How savings and capital can affect your benefits.

Havering Welfare Benefits Adviser Lorraine Moss today writes in the Havering Daily:

I am sure that if someone won the Euro millions jackpot, this would not be a concern for them.  However, many people who are in receipt of benefits could have a sudden increase in income through things like inheritance.  

Regardless of what articles you read or what you are told by others, my advice would be that whenever you have a change of circumstances, you must inform the DWP, Local Council or HMRC. Failure to do so could lead to an over payment of benefit and a conviction for fraud.  Please see Benefits: report a change in your circumstances – GOV.UK (

“How do savings and lump sum pay-outs affect benefits?Source How do savings and lump sum pay-outs affect benefits? – Money Advice Service

Some benefits are affected by the amount of money you have in savings, such as cash in a savings account, or investments in shares. These benefits are called means-tested benefits. Find out more about which benefits are affected by savings or a lump sum pay-out, such as redundancy pay or compensation.● Which benefits are affected by savings?● How savings affect Pension Credit● What counts as savings?● Will my redundancy pay or other lump-sum payment affect my benefits?● Backdated lump sum payments from DWP

Which benefits are affected by savings?

The main means-tested benefits that are affected by both income and savings include:● Universal Credit● Pension Credit● Tax Credits (Child Tax Credit and Working Tax Credit)● Council Tax Support● Income-based Jobseeker’s Allowance● Income-related Employment and Support Allowance● Income Support● Housing Benefit

What are the savings limits?

Universal Credit

If you or your partner have £6,000 or less in savings this will not affect your claim for these benefits.

If you and/or your partner have £16,000 or more in savings, you will not be entitled to Universal Credit.

If you and/or your partner have any savings or capital of between £6,000 and £16,000, the first £6,000 is ignored.

The rest is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250.

Example● You’re claiming Universal Credit and have £7,000 in a savings account● The first £6,000 of it is ignored● The remaining £1,000 is counted as giving you a monthly income of £17.40● £1,000 ÷ £250 = 4● 4 × £4.35 = £17.40● £17.40 will be taken off your monthly Universal Credit payment.

How your savings are affected if you move from Tax Credits to Universal Credit

This depends on if you’ve been told by the Department for Work and Pensions (DWP) you will be moving to Universal Credit (known as managed migration), or if you’re circumstances have changed (for example, a change in employment status, family circumstances or housing situation).

If you’re moving from Tax Credits because of a change in circumstances (for example, a change in employment status, family circumstances or housing situation) and you have over £16,000 in savings, you will normally not qualify for Universal Credit. Any savings you have between £6,000 and £16,000 will reduce the amount of Universal Credit you will get.

If you’re moving as part of managed migration, any savings you have over £16,000 will be disregarded for 12 months from the point you move to Universal Credit. After 12 months, the normal rules apply.

Try to get advice from a benefits specialist before you move from tax credits to Universal Credit.

Call the Citizens Advice Help to Claim helpline 0800 144 8444 in England or 0800 024 1220 in Wales or 0800 023 2581 in Scotland.

How savings affect Council Tax Support

Council Tax Support (CTS) is run by local councils and if you are of working age the amount of savings you are allowed to have depends on the rules of the CTS scheme in your area.

Your local council can tell you more about how the scheme works where you live.

If you are getting Pension Credit and qualify for Council Tax Support, your savings could affect how much you get.

Find out more about how getting Pension Credit affects Council Tax Support on the Citizens Advice website.

Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance, Income Support, Housing Benefit

Most new claims will be for Universal Credit which is replacing these benefits.

If you’re already claiming one of these benefits and you have savings worth £6,000 or more you will need to let the office that pays your benefit know.

How savings affect Pension Credit

There is no upper capital limit for Pension Credit but you may receive a reduced amount if you have more than £10,000 of capital.

For every £500 or part of £500 of capital over £10,000, you’ll be treated as having an income of £1 a week. This is added to any other income you have, such as a pension.

Find out more about Pension Credit.

Find out more about savings rules for benefits if you’re over 60 on the EntitledTo website.

What counts as savings?

Savings are counted as any money you can get hold of relatively easily, or financial products that can be sold on. These include:● cash and money in bank or building society accounts, including current accounts that don’t pay interest● National Savings and Investments savings account and Premium Bonds● stocks and shares● property, which is not your main home.

Under certain circumstances, other properties you own, which you don’t live in, might be disregarded. You can find out more at

Other savings and capital are disregarded including:● personal possessions, such as jewellery, furniture or a car● value of any pre-paid funeral plans● life insurance policies which have not been cashed in● insurance claims will be ignored for six months if used to replace or repair.

The Department for Work and Pensions (DWP) are responsible for determining what saving are included or excluded in a benefits claim and this can be based on your personal circumstances.

For more information you should contact the DWP or the Universal Credit helpline.

If you’re not happy with a benefits decision you have the right to appeal.

Will my redundancy pay or other lump-sum payment affect my benefits?

Redundancy pay

If you receive redundancy pay this will be treated as savings for any means-tested benefits you claim.

Bear in mind that not all benefits are means-tested. If you’ve lost your job, the main benefit you can claim is new-style Jobseeker’s Allowance and this is not affected by your savings.

Find out more about benefits and tax credits when you’ve lost your job.

