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ESA and small annuity

edited 30 November -1 at 12:00AM in Benefits & Tax Credits
10 replies 614 views
robbond55robbond55
82 posts
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edited 30 November -1 at 12:00AM in Benefits & Tax Credits
Hello - I was just wanting a bit of advice please.
I receive a very small annuity of £360 per year as cashed in a private pension that I had not paid into for years - I stopped working in 2008 due to MS and have received ESA in the support group for a number of years due to it - my wife is my full time carer.
I was able to cash in the annuity early as due to the ill health as I am now 49 not at retirement age.
I was just wondering though about the way different way incomes are treated as I understand that if it was a small private pension it would be treated differently to an annuity.
I receive a single annual payment of Rob£360 in April in one lump sum and have done for the last five years and informed ESA straight away and they deduct just under £7 per week from my ESA payment because of this.
However, I understand that if it was classed as a private pension then it would fall under the permitted earnings rule of ESA and therefore the first £15 per week would be disregarded - I have no earnings other than this and was wondering if someone could provide a bit of clarity on this please as otherwise it seems a little unfair as the only real difference as far as I see is the name of the payment.
Many thanks in advance anyway
Rob

Replies

  • calcotticalcotti
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    A private pension would not be treated as earnings and there would be no earnings disregard applied.
    Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.
  • TigXCTigXC
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    calcotti .... How so?



    Recently had an early payout on my pension (I currently work part-time) and the Tax Office classed it as Taxable Earnings. As such they added this sum to my wages thus increasing my yearly earnings by the amount of this Private Pension payment!


    Because of this 'increase to my yearly earnings' as they put it... it now raises my yearly income (in their eyes) and as such they've reduced my monthly Working Tax Credit amount as well as removing my Tax Exception Certificate (for help with Health Costs etc ...) even though my income is (currently) still below their 16K earnings threshold for one of these Certificates?


    [The way my earning are going ... it's only if I where to get a hefty dose of overtime by the end of the tax year that I'd actually breach the 16K threshold ... but despite the fact I'm under this 16k yearly income figure they still withdrew my entitlement as soon as they where informed I'd had this PP payment!].


    No amount of trying to speak with them has helped as (tbh) I doubt any of their telephone operators are full up on all the ins & outs of their own tax regs [I've spoken to at least three different operators and was given different information each time! Also calling them is a nightmare and sooooo draining!!!] .... they just class any P/Pension Payout as a continuing recurring taxable monthly payment (even if it's just a one off payment) that's then added to your monthly income... each month! (I'm just now hoping that it all gets sorted after the end of the tax year ... fingers crossed?)


    So sorry to say ... my Private Pension payouts are classed (by the tax office) as earnings and as such are Taxable! [Go tell the Taxman if you really know differently?]
  • _shel_shel
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    TigXC wrote: »
    calcotti .... How so?



    Recently had an early payout on my pension (I currently work part-time) and the Tax Office classed it as Taxable Earnings. As such they added this sum to my wages thus increasing my yearly earnings by the amount of this Private Pension payment!


    Because of this 'increase to my yearly earnings' as they put it... it now raises my yearly income (in their eyes) and as such they've reduced my monthly Working Tax Credit amount as well as removing my Tax Exception Certificate (for help with Health Costs etc ...) even though my income is (currently) still below their 16K earnings threshold for one of these Certificates?


    [The way my earning are going ... it's only if I where to get a hefty dose of overtime by the end of the tax year that I'd actually breach the 16K threshold ... but despite the fact I'm under this 16k yearly income figure they still withdrew my entitlement as soon as they where informed I'd had this PP payment!].


    No amount of trying to speak with them has helped as (tbh) I doubt any of their telephone operators are full up on all the ins & outs of their own tax regs [I've spoken to at least three different operators and was given different information each time! Also calling them is a nightmare and sooooo draining!!!] .... they just class any P/Pension Payout as a continuing recurring taxable monthly payment (even if it's just a one off payment) that's then added to your monthly income... each month! (I'm just now hoping that it all gets sorted after the end of the tax year ... fingers crossed?)


    So sorry to say ... my Private Pension payouts are classed (by the tax office) as earnings and as such are Taxable! [Go tell the Taxman if you really know differently?]

    You know HMRC and the DWP are different departments with their own rules right?
    Don't Buy The S*n
  • calcotticalcotti
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    _shel wrote: »
    You know HMRC and the DWP are different departments with their own rules right?

