How accessing your pension can affect state benefit entitlement
Any pension money you have may affect your entitlement to benefits. This applies if you take money out of your pension pot or leave it in.
Before Pension Credit qualifying age
Before you or your partner reach the qualifying age for Pension Credit any money you take out of your pot will be taken into account when you’re assessed for benefits.
This might, for example, be income you get from an annuity, a tax-free lump sum, or an adjustable income.
After Pension Credit qualifying age
After you or your partner reach Pension Credit qualifying age any money either of you take out of your pension pots and any money left in the pot owned by the person over Pension Credit qualifying age will be taken into account when your income is assessed.
Example You’re 67 and applying for Housing Benefit. You have a pension pot of £40,000 and have taken £10,000 tax-free cash from your pot. Your remaining pot is £30,000. Because you’re past Pension Credit qualifying age both amounts will count when you’re assessed for benefits.
Leaving your pot untouched
If you leave money in a pension pot the Department for Work and Pensions (DWP), HM Revenue and Customs (HMRC) or your local council will check how much you’d get if you had bought an annuity.
They’ll take this amount into account when they assess your income.
If you take an adjustable income they’ll look at how much you’d get if you bought an annuity, and how much adjustable income you’re taking. The higher amount will be used when you’re assessed for benefits.
It’s your responsibility to tell DWP, HMRC or your local council if you or your partner take any money from your pension pot.
If you deliberately spend or give away money (including tax-free cash) from your pension pot to get or increase benefits, DWP or your local council may assess your eligibility again and treat you as still having that money.
As well as any income or cash taken from your pension pot, your other assets (e.g. savings and investments) may also count when you’re assessed for benefits.
Getting help with benefits
Use a free and independent benefits calculator to see what benefits you might be eligible for.
You can go to your local Service Information Point for help and advice about many benefits. You need to book for face-to-face advice.
You can also get help from the Money Advice Service.