lump sum pension on sick

antonjanekids
antonjanekids Online Community Member Posts: 3 Listener
in Benefits and income
hi   i am retairing on ill health  i can  draw down on  my  works pension  which i will pay off  some  deit s    about 9000   can i  do this or  will  any  off  my  benifits  drop  thanks

Comments

  • 2oldcodgers
    2oldcodgers Posts: 739 Connected
    I hope that you have sought advice before doing this when taking money out of your pension pot. Will the resulting pension payments be enough to live on during retirement?
  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing
    A drawn down lump sum from a pension will be classed as savings. For every £250 or part there of over £6,000 and your ESA will reduce by £1/week. 

    If you do take this lump sum then you will need to report the changes to your ESA. It will be down to a decision maker to decide whether paying off your mortgage and reducing your savings will affect your ESA. In my opinion I can’t see paying off a mortgage is going to be seen as deprivation of capital but I’m not a decision maker. 
  • 2oldcodgers
    2oldcodgers Posts: 739 Connected
    poppy123456 said:
    A drawn down lump sum from a pension will be classed as savings. For every £250 or part there of over £6,000 and your ESA will reduce by £1/week. 

    If you do take this lump sum then you will need to report the changes to your ESA. It will be down to a decision maker to decide whether paying off your mortgage and reducing your savings will affect your ESA. In my opinion I can’t see paying off a mortgage is going to be seen as deprivation of capital but I’m not a decision maker. 
    Paying off a mortgage is a very efficient way of converting assessable capital to a non assessable asset.
     
  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing
    2oldcodgers said:
    poppy123456 said:
    A drawn down lump sum from a pension will be classed as savings. For every £250 or part there of over £6,000 and your ESA will reduce by £1/week. 

    If you do take this lump sum then you will need to report the changes to your ESA. It will be down to a decision maker to decide whether paying off your mortgage and reducing your savings will affect your ESA. In my opinion I can’t see paying off a mortgage is going to be seen as deprivation of capital but I’m not a decision maker. 
    Paying off a mortgage is a very efficient way of converting assessable capital to a non assessable asset.
     

    Your point being?
  • 2oldcodgers
    2oldcodgers Posts: 739 Connected
    2oldcodgers said:
    poppy123456 said:
    A drawn down lump sum from a pension will be classed as savings. For every £250 or part there of over £6,000 and your ESA will reduce by £1/week. 

    If you do take this lump sum then you will need to report the changes to your ESA. It will be down to a decision maker to decide whether paying off your mortgage and reducing your savings will affect your ESA. In my opinion I can’t see paying off a mortgage is going to be seen as deprivation of capital but I’m not a decision maker. 
    Paying off a mortgage is a very efficient way of converting assessable capital to a non assessable asset.
     
    Being allowed to pay off their mortgage will mean that the capital will become non assessable capital.
    Money that is tied up in their own home be it equity or mortgage repayment is never used towards the £6000 limit. 
     
  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing
    Indeed. It's also worth thinking about whether it's worth paying off the mortgage with that amount. If it pays off the motgage completely then yes it will be worth it. I'm not saying that the OP shouldn't do this though.

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