Drawing on a pension fund

Betty26
Betty26 Online Community Member Posts: 14 Connected
in Employment & Support Allowance (ESA)

Hi all.

I receive Contributory ESA and am in the Support group. I also receive PIP. I have a SIPP pension that I can draw down from as and when I need it. If I take a lump sum from my SIPP, will this count towards the £85 you are allowed from occupational pensions?I have raised this with the DWP but have not had the same answer twice, so not sure if they know.

Yesterday they said that they’re not interested in lump sums, only money paid each month from a workplace pension. They’ve put that on my notes, but it doesn’t fill me with confidence that it’s right

Would anyone be able to help me with this please?

Comments

  • Rosie_Scope
    Rosie_Scope Posts: 7,935 Scope Online Community Coordinator

    Hi @Betty26, The advice you received over the phone yesterday sounds correct. With Contributory ESA, pension lump sums are usually seen as savings rather than income and shouldn't affect your payments.

    Your PIP would also be totally unaffected by this as it's not a means tested benefit ☺️

  • Wibbles
    Wibbles Online Community Member Posts: 3,283 Championing
    edited March 5

    @Betty26

    Lump sums are usually treated as capital, not income

    A one-off lump sum withdrawal (for example the 25% tax-free lump sum or an occasional drawdown payment) is normally treated as capital/savings, not pension income.

    For contribution-based / New Style ESA:

    • Capital and savings do not affect entitlement.
    • So a lump sum from your pension does not trigger the £85 rule and doesn’t reduce ESA.

    This is why the DWP agent told you they are only interested in monthly pension payments — that part is broadly correct.

  • Betty26
    Betty26 Online Community Member Posts: 14 Connected

    Thank you so much for your replies, I feel much better now.

    The reason I felt the agent I spoke to wasn't very clear, was she stated my state pension age was 66 and I would stop getting ESA then. She was totally unaware that the retirement age goes up to 67 after 6th April 2026, so I will be 66 and 4 months.

    It sort of made me doubt if she'd told me the right info re the drawdown. I am only bound by ESA rules until I get my state pension, so not long to wait.

    Thank you again for your very clear explanations. Much appreciated.

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