Deferred CSP lump sum effect on ESA

System

This discussion was created from comments split from: Unclaimed Deferred Classic CSP.

Ripley43

Hello I'm just jumping on this thread hoping to get much needed advice.

My Mum has just found out that her deferred classic civil service pension would be backdated to age 60 when she claims it shes currently 64, she did not know that her deferred pension would be backdated in a lump sum. This has put a big fear in her way and is impacting her health as she currently claims contribution based ESA with an income-related top-up alongside Housing and Council Tax Benefit and has deferred the classic civil service pension as per the DMG Chapter 51 (page 139) which basically states that an occupational pension is not classed as notional income until you reach state pension credit age. 

Her big worry is now she has found out she will receive a backdated lump sum of the pension arrears dating to age 60, what are the DWP going to class the backdated pension lump sum payment as? i.e will they say that this money will be applied retrospectively as it is arrears of pension income from age 60, which will mean she has had all her benefits overpaid or because this was originally classed as none notional income and it was deferred that it will only be classed as capital from the date she claims it and therefore only future civil service pension monthly payments are into account for deductions to her contribution based ESA as her capital will take her over the savings limits?

MallyGirl

@Ripley43
I have split this out from a pension query as it is more related to the benefit impact than the pension itself.

Ripley43

Hello @MallyGirl
Apologies, I'm new here what does this mean and where will I find my post?

Newcad

@Ripley43

Hi,

A lump sum from a pension is counted for benefits as capital (savings) not income, and it is only counted from when the money is actually in your account.

So as I see it then it doesn't matter how it became deferred, that still applies

Will she actually have to take the lump sum or will/can it be deferred until state pension age?

It would seem odd if there is no option to defer the payment further. (But some occupational and private pensions do have strange rules).

I suggest reading again the letter she got, it may have been misunderstood.

The lump sum once taken will be regarded as capital for benefits purposes from the day that she receives it, but not until then.

There should be no question of Income Related benefits already paid being affected in any way. - Not least because it will be capital and not income.

It may  of course affect entitlement to IR benefits once it has been received as a lump sum.

Ripley43

@Newcad

Hi, thanks for the reply.

As the lump sum is actually all the arrears of pension from her 60th birthday would this definitely be classed as savings?

Newcad

If I understand what you have said correctly then it can't be classed as income that she could have taken at the time - because she couldn't have taken at the time even if she had wanted to.

The CS calling it 'deferred pension income from age 60' is just a legal move to avoid other possible (probably tax) problems.

Inbetweeners

Newcad said:

If I understand what you have said correctly then it can't be classed as income that she could have taken at the time - because she couldn't have taken at the time even if she had wanted to.

The CS calling it 'deferred pension income from age 60' is just a legal move to avoid other possible (probably tax) problems.

What makes you say 'couldn't have taken at the time even if she had wanted to'?

Classic pension is payable at 60.

Jackie1813

Doesn't this depend on whether or not the mum delayed taking it or whether she couldn't take it?  My husband has a civil service pension that was payable at 60 there was no benefit to delaying it.

Ripley43

@Newcad

She could have taken her pension at 60 but she deferred it so all those monthly payments what she could have had over the years would now be backdated as one taxable lump sum payment along with the 1st monthly pension payment but as I said in original post she was allowed to defer the pension in the 1st place under the rules that a pension is a none notional income. she is just so worried that the DWP will class this one off backdated pension payment as previous income even though she was allowed to defer? I'm so confused by this myself and my poor Mum is going out of her mind thinking all sorts

Newcad

Inbetweeners said:

Newcad said:

If I understand what you have said correctly then it can't be classed as income that she could have taken at the time - because she couldn't have taken at the time even if she had wanted to.

The CS calling it 'deferred pension income from age 60' is just a legal move to avoid other possible (probably tax) problems.

What makes you say 'couldn't have taken at the time even if she had wanted to'?

Classic pension is payable at 60.

I was going on what you said,

"has just found out" which sounds like she didn't know before so it wasn't her decision to defer payment.

I may have misunderstood so let's start afresh.

When does your mum reach State Pension Age?

When is this lump sum due to be, going to be, paid out?