15 said:

Thinking if she takes the tax free bit (about 4k) and transfers the rest to a SIPP ? Could she then drawdown when she's used the 4k or would ESA see it as she's had the whole 14k as its in drawdown? tia

Does she have any earned income?

If not the maximim she can put in a SIPP would be £2880 per tax year.

No she doesn't, didn't think of that

NedS

mazworld15 said:

kaMelo said:

mazworld15 said:

Thinking if she takes the tax free bit (about 4k) and transfers the rest to a SIPP ? Could she then drawdown when she's used the 4k or would ESA see it as she's had the whole 14k as its in drawdown? tia

Does she have any earned income?

If not the maximim she can put in a SIPP would be £2880 per tax year.

No she doesn't, didn't think of that

She doesn't need income to do a pension transfer. If the current pension provider does not allow the flexibility to take the pension in that way (tax free lump sum followed by regular drawdown), they could transfer the pension to a SIPP which would allow that flexibility.

What she cannot do is withdraw the pension funds and then pay them back into a SIPP (without relevant earned income) as new pension contributions.