Taxing a tax free lump sum from a private pension

Benefits, finances and funding
1

Hello everyone - I get carers allowance - I don’t work anymore apart from caring for my disabled husband. We need to move house, and to help fund this I am entitled to take 25% tax free lump sum from my private pension. I am 5 years belwo pension age. Will the DWP take my carers allowance off me if I take the money from my pension pot. It would be approx £19,000.
If anyone has experience of this please let me know cheers Jean

2

Hi Jean,
I suggest you contact the email helpline:

advice@carersuk.org

or the Citizen’s Advice Bureau for advice on this.

3

Have a look at the regulations. I think “income” is earned income from regular work, it a lump sum.

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4

Thanks for your reply/ Everything I’ve looked at suggests you can take a lump sum but I’ll have to get some advice before i do anything

5

Hi Melly - good suggestion, I’ve emailed the carers helpline - thanks

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6

Occupational pensions are ignored by Carers Allowance, whether it’s income or lump sum.

7

thanks for your reply Charles, is this something you have already done? Thanks Jean

8

That’s right. Your occupational pension is ignored in the same way as savings, where Carers Allowance is concerned.

9

Yes I took my lump sum out when I was 55 and it did not affect my Carers Allowance - I checked with my Financial Advisor and guy who did my Tax Return. That said, regulations are always changing so well worth getting professional advice.

10

Thanks so much for your reply – I will of course check but good to know it might be possible

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11

Hi. I took a small lump sum from one of my pension pots and still get Carer’s Allowance. Good luck.

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12

Hi Jean
I have just found your post after scrolling through google trying to work out exactly what you where asking. We have to move house and I need to release some of my small private Pension and was trying to find out if the amount will have any affect on Carers allowance(I realise it will affect some benefits if you have it in savings but it wont be in the account long enough to worry about that). Did you manage to take yours with no problem as everything I am seeing says that its not used as an earnings amount so I may try and take it all in lump sums before I lose Carers at 67 and get taxed on my private pension.

13

Hi MX
I did manage to take my 25% with no probelm. I even double checked with the Carers Allowance unit and was assured that it would not be counted as income. I get Carer’s allowance and PIP. I am considering taking more as we are moving house soon. I read that I would pay more tax if I take it within the same tax year, so decided I will take it after April this year. I’m 63 and was considering leaving some for when I lose Carers Allowance but you might just have changed my mind with that other tax bombshell. Thanks for the heads up

14

Thanks for getting back to me. Yes I realised that they would be taking 20% tax of me at 67 and as I only get carers I can remove all of my pension within the next 5 years and use it to prepare for the future as I am 63 in May.