Some questions r.e. benefits and pension pot

66Mustang · June 2020

Does a SIPP (self invested personal pension) count as savings when calculating ESA?

(A SIPP is a pension and is not accessible until age 55 (will be 57 soon).)

This is currently just an idea we are considering, but a family member wants me to start building up a private pension and wants to give me some money each year to put into it while I am not working.

1) If I have over £16,000 in the pension pot, will my benefits stop? I am currently 26 so the money is not accessible to me.
2) If a family member gives me a lump sum and I deposit it into a pension pot would this be seen as deprivation of capital or is it seen as acceptable to deposit it into a pension?

Many thanks in advance.

janer1967 · June 2020

Hi @66Mustang Sorry I am not too sure about pensions and ESA, I would only give the assumption that as it is a pension and not funds available to you it would count as savings as many people have a pension fund but still claim benefits.

A gift may be seen differently though and would suggest the money is paid direct into the pension and not to you

I hope other members may have more knowledge of the question and can answer your query

66Mustang · June 2020

Thanks @janer1967 that all makes perfect sense.

janer1967 · June 2020

Sorry it should have said would not count as savings until it is paid out to you

atlas47 · June 2020

Hi @66Mustang

It’s a relatively simple problem to overcome, though you will need to seek legal advice.

Your relative needs to establish a Trust Fund, in your name, which allows £8k per annum to be paid in (tax free).

The Trust Deed should establish a pension fund in your name, which is paid into the pension fund, via the Trust Deed.

There after you have no Capital or Savings to declare to anyone.

This pension fund, would be equivalent to you earning about £75k per annum. You could obtain more independent advice from a Notary.

On the assumption that you are 26 years old (as stated on this thread), you should enjoy a healthy pension, down the line.

Stay kind and be safe.

66Mustang · June 2020

Many thanks everyone for the replies, they are all much appreciated.

The reason I wanted to use a SIPP is that I have traded on the stock market in the past and we like the idea of me managing and choosing my own investments. I will however have a look into trust funds, thank you for the suggestion. Maybe there is a trust fund that then can be converted into a SIPP after a period of time or to coincide with when I start working. This is not a long term thing - they just want to help me out while I am not working, and it will stop once I am able to work. I hope to be working after, hopefully, not very many years, as I am due to start some intensive treatment soon that should take around 2 years.

Thanks again everyone.

Adrian_Scope · June 2020

Hello @66Mustang.
With regards to your original questions:
1) No, the money isn't counted as income or capital so even if you have more than £16,000 in your SIPP it won't affect your current benefits.
2) Gifts that don't take your savings/capital over £6,000 don't need to be declared, so as long as the lump sum (combined with any money you already have) doesn't exceed £6,000 it shouldn't be a problem. There is a maximum you can pay into a SIPP while not working (I think it's £2880 a year) so keep that in mind if they are gifting you a larger amount.

66Mustang · June 2020

Thanks @Adrian_Scope, that helps a lot

66Mustang · June 2020

Just had a look and the limit to receive 20% tax relief is now £3,600 while not working. That is approximately how much my family member wanted to put in there for me each year so that works out really nicely.

https://www.hl.co.uk/pensions/contributions

Thanks again

Some questions r.e. benefits and pension pot

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