Legacy Benefit and Pension

dmwors

Hi

I’ve phoned ESA but can’t get a straight answer so hoping someone can help. Am In receipt of legacy benefit ESA support group. (Age 56) I have a mortgage which am struggling with and would like some breathing space. I currently have an old SERPS pension worth £4.000 which I would like to cash in and put straight into my mortgage to give some breathing space but ESA won’t give a straight answer as to whether this will be classed as income or savings. If classed as income then ESA will be stopped and will be in a worse position but if classed as savings then would be under the £6.000 limit. Hope someone knows x

calcotti

A lump sum pension payment is capital.

dmwors

Thanks! How will this affect ESA income related benefits? 

poppy123456

Savings of up to £6,000 are ignored. For every £250 or part there of over this amount then there's a £1/week deduction. For savings of more than £16,000 entitlement to all means tested benefits ends.

For council tax reduction some local Authorities have a maximum savings limit of £6,000 before entitlement to CTR ends.

dmwors

Is this for both legacy benefits and universal credit as will be moving over soon. Also, do you have a link on gov.Uk explaining this please x

poppy123456

For those claiming Income Related ESA you won’t be invited to apply for UC as part of managed migration until at least 2028. Unless you’re claiming tax credits.

To answer your question the savings limit applies to UC as well but for every £250 or part there of over £6,000 there’s a £4.35/month deduction. Over £16,000 entitlement stops. 

dmwors

Thanks for that. Would I need to inform ESA about the pension lump sum if this would be classed as savings? Feels like a lot of money to not inform them?

calcotti

dmwors said:

Thanks! How will this affect ESA income related benefits? 

You covered this in your opening post

dmwors said:

.. if classed as savings then would be under the £6.000 limit. 

which is why I didn't say any more in my reply.

dmwors said:

Thanks for that. Would I need to inform ESA about the pension lump sum if this would be classed as savings? Feels like a lot of money to not inform them?

It's probably prudent to tell them cause they will become aware of it in due course. When you tell them make it clear that it is a one off pension lump sum and that your capital/savings remains below £6,000.

Not sure what you intend but if you are going to give yourself a 'breathing space' on the mortgage you should either use the lump sum to pay each monthly payment as it becomes due or agree with the mortgage provider that you intend to pay £x now and then want to not pay monthly payments for the next x months. The latter may be more difficult to organise.

poppy123456

You do not need to inform them if it doesn’t take your savings to more than £6,000. 

dmwors

Could either of you please send me a gov.Uk link where you got your information from please. I can’t find this anywhere xx

calcotti

dmwors said:

Could either of you please send me a gov.Uk link where you got your information from please. I can’t find this anywhere xx

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1063461/dmgch51.pdf
Paragraph 51002
A lump sum doesn't fit the description that defines what is income and is therefore capital.

see also see Paragraph 51545

51545 Where a claimant chooses to
1. take ad-hoc withdrawals or
2. take the whole sum
then the amount withdrawn falls to be treated as capital (see DMG Chapter 52).

dmwors

thanks so much 🙏 xx

dmwors

Calcotti Ive just understood what you have said regarding paying the lump sum towards the mortgage as this would just be classed as overpayment and they would still require the full mortgage each month. Will need to have a think as I just want some time to look at my options, If I sell then legal aid require a charge back plus selling fees/buying fees. My heads in a whirl xx

calcotti

dmwors said:

Calcotti Ive just understood what you have said regarding paying the lump sum towards the mortgage as this would just be classed as overpayment and they would still require the full mortgage each month. Will need to have a think as I just want some time to look at my options, If I sell then legal aid require a charge back plus selling fees/buying fees. My heads in a whirl xx

If you get a £4000 lump sum from your pension and your total savings are below £4,000 then your ESA is not affected. You can then just pay your usual monthly mortgage payments as usual and the £4,000 will simply give you that a financial cushion until it is exhausted.

dmwors

Oh yes thanks! That would be far better.  Have a lovely even evening and thanks again 🙏 x