    If this is a response to TigXC (who confusingly has raised a different issue to the original OP, rather than starting their own thread) then DWP are not involved. Their issue is with income tax and Tax Credits both of which are dealt with by HMRC (but in different departments).
    Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.
  • calcotticalcotti
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    TigXC, initially I think may be a tax issue rather than a Tax Credits issue. If you speak to HMRC about your income tax I think there's a form you can complete to confirm that this is a one off payment rather than a recurring monthly payment. The appropriate form I think varies depending on your circumstances. There are probably posters with more knowledge of this on the Tax or Pension forums.
    Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.
  • _shel_shel
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    calcotti wrote: »
    If this is a response to TigXC (who confusingly has raised a different issue to the original OP, rather than starting their own thread) then DWP are not involved. Their issue is with income tax and Tax Credits both of which are dealt with by HMRC (but in different departments).

    Confusing, assumed it was the op :o
    Don't Buy The S*n
  • Dazed_and_confusedDazed_and_confused
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    Going back to the original question, I'm still confused by this
    A private pension would not be treated as earnings and there would be no earnings disregard applied.

    How do DWP (who do pay ESA) differentiate between a private pension paid by say Standard Life and the company pension of someone who worked for Standard Life and is being paid a company/occupational pension by Standard Life?
  • TigXCTigXC
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    ''TigXC, initially I think may be a tax issue rather than a Tax Credits issue. If you speak to HMRC about your income tax I think there's a form you can complete to confirm that this is a one off payment rather than a recurring monthly payment. The appropriate form I think varies depending on your circumstances. There are probably posters with more knowledge of this on the Tax or Pension forums.''




    calcotti .... my reply (initially) was in response to your ones stating 'Private Pension would not be treated as earnings'' ... They are and as such become part of your Taxable Income for the year they are paid out in.


    The OP say they cashed in an Annuity and that whilst they are getting ESA ... the DWP had deducted £7 a week from their benefit payment. which is right as it's classed as an income .... the permitted work section whilst getting ESA does not mean it's Tax Free or will not effect your final award ... just that your permitted to carry out a set amount of paid work without it taking away your ESa entitlment in full.


    But anyway my reply was aimed at your incorrect assumption that a Private Pension was not classed as earnings ... it is if your still of a workable age and not classed as fully retired and to show this point where Private Pensions, Taxable Earnings and the failings of our own Government (both DWP and the Tax Office) I posted my own experience this year.


    So if your of working age, you get the same yearly tax allowance that everyone does be you in work, full time or part time or on ESA (which ever group). And if you get an Annuity payment it is then added to your final earnings which if it takes you over your yearly tax allowance figure means you pay tax on it ... (in my case my payout did not take me over my tax allowance in any way but still the tax office once they had informed my employer and added it to my earnings total charged me tax from the off (!) and then removed my Tax Credit benefits by way of reducing my Tax Credit as well as removing my entitlement to a Tax Credit Certificate for help with Health costs!).


    In my case my partner also gets ESA as he's severely disabled but fortunately in our case my Private Pension payout has noe effected their ESA award .....


    So ignoring my explanation as to why I know your comment was wrong and going back to the OP ... his payout is classed as earnings and as such will have an impact on his ESA award. And speaking of ESA ... if his award is Income Related (or part-income/part contribution based as they recently introduced!) then any earnings will effect his award total (hence probably the £7 reduction) but if his ESA Award is purely Contribution Based then you or your partner if it's a joint claim can earn as much as you like without these payouts/earnings impacting your ESA award?




    Off the top of my head (so don't crucify me if I miss quote the figures) but if the OP's award under ESA is around £111 a week then he probably on Contribution based ESA .... if it's over £150-170 a week then I'm guessing it's Income Based (he does not say which ESA he's on) so a deduction from a Income Based ESA would be correct .... pension payouts are classed as earnings.





    Enjoy....
  • calcotticalcotti
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    Going back to the original question, I'm still confused by this

    How do DWP (who do pay ESA) differentiate between a private pension paid by say Standard Life and the company pension of someone who worked for Standard Life and is being paid a company/occupational pension by Standard Life?

    For ESA purposes they are treated in the same way. There is a partial disregard in respect of contribution based ESA but for income based ESA they are taken into account in full.
    Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.
  • edited 17 January at 6:01PM
    calcotticalcotti
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    edited 17 January at 6:01PM
    TigXC wrote: »
    calcotti .... my reply (initially) was in response to your ones stating 'Private Pension would not be treated as earnings'' ... They are and as such become part of your Taxable Income for the year they are paid out in..

    I obviously wasn't clear enough. OP was asking about treatment of his pension income by DWP for ESA purposes. I meant they are not treated as earnings for ESA purposes. The significance of this being that there is a disregard for earnings (below the permitted work limit of £131.50/week) but none for pension income if it is entirely an income based ESA award.

    I completely understand that pension income is taxable income.
    Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.
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