ESA Support Group and lump sum pension

negativpitch

Sorry if this is in the wrong section.

I am currently on the old ESA and in the support group part (I have been for a while)

I have just hit 65 years old.

My state pension doesn't start until I am 67.

I have a very small private pension from a previous employer, and I have been offered to take it as a lump sum of £7,713,79p.

I have no savings.

If I take the offer, I plan to use it all on much-needed home improvements, not as a monthly income.

If I take the lump sum, do I need to inform the benefit people, and will it affect my ESA Support Group payments?

A second question, if I could.

When I reach state pension age of 67, will my ESA stop?

Many thanks for any replies.

NedS

Old style (income-based) ESA has now ended and everyone should have been migrated over to Universal Credit. That means if you are still receiving ESA, it should be the new style contributions based ESA only (£95.55/week??). This form of ESA is not means tested, so any capital you have is not taken into account. However, private or occupational pension income is taken into account. The first £85/week of pension income is disregarded, and anything over this amount is then deducted pound for pound (for example, if you had £100/week pension income, the first £85 is disregarded and the remaining £15 would be taken into account, reducing your ESA payments by £15/week)

So if you take the lump sum, you do not need to notify ESA, but if you take a regular income then you would need to notify ESA of this income.

Your ESA will stop once you reach state pension age, to be replaced by your State Pension.

How much would your pension be annually if you didn't take it as a lump sum, and does it come with any inflation linking. Often taking a pension as a lump sum is poor value to you - the pension provider just wants to reduce their liabilities and get you off their books, and most people are incapable of determining if the offer represents good value or not.

We can advise you here regarding the implications for benefits, but you can also ask about the lump sum versus any pension you are giving up and whether this represents good value on the Pensions forum. Just because they have made you an offer does not make it good value.

Altior

No savings and LCWRA/support group, so you should be eligible for UC as a pre 2026 claimant?

It's not a life changing amount, but circa effective £50 pw extra until sp.

This pot can come under trivial commutation, assuming that you have no other pensions (or in total they are less than £30K).

There is a small tax consideration, NS ESA is taxable, and so is pension receipts. However, if 25% of that is TFLS then you should still be able to receive it all, free of tax, if there's no other taxable income.

I doubt it will pay much more than £15 pw in payment, the home improvements are likely to be more valuable to you. But of course, important to verify the actual amount.

negativpitch

https://forums.moneysavingexpert.com/discussion/comment/82061034#Comment_82061034

I will need to get back to you on this, as my wife is the maths guru, and she worked it out as not being that much really, so I might as well take the lump sum.

negativpitch

https://forums.moneysavingexpert.com/discussion/comment/82061256#Comment_82061256

Many thanks for taking the time to reply.

Altior

https://forums.moneysavingexpert.com/discussion/comment/82061466#Comment_82061466

No worries.

There is another tax consideration, if you are due to get the full new state pension, then under the current income tax regime, any income over the state pension income is likely to be taxed at 20% (current rates). Assuming the personal allowance stays at £12570, or only moves up to be level with the full new state pension at the time.

negativpitch

https://forums.moneysavingexpert.com/discussion/comment/82061034#Comment_82061034

OK 😊I have spoken with my wife.

She said that even though I am taking a lump sum, I will still be getting a payment from them each month, which will be £96.43 a month.

My ESA is £149.90 a week.

It is due to start on the 28th of this month.

That's all the info I have.

NedS

@negativpitch

The lump sum will not affect your ESA.

You should declare the monthly income, but again it should not affect your UC as your pension income is less than £85/week.

Shadyocuk

I thought that UC count all pension income as un-earned income and will deduct it pound for pound (the £96.43 a month income not the lump sum).

NedS

https://forums.moneysavingexpert.com/discussion/comment/82062008#Comment_82062008

That's correct, they do on UC, but the OP has not said they are claiming UC, only that they are claiming ESA where the first £85/week of pension income is disregarded.

Different benefits, different rules.

poppy12345

https://forums.moneysavingexpert.com/discussion/comment/82061034#Comment_82061034

"You said" for example, if you had £100/week pension income, the first £85 is disregarded and the remaining £15 would be taken into account, reducing your ESA payments by £15/week)

This is incorrect. The deduction for any pension over £85/week is 50% so if the pension is £100/week the deduction in New style ESA would be £7.50/week.