Would taking a pension lump sum affect ESA payments?

poppy123456

Burtkatarack said:

Regarding New Style ESA and taking the 25% tax free lump sum. I live alone with no income. All I have is my ESA and £2000 in the one bank account. I am in the group and have paid my NI for 30 years. I assume I am on contributory. My 25% is over £16,000 by a couple of grand. Looking at answers here I can take the lump sum without affecting my payment in anyway. Question is I'm over the savings limit? Also do I still need to inform DWP of this lump sum if it's not affected, as the New ESA is not means tested? 

You are correct that New style ESA is not means tested so a lump sum will not affect it. You will still need to report to ESA that you've taken a lump sum.

If you're claiming Council Tax reduction as it's means tested then the lump sum will affect that so you will need to report the changes to your local Authority. If you're claiming single person discount this will not be affected. 

Burtkatarack

I know local Councils have their own rules, but do they use the rules regarding paying off debt or giving money away as a no no?
The money in my account will be taken all in a cash withdrawal to pay off a debt and buy new windows and a boiler. I own my own house. Leaving the same amount as I had previously on the last assessment. They ask for three months of statements. Any ideas?

poppy123456

Burtkatarack said:

I know local Councils have their own rules, but do they use the rules regarding paying off debt or giving money away as a no no?
The money in my account will be taken all in a cash withdrawal to pay off a debt and buy new windows and a boiler. I own my own house. Leaving the same amount as I had previously on the last assessment. They ask for three months of statements. Any ideas?

Giving away money is highly likely to be treated as deprivation of capital and you will still be treated as having that money. Once the money goes into your bank you will need to report the changes to your local Authority. 

You mention "assessment" are you also claiming Universal Credit as well as ESA?

Burtkatarack

I have no other income. I meant assessment for reduction of Council tax. I have done it twice this year. Once when I left my job and once when my partner left. Apart from the 25% off, I'll  have to wait. The money will go in mid April, so a third change. The money will be withdrawn regardless as I owe it to my father for paying off my house over three years. I have been waiting years to repair the house. I can take the hit this year but surely once it's  spent it's spent. Yes some of it's a debt, but if I don't have it how can I possibly pay my Council tax? I will only have about 2K left in the account. In my city I can have upto 10k savings. But what happens in the new financial year? Will that be seen as spent and clear? Surely they can't keep assessing on "ghost" money, and can they really control how I spend my own hard earned money? 

poppy123456

Burtkatarack said:

I have no other income. I meant assessment for reduction of Council tax. I have done it twice this year. Once when I left my job and once when my partner left. Apart from the 25% off, I'll  have to wait. The money will go in mid April, so a third change. The money will be withdrawn regardless as I owe it to my father for paying off my house over three years. I have been waiting years to repair the house. I can take the hit this year but surely once it's  spent it's spent. Yes some of it's a debt, but if I don't have it how can I possibly pay my Council tax? I will only have about 2K left in the account. In my city I can have upto 10k savings. But what happens in the new financial year? Will that be seen as spent and clear? Surely they can't keep assessing on "ghost" money, and can they really control how I spend my own hard earned money? 

If you're not claiming council tax reduction then there will be nothing to report. The single person discount, is not affected by capital. 

If you're claiming council tax reduction then once you have the money in your bank you will need to report the changes and let a decision maker make the decision.

I'm afraid even though it's your own earned money, it's still capital once you make a draw down of a pension and this does need to be reported. If you don't report it then they could find out sometime in the future. The new tax year is irrelevant. 

Burtkatarack

Example: The Council ask for 3 month's worth of statements. I will let them assess this year on the change. They will see that money going in. They will not give a discount. I will ve withdrawing the money for said meantioned purposes. Come the new financial year I will only be showing well  below the 10k mark in savings. Are you saying they will ask, what's happened to all that money last year when I ask for a reduction again?  The three months of statements will only show under 10k. 

poppy123456

Burtkatarack said:

Example: The Council ask for 3 month's worth of statements. I will let them assess this year on the change. They will see that money going in. They will not give a discount. I will ve withdrawing the money for said meantioned purposes. Come the new financial year I will only be showing well  below the 10k mark in savings. Are you saying they will ask, what's happened to all that money last year when I ask for a reduction again?  The three months of statements will only show under 10k. 

25% discount, is single person discount. It is not council tax reduction, they are 2 completely different things.

If you're claiming council tax reduction then you need to report the changes when the money goes into your bank. Yes, they will very likely ask what happened to that money if you don't report the changes. When claiming any means tested benefits, it's your responsibility to report all changes. 

Burtkatarack

I'd like to thank Poppy for the input.
I contacted DWP today and no issue with a lump sum from the pension. It will not affect my ESA payments. I asked them to make a note on record of my future action so that I didn't have to ring them again. They were not concerned about the amount. It's not means tested. You are allowed over £16000 in savings.  To reiterate, my only income is the New Style ESA.  I am in the group and have paid enough NI. The DWP will contribute to my NI while I recieve it and pay my stamp. I can take regular draw downs from my private pension and it will not affect the ESA payments unless it's over £80+ a week. Or I can take two large lump sums a year. Both options are taxable so I would be put on a high emergency tax code at first but would probably receive a refund when final calculations are made. Very helpful site. If I have missed something, please correct.

poppy123456

Burtkatarack said:

I'd like to thank Poppy for the input.
I contacted DWP today and no issue with a lump sum from the pension. It will not affect my ESA payments. I asked them to make a note on record of my future action so that I didn't have to ring them again. They were not concerned about the amount. It's not means tested. You are allowed over £16000 in savings.  To reiterate, my only income is the New Style ESA.  I am in the group and have paid enough NI. The DWP will contribute to my NI while I recieve it and pay my stamp. I can take regular draw downs from my private pension and it will not affect the ESA payments unless it's over £80+ a week. Or I can take two large lump sums a year. Both options are taxable so I would be put on a high emergency tax code at first but would probably receive a refund when final calculations are made. Very helpful site. If I have missed something, please correct.

You're welcome. Yes, a weekly/monthly pension income of more than £85/week will reduce your ESA by 50p/week for everyone £1 over that amount. 

For the avoidance of doubt, everyone that's being paid New style ESA will have paid enough NI contributions In the 2 tax years prior to the start of their claim.