Labour Research November 2004

Law Queries

Incapacity Benefit

Q: We have a member who has taken ill-health retirement with early access to his pension, at the age of 62 while still in receipt of Statutory Sick Pay. One year later, he has now made a claim for Incapacity Benefit and been told that his occupational pension (of over £85 per week) is taken into account in assessing his eligibility. He therefore does not qualify for a payment. Is this correct? I thought Incapacity Benefit was a contributory benefit and not means-tested.

A: Although Incapacity Benefit is not classed as means-tested, it can now be offset against the claimiant's occupational pension and certain other benefits such as a carer's allowance.

Pension of up to £85 is ignored, but for every £1 per week above that, 50p is deducted from the Incapacity Benefit. So, if the claimant gets a pension of £95 per week, £5 per week will be deducted from their benefit.

Therefore your member's occupational pension, if it is large enough, may cancel out the entire amount of Incapacity Benefit so that he will receive nothing.