cashing in civil service pension

jac1
jac1 Online Community Member Posts: 4 Listener
in Employment and Support Allowance (ESA)

hi there,

I'm in receipt of esa, and pip, with the costs of living going up, I'm thinking about cashing in my civil service pension. I will get the lump sum 25%tax free, then draw the monthly pension. will this effect my esa payments, I know it doesn't effect pip as its not means tested, any help and advice you could give me would be greatly appreciated

thankyou so much, I'm new to the group, so would like to say hi to everyone 😊😊

Comments

  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing

    Which ESA are you claiming? New style ESA/ contributions based or Income Related?
    If any part of your ESA is Income Related then a weekly/monthly income from the same pension will reduce your ESA £1 for £1. A lump sum for Income Related ESA will be treated as capital/savings. If the total brings it to more than £16,000 then all means tested benefits will stop. There will be a deduction of £1/week for every £250 or part thereof over £6,000.

    If your ESA is New style or contributions based then a lump sum will not affect it. Pensions of up to £85/week are also ignored (you still need to report that income) for every £1 over that amount your ESA will reduce by 50p/week.

  • jac1
    jac1 Online Community Member Posts: 4 Listener

    hi there,. and thankyou for the prompt response. I receive contributions based esa. Will I have to declare it to them if I take the pension or do they share the information anyway, as its a civil servants pension?

    so it doesn't effect the lump sum, and could you just explain again, what they would take off the me, im sure the pension would be £120 a week

    Thanks again 😊😊😊😊

  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing

    If you’re in the Support Group and your ESA is currently £138.20/week then yes that would be New style/contributions based. If it’s any more than that then at least part of it will be Income Related.

    Lump sums will not affect contributions based. If you take £120/week income then that would be £35/week over £85 so there would be a £17.50/week deduction in CB/ESA. You will still need to declare it.

    Are you claiming housing benefit and/or council tax reduction? If so those are means tested and savings over £6,000 will affect them. For council Tax reduction some local Authorities have a maximum savings limit of £6,000 before entitlement ends.

  • Jimm_Alumni
    Jimm_Alumni Scope alumni Posts: 5,717 Championing

    Hi @jac1, welcome to the community 😊 I hope you're doing well today! I don't have anymore to add to what Poppy has already answered with. So just here to say hello 😄

    Please do let us know if you have any other questions about ESA! If you'd like feel free to browse our other categories, maybe you've another question or topic you're like to talk about?

  • jac1
    jac1 Online Community Member Posts: 4 Listener

    hiya. thank you so much for welcoming me, and thanks poppy for the prompt replies!! is really hard to navigate with all the red tape around benefits and pensions tbh, I'm still a little confused, and I wouldn't want to get into trouble with the benefits agency

    🤗

  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing

    It would help to know how much ESA you receive each week? Many people get confused between contributions based and Income Related and many of them think they are claiming contributions based when it's actually Income Related ESA you're claiming.

    Are you claiming any other benefits apart from PIP, if so which ones?

  • jac1
    jac1 Online Community Member Posts: 4 Listener

    hi, on my award letter it says contributions based, I get around £200 a week, I claim no other benefits, thankyou

  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing

    ESA letters are extremely difficult to understand and very often make no sense at all. £200 per week means at least part of it is Income Related. If it was contributions based then you would be receiving £138.20/week. (if you're In the Support Group)

    This means that a lump sum drawdown would be treated as savings/capital. Capital/savings of less than £6,000 is ignored. For every £250 or part thereof over £6,000 there's a £1/week deduction in ESA. Over £16,000 and entitlement to means tested benefits will end.

    For a monthly income from your pension this would reduce Income Related ESA £1 for £1 so there would be no financial gain to taking an income from it.

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