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How does my private pension affect my benefits now I’m 50

gillian29gillian29 Member Posts: 36 Courageous
in Finances and extra costs
Hi I’m gillian29,I claim enhanced pip,and esa and am in the support group,and up until last week I was getting child tax credit and child benefit for my son,that has ended because he has finished college and is now looking for a apprenticeship.I have also lost my severe disability benefit,and am really going to struggle now.When I was working I saved a small personal pension £26,000,I have just been told I could take it all now that I’ve just turned fiftyor just take 25% tax free or leave it till I’m retirement age 67.Do I have to declare my pension to the benefits people and how does it effect my benefits.will they stop my benefits as I have over  £6000,I only want totake out £5500 to get a new washing machine bed,and a recliner chair,and would like to keep the rest for when I retire.Hope you can help me it’s really worrying me 
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Replies

  • poppy123456poppy123456 Member Posts: 22,218 Disability Gamechanger
    Hi,

    As you're claiming the enhanced disability premium that part at least, if not all of your ESA is Income related. You may be claiming contributions based with an income related top up but anything over £110.75 per week is income related.  Any savings/capital you have of £6,000 will affect your benefits £1 for every £250 over that amount. £16,000 and all means tested benefits stop. This includes any housing benefit and council tax reduction you claim. When you cash the money in, if the amount you have takes you over £6,000 then you'll need to report this to DWP and your local council as soon as the money goes into your bank. 
    Community champion and proud winner of the 2019 empowering others award. This award was given for supporting disabled people and their families for the benefit advice i have given to members here on the community.
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  • gillian29gillian29 Member Posts: 36 Courageous
    Hi Poppy123456,thanks for the reply.Im still a bit confused.I have £26,000 pension,only about £400 in savings,I want to take 5.500 for washing machine and things I need for the house etc,which keeps me under the £6000 mark,and I want to keep the rest till I retire when im 67 do I have to tell them about my pension now,even though I want to keep it.I read somewhere you have to tell them about it as soon as I turned fifty,and because they count it as capital I will loose all my benefits and was told I will have to live on this.whats point in having I a pension if I have to use it now
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  • RipplesRipples Member Posts: 189 Pioneering
    @gillian29 Pensions and benefits can be a minefield.  Legally speaking you have to tell the DWP when you can take any sum from a pension pot irrespective of the amount. One of the problems people don't realise is that when you get to 67 and you apply for whatever benefits are in place then should you have a pension this will be taken into consideration as HMRC and DWP share information.
    Secondly if someone had a pot of  say  £25,000 and took £5000 out when you get to pensionable age your assets will be treated as if you still had the £25 000 and the annuity it would earn.

     The whole thing about being able to access your fund was to be able to buy an annuity and give people control over their pension. There is no restriction to what you can actually spend it on but you have to be aware that they look for any indication to deprive yourself of income to receive future benefit gain.

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  • gillian29gillian29 Member Posts: 36 Courageous
    @Ripples,hi thanks for your reply,your right pensions are a mine field.How I think is if I draw out £5500 and tell dwp that I’m replacing my broken recliner chair and washing machine etc,I won’t have to apply for a grant to get them.
    Also if I get to age 67 I am due full state pension and hopefully pip which is not means tested,and with my private pension I’m hoping I won’t need any benefits,so I would be saving them money.
    So your saying I don’t have to declare my pension until I take some out,and then only declare that amount.I keep getting conflicting advice
    Been told that I have to tell them I’m 50 and how much my private pension is,and then I was told they count that as capital,so I would be counted as having to much and they would stop my benefits,really worried,whole idea of having a pension was to make things easier not harder.
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  • RipplesRipples Member Posts: 189 Pioneering
    @gillian29 What I am saying is that it is your responsibility to tell DWP if and when you access your pension pot. There is no legal requirement to tell them how you are spending the money although some like to add the information on record.

    You are already aware of the savings rule relating to income related benefits, some people choose not to tell DWP they have tapped into their pension pot as long as they keep below the minimum amount of savings, that is a personal choice and not one I can advise on either way.

    You are not required to tell them how much is in the pot as depending on the type of pension that amount could be variable You are not drawing a pension yet and your benefit relates to how much money you are getting today not a projected amount in  x amount of years. Your benefit will only be changed if you start drawing a regular income.
    It will be a different situation when you reach pensionable age. As I said before HMRC and DWP work together so each would be aware that you are receiving an income at that time.Your pension for certain benefits at that time may be assessed as if the pot was untouched.
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  • Cmac500Cmac500 Member Posts: 1 Listener
    Cmac500 it should have no effect as you cannot under the current law access any pension until you are 55. Tell them you will refer them to the pension ombudsman if they put any pressure on you. Before retirement and illness was a pension specialist and previously you could access pensions at 50 but age of access is now 55
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  • gillian29gillian29 Member Posts: 36 Courageous
    @Ripples,thanks a lot for all your advice,that makes a lot more sense,put me at ease now
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  • gillian29gillian29 Member Posts: 36 Courageous
    @Cmac500,thanks for your advice,feel a lot better now.What happens when I get to 55,do you have to tell DWP about your pension pot,or just any money you take out.Would they count your money as capital when you get to 55 or not,would be nice to know 
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  • RipplesRipples Member Posts: 189 Pioneering
    @gillian29 You don't have to tell DWP anything unless you draw your pension early  then it becomes  income.  Pensions are not counted as capital unless you withdraw part or all of the pot.
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  • poppy123456poppy123456 Member Posts: 22,218 Disability Gamechanger
    I noticed that you are only 50, you can't access your pension fund until you reach the age of 55. In some circumstances you can access it before you reach 55 but the tax you could pay on this would be extremely high.  The rules changed in 2015. See this link. https://www.pensionwise.gov.uk/en/your-pension-before-55
    Community champion and proud winner of the 2019 empowering others award. This award was given for supporting disabled people and their families for the benefit advice i have given to members here on the community.
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