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Small pension pot & ESA/IRESA.

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Fletch69
Fletch69 Community member Posts: 8 Listener
Hi Scope, I turn 55 in few months and have a small pension pot of around £12/13k. I understand the impacts of taking lump sum payment in one go as am in receipt of ESA. I understand that this is a combination of CBESA and IRESA (as also receive PIP My partner is my carer).
Although it is not mentioned on uprating letters I presume I am still on CBESA as I am in Support Group and have been since the transfer from Incap Ben (which I understand was only payable if you had enough NI contributions).

If I take 25 or 50% of the above amount, I will be able to repay relation £5k they had to lend us to pay for an automatic car as I could no longer manage the then manual with clutch.
(I knew I had overpaid for the car but all 2nd hand cars were at a premium due to the covid impact. However, the plan always was, to buy a semi decent 2nd hand car when pension pot became available, but unfortunately health matters brought this plan forward and the automatic purchased was the only 1 in surrouding area.)

Anyway, as said I am aware of the impact of any sums from pension pot going into account and any balance over £6k. This should not be the case, once I have repaid the private loan for the automatic, of which I have proof. My query relates to the remainder of my pension pot & I came across the following in my searches from either Age UK or similar credible websites:

'If you're under Pension Credit age:
Only the money you actually take out of your pension is counted as income or capital, not the full amount that you're entitled to take. The rules are the same otherwise. This means:
    money you take out of your pension will be considered as income or capital when working out your eligibility for benefits - the more you take the more it will affect your entitlement
    if you already get means tested benefits they could be reduced or stopped if you take a lump sum from your pension pot
    if you already get benefits, any money you take out and spend quickly could mean your entitlement gets reassessed
    if the benefit decision maker decides a your motivation for spending the money was to make sure it didn’t affect your means tested benefits, you could be seen to still have the money and have your benefits reduced or lose benefits.'

Nowhere can I find how the remainder/money left in pension pot is treated?

Many thanks for any advice/help that is able to be given.

Comments

  • poppy123456
    poppy123456 Community member Posts: 57,036 Disability Gamechanger
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    Money in a pension pot is ignored when you're under state pension age, even if you can access that if you want to once you reach 55. 

    It's only when you withdraw from it that counts. Any lump sum you take will be treated as capital. If that increases your capital to more than £6,000 there will be a £1/week deduction in your ESA for every £250 or part thereof over that amount. More than £16,000 and means tested benefits will stop. Capital of less than £6,000 is ignored. 

    What ever you withdraw you need to report this, even if it's less than £6,000 because they will find out at some point. 

    For council Tax reduction, some Local Authorities have a maximum savings limit of £6,000 before entitlement ends. For this reason you need to check your LAs website. 

    For weekly/monthly income from a pension this will reduce your Income Related ESA £1 for £1 for this reason I do not advise you to take this option because it wouldn't be financially worth it. 
    I would appreciate it if members wouldn't tag me please. I have all notifcations turned off and wouldn't want a member thinking i'm being rude by not replying.
    If i see a question that i know the answer to i will try my best to help.
  • Fletch69
    Fletch69 Community member Posts: 8 Listener
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    Hi Poppy, many thanks for clarifying the point regarding remainder of monies in pension pot. If I can, I may have couple of further questions on this later on. Just giving me headache at moment, although this should be good thing! You are correct & after further searches makes sense to use as drawdown using as & when need arises instead of taking as small pension for reasons you advise. (Not yet spoken with pensionwise but take it will be advised by insurance company to do so before final decision made).
    Whilst here, as uprating letters don't split, it seems good time to ask if you can say how much esa should be contribution based & how much is income related - total esa £171.90 per week (£343.80 fortnight). This is for partner/wife and myself. Other information is am receiving PIP & my wife is my carer. 
    Trying to keep things as simple as able, so maybe one point per post. Apologies if this lengthens posts/ answers. Thank you so much for help & answers so far.
  • poppy123456
    poppy123456 Community member Posts: 57,036 Disability Gamechanger
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    CB Support Group has now been increased to £138.20/week. It was £129.50/week before the increase. PIP and carers allowance are not affected. 

    Do be aware also that if you take regular smaller lump sums they could see that as having an income 
    I would appreciate it if members wouldn't tag me please. I have all notifcations turned off and wouldn't want a member thinking i'm being rude by not replying.
    If i see a question that i know the answer to i will try my best to help.
  • Fletch69
    Fletch69 Community member Posts: 8 Listener
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    Hi Poppy, Again, thank you for that information on CBESA amounts. Can now work out what the split is, or better able to next month when all amonts have been uprated.

    Just to clarify on your last sentence, I didn't mean taking regular lump sums such as £1 or 2000 every year until pot is depleted, mean for larger expenses such as possibly when need to replace current car, as wont last forever (already 15yr old), or new sofa and or other unforeseen expenses. Would hope this wouldn't be classed as income! 

    So glad we have people like you around to answer queries. The amount of posters who you help/have helped and certainly put minds at rest. Amount of posts I have read and the stress, worry and concern that can be imagined by so many here, and the help you give is impossble to estimate. You're invaluable!
  • poppy123456
    poppy123456 Community member Posts: 57,036 Disability Gamechanger
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    I’m so sorry, I thought I commented on this but didn’t click post comment. 

    Thank you very much for such kind words, they mean a lot! 
    I would appreciate it if members wouldn't tag me please. I have all notifcations turned off and wouldn't want a member thinking i'm being rude by not replying.
    If i see a question that i know the answer to i will try my best to help.
  • Fletch69
    Fletch69 Community member Posts: 8 Listener
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    Hi Poppy, no problem as just being honest. I was also just thinking about anything that should be disregarded, whether 12 months or indefinitely...I then remembered... just this morning in fact about the cost of living payments, again forgetting they went back as far as 2022! 
    So in 2022 and 2023/4 total payments made to qualifying claimants were, if correct, £650 (plus £150 disability) then £900 (plus £150). A total of £1850 to those eligible.
    Please tell me I am correct that these figures, this amount should be disregarded in full, forever, for capital and savings! Certainly put mind at rest, and others hopefully who may not have realised. 
    Apologise for all the additional queries but it is just how thoughts occur, not forgetting everything we need to think about inc impossible complexity of benefits.
    As always, appreciate greatly your and sites assistance answering queries.

  • morr12
    morr12 Community member Posts: 16 Connected
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    Hi Poppy, 
    @poppy123456

    Please could I ask you a question to this. Same topic. 

    Currently on ESA support group, no other income, looking to draw down a small pension pot of £5,600. Would this affect ESA payments? Do I need to inform esa, if so how do I do that? 

    Many thanks 
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