Compensation pay-outs

Compensation is treated as savings for any means-tested benefits you claim. You need to tell the office that pays your benefit as soon as you get your compensation pay-out.

When you claim compensation for an accident, injury or disease which was not your fault, the organisation you’re claiming from must tell the Department for Work and Pensions (DWP).

If you’ve been receiving benefits because of the accident, the organisation may have to pay back to the DWP the amount you’ve received in benefit. This might be deducted from your pay-out.

Find out more about benefits and compensation on the GOV.UK website.

Deprivation of assets

You are not allowed to intentionally reduce your assets or savings to increase the amount you get in benefits. The Department of Work and Pensions (DWP) calls this deprivation of assets.

Deprivation of assets can include:● giving away money● transferring ownership of a property● buying possessions which are excluded from means testing, for example cars and jewellery.

If you have done any of these things before making a claim for benefits, the DWP will look at when you got rid of your savings and assets.

If it’s believed you might have deprived yourself of savings or assets, the DWP or your local council, might look at the evidence to decide if it was deliberate.

If at the time, you would not have been able to predict needing benefits, then it might not count as deprivation of assets. You may be asked to provide paperwork and receipts to back up the date and the reasons why you got rid of savings or assets.

If it’s decided you have deliberately deprived yourself of savings or assets, you will be treated as if you still had them. This is called notional capital.

The notional capital will be added to the assets and savings you do have and will affect the amount you will get in benefits.

Find out more about deprivation of assets and notional capital on the EntitledTo websiteopens in new window.

Backdated lump sum payments from DWP

If your benefits have been underpaid you could be entitled to a back payment from the Department of Work and Pensions (DWP).

This might involve a substantial lump sum payment, which could push you over the savings limits for means tested benefits, including:● income-based Jobseeker’s Allowance● income-related Employment and Support Allowance● Income Support● Universal Credit● Housing Benefit● Pension Credit

In some cases, this payment is not counted as savings for one year and will not affect your income related or means tested benefits during this time.
However, where benefits have been underpaid because of:● an official error● an error on point of law

any payments over £5,000 can be disregarded for the length of the claim or until the award ends.

PIP mobility component and mental health

In September 2018 it was decided if you’re unable, or find it difficult, to plan or make a journey due to mental health conditions, you’re entitled to the Personal Independence Payment (PIP) mobility component.

If you already getting PIP and think you might benefit from this, you don’t need to do anything. The DWP is currently reviewing all PIP claims and you will be contacted directly.

If you’ve already asked for your PIP award to be reviewed, simply continue with your request.

Claims will be backdated to 28 November 2016.

ESA underpayments

Around 70,000 people have been underpaid Employment and Support Allowance after transferring from older benefits, including Incapacity Benefit.

The people most affected are approximately the 20,000 who were entitled to the ‘severe disability premium’ and were not paid it. In some cases, people may be owed up to £20,000.

The Department of Work and Pensions (DWP) is now making backdated payments to affected customers. Payments will be made going back to the date of the original claim.

If you think you might be owed compensation, you don’t need to do anything. DWP will contact you directly.”

Examples of How A Change of Income Can Affect Your Benefits

The following are four examples, as I stated at the beginning of this article, you must always report a change of circumstances to the DWP, local authority and HMRC.  There are exceptions to these rules, for example some people may have money held in trust due to a personal injury claim. 

Example 1

John lives with his wife. His wife works fulltime and John is in receipt of new style (contribution based) ESA.  John inherits £50.000 from his uncle.  This does not affect his benefits because the benefit he receives is not income based. 

Example 2

Lucy lives on her own and is in receipt of Universal Credit. Her mother passed away and has left the family home to her.  Lucy decides to give up her privately rented property and move into her late Mothers home.  This will not affect her benefits because you are allowed to own the property that you are living in.  She would stop receiving the Housing Element of Universal Credit because she would no longer be liable for rent. 

Example 3 

David and Lisa are both in receipt of Universal Credit and Lisa also receives Personal Independence Payment (PIP).  They live in social Housing and David’s late father has left them £20 000 in his will.  David and Lisa have £15 000 worth of debts.  They immediately pay these all off and are left with £5000.00 which they then put into a savings account.  This will not affect their benefit because if you are in receipt of Universal Credit, you are allowed to pay off debts.  However, you should keep records of the debts and receipts of payments. 

Example 4

Pauline lives with her husband and 3 children in social housing.  Her and her husband are both in receipt of Universal Credit.  Pauline inherits £70.00 from her late fathers’ estate.  They spend the money on an expensive car, luxury holiday.  They then ask a family member if they can put the remaining £40 000 into their bank account.  They do not inform the DWP.  The DWP find out about this money and immediately stop their benefits.  Pauline could also be investigated for fraud.

Notional Income (source Notional income – Turn2us

The amount of means-tested benefits you receive depends on your income.

In some situations, you are treated as having income even if you do not actually receive it.  This is called notional income.

You can be treated as having notional income when:
•    You have deliberately got rid of income so that your benefit entitlement is higher
•    You did not apply for income that you were entitled to
•    You have not received income that is due to you
•    Your income is paid to someone else on your behalf

Next week, I will be looking at Discretionary Housing Payments. 

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