Will I still receive benefits if I take my pension early?

28 July 2015


I am unable to work and receive Employment and Support Allowance (ESA). I have also recently been awarded the Personal Independence Payment (PIP) with the mobility element to be used for a car. A doctor has looked at my case and I may be allowed to take early retirement due to ill health. This means I will receive a £7,000 a year pension with a £47,000 lump sum. I am £27,000 in debt that is in arrears and I am on the point of being declared bankrupt. How do I manage the lump sum payout to ensure it helps me in the future? I am 48 and have no real prospect of working again. I worry that I will lose my benefits as a result of the pension and would have very little to live off in the future.
GP, Midlothian


Your lump sum payment from your pension will not affect either your PIP or ESA.

However, regular payments will affect your contribution-based ESA if they exceed £85 a week. If your gross pension payments exceed that amount, your ESA will be reduced by half the amount they exceed it by.

If you are receiving any means-tested benefits such as housing benefit or council tax support, these will be affected by your pension payout because you are not entitled to any means-tested benefits if you have capital of more than £16,000. When you receive your pension payments, you must declare this to all the benefit authorities that pay you money.

As for your debts, you should seek specialist advice to find out whether or not you will be required by law to include your pension payments in a bankruptcy order, to pay off your creditors.

David Samson is a welfare specialist at Turn2us