Universal Credit is a benefit designed to support those on low incomes, but your savings can impact the amount you receive.
Let’s break down the complexities and provide clear answers.
How Universal Credit and Savings Interact
Universal Credit is a benefit designed to support individuals and families with low incomes.
However, the amount you receive can be influenced by various factors, including your income and savings.
The key threshold to remember is £6,000.
If your savings, including any investments, fall below this figure, they generally won’t affect your Universal Credit payment.
However, once your savings exceed £6,000, you’ll start to see a reduction in your benefit.
It’s important to note that this is a general rule and there are exceptions.
For instance, the Help to Save scheme is designed specifically for low-income individuals and the savings within this account won’t affect your Universal Credit.
How Much Savings Will Reduce My Universal Credit?
If your savings are between £6,000 and £16,000, your Universal Credit will be reduced by £4.35 for every £250 (or part of £250) above the £6,000 threshold.
For example, if you have £7,500 in savings, you’re £1,500 over the threshold. Dividing this by £250 gives you six full £250 increments.
Therefore, your Universal Credit will be reduced by £4.35 multiplied by six, which equals £26.10 per month.
What Happens if I Have Over £16,000 in Savings?
If your savings exceed £16,000, you generally won’t be eligible for Universal Credit.
This is because you’re considered to have sufficient resources to support yourself.
What Are Capital Disregards?
There are certain types of savings or assets that are disregarded when calculating your Universal Credit.
These are known as capital disregards. Some common examples include:
- Your home: The value of your home is generally disregarded.
- Business assets: Assets related to your business are usually disregarded.
- Occupational and personal pensions: These are typically excluded from the savings assessment.
Will My Savings Affect Other Benefits?
While we’ve primarily focused on Universal Credit, it’s worth noting that your savings can also impact other benefits.
For instance, Housing Benefit and Council Tax Reduction might be affected if your savings exceed certain thresholds.
How Can I Protect My Savings While Claiming Universal Credit?
There are ways to protect your savings while claiming Universal Credit. One option is to consider using a Help to Save account.
This government-backed savings account offers bonuses to low-income individuals and the savings within it don’t affect your Universal Credit.
What if I Receive a Lump Sum?
Receiving a lump sum, such as an inheritance or redundancy payment, can impact your Universal Credit.
The Department for Work and Pensions (DWP) will assess the lump sum and determine if it affects your entitlement.
How Do I Calculate How Much My Savings Will Affect My Universal Credit?
Calculating the exact impact of your savings on your Universal Credit can be complex.
It’s recommended to use the Universal Credit calculator on the government website or seek advice from a benefits advisor.
What if I Disagree with the Decision on My Savings?
If you disagree with the DWP’s decision regarding your savings and Universal Credit, you have the right to appeal.
You can request a mandatory reconsideration or appeal to a tribunal.