If I start receiving my NHS pension at age 60, will it affect my Universal Credit payments? STEVE WEBB responds

I will be turning 60 in a few months and I am currently a carer, living solely on carer’s allowance and universal credit, which I have received for some years while caring for a family member.

I have some pension funds and according to a letter I received from an NHS, I would be eligible to claim from the age of 60.

However, will this be deducted from my benefits if I do this?

The other pensions I have also come from the NHS, and one is from a local authority, for which the normal retirement ages are 65 and 66.

Is it better to leave them all until I collect my state pension, which I think I do at 66, and collect them all at the same time? Feeling confused…

SCROLL DOWN TO FIND OUT HOW TO ASK STEVE HIS PENSION QUESTION

Steve Webb responds: There is one set of benefit rules for people under state pension age and another for those over state pension age.

Generally speaking, people over state pension age are expected to or will be deemed to have accessed any pension they have accrued.

But for people, like you, who are not of retirement age, the rules are more complex.

If we start with the simple case of modern “money pot” pensions, which are more common in the private sector today, the basic principle is that the money deposited in such pensions is ignored when calculating your benefit when applying for benefits. of working age. .

In its official guide (DWP Pension and Benefit Freedoms) the DWP says:

“If you (or your partner) have not reached the age required to receive pension credit and do not withdraw money from your pension fund, it will not be taken into account when calculating your benefit entitlement.”

However, if you freely choose to withdraw money from this type of pension, then it will count when you are assessed for Universal Credit.

How it will be treated depends on whether you take a regular amount or just an occasional lump sum.

The DWP says:

“If you or your partner take money from your pension fund, it will be considered income or capital, depending, for example, on how regularly you withdraw it.”

With respect to pensions you have accrued while working in the public sector (salary-related or “defined benefit” pensions), if you receive such a pension, it will be counted in full as “unearned income” for purposes of the Credit Universal.

This means that every pound of occupational pension you receive will mean one pound less Universal Credit.

For those who instead receive contributory Employment Support Allowance (ESA), a more generous rule would apply.

The first £85 a week of any occupational pension is ignored and only 50 per cent of any pension above this level is taken into account.

Typically, one advantage of delaying (‘deferring’) your pension if you don’t receive benefits is that it could entitle you to a larger amount when you finally receive it.

For example, the Local Government Pension Plan website says:

‘If you collect your pension after your normal pension age, it will increase. The increase is based on the number of days from your Normal Pension Age until the date you collect your pension.’

The exact rules for how deferred pensions are calculated can vary from plan to plan and even from one “section” to another within the same plan, so it is important to check the rules before making any decisions.

However, the DWP has rules on “notional income” from pensions and other sources.

This allows them to treat you as if you received income even if you are not actually withdrawing it.

I have looked at the detail regulations covering Universal Credit and in Section 74(1), which is titled “Notional Unearned Income”, it says:

“If a person could have unearned income available when filing an application, that person will be considered to have that unearned income.”

In the case of an occupational pension where you have reached normal retirement age, it appears that you will be treated as if you were already collecting it and your UC would be reduced in any case.

In short, the rules for when one can be expected to receive different types of pension seem to be loosely based on the age at which one could reasonably be expected to collect them.

In the case of “money pot” pensions, the government has decided that you can only be expected to have withdrawn your pension fund once you have reached retirement age.

But in the case of occupational pensions which may have a lower “normal retirement age”, the key seems to be the age at which you become entitled to receive them (at the normal rate).

As for your carer’s allowance, you can receive it in addition to a professional or personal pension, as earnings from these are not counted as income. Gov.uk says:

‘Payments that do not count as income include: • money received from a professional or private pension.’

Carer’s Allowance normally ends at state pension age.

Finally, I’m afraid that based on your date of birth, your state pension age will be 67 instead of the assumed 66.

My recent column sets out in more detail the timetable for the move from ’66 to ’67: I will be 66 in April 2026. How long will I have to wait to receive my state pension?