ESA and Taking Private Pension Early

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Hi All. I have just come back from a meeting with Pension Wise at the Citizens Bureau. I am on ESA and although I am under 55, my private pension company have said that I can take the money early because I have been ill for so long.

I know it is not worth taking over 6K. However, the advice I was given at CAB was that even if I take just 6K, the DWP might force me to take the rest of my pension and cut my benefits! Surely this cannot be correct? I challenged thi sand th elady said they definitely could and that they might also tell me to take a annuity out. It would therefore be better not to take any money from my pension.

I also asked if a miracle happened and i got well and returned to work , would the Government come after me for a 55% penalty for taking it early. She said no, but I am sure i have read that this can happen.

Any advice would really be appreciated as I am struggling to find detailed information elsewhere.

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17 Replies

  • Posted

    Hi I'm on ESA and last October was paid £8,500 from a pension taken early due to ill health. I needed it to pay both a loan and credit card up. I only had the money in my account long enough to make these payments and genuinely thought I was doing the right thing as my loan and card payments were leaving me very short. I now realise that over 6k makes a difference to ESA  no matter how long you have it and  that it maybe seen as deprivation of capital.

    In January I had a letter from fraud and error prevention department of DWP asking for bank statements of all accounts from Oct to present day. Its making me ill with worry waiting to see what the consequences may be.

    I also have 18,000 due in 2 years when I reach 55 and have no clue how I should take it ?

     

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    • Posted

      Hi Mermeo. I am sorry to hear how worried you are. Isn't it bad enough being unwell or disabled and having this to worry about too?

      I know that for every £250 over £6k they take £1 a week in benefit so that would mean £40 per month (if my arithmetic is correct) but surely this is not for a prolonged period? Especially if you used the funds quickly.

      If someone can tell me that taking 6k won't affect anything I will perhaps do it but I would still like clarification.

      With regard to deprivation of Capital - is it not OK to pay of debts ? i think as long as you don't give money to family members etc it is viewed as acceptable i.e. not deliberately trying to gain benefits.

      i just need a new sofa and would love to get some debt paid off too.

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    • Posted

      You would be in a better place if, all the people you owe money too were putting pressure on you to pay up. Sounds nuts, because it"s the very thing you avoid by following the agreement of the loans. After all, the DWP can give loans, with repayments spread out, "but" would want it payed up in one go if you came off benefits. So, what"s the differance.!!!!!!!!

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  • Posted

    I think that its a really grey area. Like you say its bad enough being incapable of work through illness. You work all your life for these pensions and then you are penalised for taking the money. 6k is not a lot as a limit when folk have loans, credit cards etc that they have taken on in good faith whilst they were working and before any illnesses.
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  • Posted

    If you're claiming Contribution based ESA then any savings/capital doesn't affect it.

    If you're claiming Income Related (means tested) benefits then anything over £6000 needs to be report to DWP and any other means tested benefits you claim. anything you have over this amount, if you use it to pay off debts doesn't matter what debts it is, it can indeed be classes as deprivation of capital in order to obtain means tested benefits and you will be classed as still having the money and your benefits will still be reduced regardless.

    If you take part of the pension so that you don't go over the amount of savings/capital allowed then this could also be classed as deprivation of capital in order to obtain means tested benefits.

    It doesn't matter how long that money is in your bank for, as soon as it hits your bank you need to report those changes in circumstances.

    As you were previously working before you claimed ESA are you 100% sure it's Income related you're claiming? Do you have a partner that works? Are you in one of the groups for ESA or on assessment rate?

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    • Posted

      Savings/capital of £16000 and over will stop your means tested benefits completely.

      As for spending, it's fine to replace old furniture but i'd advice to keep receipts. Paying of debts unfortunately not.

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    • Posted

      Hi yes I get income based ESA, I am in the support group, No partner.  So even if i took my future 18k in smaller amounts I can lose out aswell. It just doesn't seem fair when that is your own pension, earned through years of hard work.

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    • Posted

      Unfortunately with means tested benefits that's the way it is. Is all of your ESA Income Related? or is it Contribution based with an Income Related top up? It could well be this. When did you last work? and did you claim ESA when you finished work?

      If it's Contribution based with an Income Related top up then savings/capital will only affect the Income Related top up. You'll be able to keep all of the contribution based, which is approx £109 per week.

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    • Posted

      Hi yes it is as you say with the income related top up.

      So if I get £138 now minus the £109 means a loss of £29 per week.

      How does this relate to the £6k savings rule and £1 for every £25 over the £6K

      Im getting confused?

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    • Posted

      Sorry that should say £1 for every £250 taken off per week?

       

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    • Posted

      I'm not sure why you get £138 per week? Income related support group amount is £125.55 per week.

      This is made up of £109.65 Support Group and £15.90 Enhanced disability Premium.

      Severe Disability premium is possible but has criteria and a disability benefit is also needed to be able to claim this.

      Where did you get the £138 per week from?

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    • Posted

      Yes I get PIP as well.

      I will have to look at the breakdown of ESA again to be sure I may be mistaken

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    • Posted

      You could be claiming SDP (severe disability premium) do you live alone, or classed as living alone? If so and no one claims Carers Allowance for looking after you then it sounds like it's SDP.

      If it is then you must be having money taken from your ESA because SDP is £62.45 per week. Add that onto the £125.55 gives a total of £188 per week. You say you're claiming £138 per week yes? That's £50 per week that's being taken off your ESA.

      Savings over £6000 will affect Income related benefits £1 for every £250 over. For every £1000 over this amount you would lose £4 per week from your ESA. Anything over £16000 and your premiums on top of your ESA would stop but your Contributions ESA of £109.65 per week wouldn't be affected, which means you'll still be entitled to that.

      Any housing benefit/council tax rebate you receive is also affected by savings/capital in the same way ESA is. Hope this helps.

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    • Posted

      Thank you for your reply to my original post Denise15811. Are you saying I just shouldn't take any funds from the pension at all? Why is there a £6k threshold then?

      It is so confusing and no-one seems to really know. They should make it more black and white.

      I think I will just leave my pension where it is and muddle on. At least if I snuff it, it gets given to my son.

      I wonder though if it is worth going to a lawyer for advice?

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    • Posted

      Hi Db,

      You're welcome, i'm sorry your thread got taken over. A lawyer, that's exactly what i came on this morning to advice you to do.

      Pensions and Income related benefits are both very complicated. As i said in my other reply to you though, are you sure all of your ESA is Income related? As you worked previously it seems more likely that you're claiming Contribution Based. If you live alone, or you have a partner that doesn't work then most likely you have an Income related top up as well.

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