Employment and Support Allowance (ESA)
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Cashing in old pension

Hi everyone.

Got a small pension which decided to cash in, no more than 9.5k in total.  Wife receives PIP, Income Related ESA in Support Group and we get help with council tax, I'm her Carer and receive Carers Allowance.

Reason for cashing in pension is for home improvements, mainly kitchen that is old and needs urgently updated, making it more accessible for wife who has limited mobility and walks with crutches.

Reading around it says 6k savings is max before benefits are effected, but in effect the money wont be in a savings account, paid by pension provider to current account where approx 5k will be spent almost straight away on new kitchen, so how do we stand with regards to DWP, is it permittable or would  they still class it as us have above the 6k limit.

Any advice appreciated.

Replies

  • poppy123456poppy123456 Community champion Posts: 20,510 Disability Gamechanger
    Hi,

    Once the money goes into your bank your wife will need to report the changes and it will affect the amount of Income related ESA you're entitled to. It will reduce your ESA by £1 for every £250 over that amount. Improvements to your home and buying new furniture are allowance provding you don't buy the most expensive items.

    If you're also receiving a weekly payment from your pension then this will also affect the amount of ESA you're entitled to.
    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.
  • woodbinewoodbine Member Posts: 1,364 Disability Gamechanger
    @ataloss2018 they will usually tax the money at 40% after paying the first 25% tax free, if they do this you can ask HMRC to repay any over-paid tax usually takes no longer than 5 weeks.
  • ataloss2018ataloss2018 Member Posts: 48 Courageous
    Hi,

    Once the money goes into your bank your wife will need to report the changes and it will affect the amount of Income related ESA you're entitled to. It will reduce your ESA by £1 for every £250 over that amount. Improvements to your home and buying new furniture are allowance provding you don't buy the most expensive items.

    If you're also receiving a weekly payment from your pension then this will also affect the amount of ESA you're entitled to.

    Thank you for reply.  So inform DWP of lump sum but explain what large chunk of money will be used for, if they wanted would be happy to forward them copy of invoice once work is done if they requested this.

    In the short term would it still effect benefits do you know, it would seem a hassle just for sake of few weeks at most.

    woodbine said:
    @ataloss2018 they will usually tax the money at 40% after paying the first 25% tax free, if they do this you can ask HMRC to repay any over-paid tax usually takes no longer than 5 weeks.

    Thanks for reply. Yes was advised this by pension company.
  • poppy123456poppy123456 Community champion Posts: 20,510 Disability Gamechanger
    Yes, you need to inform them and yes it will affect the ESA by £17 per week. If you don't tell them they will find out.
    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.
  • dkb123dkb123 Member Posts: 85 Courageous
    they may also say that you got rid of it to continue on benefits, and will stop it altogether, so be very careful 
  • dkb123dkb123 Member Posts: 85 Courageous
    one answer people may know is, How long does nominal income last, once they apply the £1 per 250, Forever?
  • poppy123456poppy123456 Community champion Posts: 20,510 Disability Gamechanger
    The ESA won't stop completely unless you have savings of more than £16,000. It lasts for as long as you have more than £6,000.
    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.
  • dkb123dkb123 Member Posts: 85 Courageous
    that's an awfully long time, a reducing rate of £4 per week, per thousand, especially when you may have paid the rent and rates and food out of this capital and was in your bank account  for a few minutes  
  • poppy123456poppy123456 Community champion Posts: 20,510 Disability Gamechanger
    I'm not sure what you mean by "an awfully long time" i didn't give a timescale, i said for as long as you have more than £6,000. It's also £1 per week for every £250 or part there of. If you have £6,500 then it's £2 per week.
    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.
  • dkb123dkb123 Member Posts: 85 Courageous
    well its how long you have the 500 if you drawdown from your pension and you then pay the rent from this and it brings you down to blow the 6k limit  then you don't have the money any longer but they still class it as income, what I was asking is how long do they apply is the rule, because the 500 has gone, but they are still taking it to account as weekly income 
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