Pension lump sum -taking it early? Affects IR ESA?

Hi all,

Sorry I am having a bit of a moment.

I have a client that wants to take out their pension early-via a lump sum. I advised her initially that it would affect her IR ESA as it would be taken as capital?

But she is adamant that she read on the internet that it would not affect her ESA.  A

I imagine that it won’t affect her ESA if it were Contribution based ESA but it would affect IR ESA?

Thanks!

She can either speak to Pension Wise or the Pensions Advisory Service if she wants to be sure (because relying on something you’ve read on the internet in this area is usually a very bad idea as people are getting scammed all over the shop).

Or she can look at our factsheet Pension freedom and benefits, section 5.2 which is pretty straightforward:

If your pension pot remains untouched and you are below pension credit age, its value is ignored as a capital asset for the benefits above. [which includes income -related ESA]

However, if you take a lump sum from your pension pot, as partial drawdown or the whole amount, it is treated as capital in the means-test. This may mean your entitlement is reduced or removed.

Paul_Treloar_AgeUK - 08 February 2019 11:53 AM

She can either speak to Pension Wise or the Pensions Advisory Service if she wants to be sure (because relying on something you’ve read on the internet in this area is usually a very bad idea as people are getting scammed all over the shop).

Or she can look at our factsheet Pension freedom and benefits, section 5.2 which is pretty straightforward:

If your pension pot remains untouched and you are below pension credit age, its value is ignored as a capital asset for the benefits above. [which includes income -related ESA]

However, if you take a lump sum from your pension pot, as partial drawdown or the whole amount, it is treated as capital in the means-test. This may mean your entitlement is reduced or removed.

Thanks Paul. That’s what I thought! Thanks- need to eat some food and recharge my batteries.