Esa and pensions

How will my contribution based esa be affected when I receive a local authority I’ll health early retirement pension

Hello Tee,

The first £85.00 of occupational pension is disregarded and thereafter 50p in every £ above that will be deducted from your contribution based ESA. i.e. if your occupational pension is £100 per week, £85 is disregarded and 50% of the remaining £15.00 (£7.50) will be the reduction in your ESA.

I was told if I receive a pension that my esa would stop altogether ? Also if I receive a lump sum what happens to that ? Thankyou

Hello Tee,
Providing your ESA is all contributory based then as previously stated the first £85.00 will be disregarded. As a rough idea if your weekly pension is likely to be over £300 a week then you will not receive any ESA but you will receive NI credits towards your state pension. The lump sum is disregarded when calculating ESA reduction. I should add that if you are in the WRAG group of contributory based ESA then your payments would stop after 365 days, but in the Support Group they continue until such time as you are reassessed and a new decision is made,

Thanks Izzy , you see I’ve been told something totally different and that’s by c.a.b over the phone ! My pension will only be £52 pw and my Esa is contribution based thanks for your help . I have a choice of either just a weekly pension or a lump sum and a smaller weekly pension and not sure which to take and the lady at c.a.b said my Esa would stop?

Hello Tee,

If your occupational pension will be £52.00 per week and your ESA is made up of contributory based only payment with no income related top up then there will be no reduction of your ESA. Only you can make the decision regarding how you take the pension but bear in mind that the weekly pension you receive will be lower than £85.00 so no deduction will be made. Both ESA and pension are taxable but if their combined value is less than your personal allowance then there would be no income tax deduction. The lump sum would be tax free if it is below 25% of the total value of your pension pot.