This blog will provide the reader with clarifications as to whether an individual can claim benefits while having savings. It will define what does and does not constitute savings. It also tries to understand the savings conditions to access different benefits, the requirements and the exceptions to the rules under the Universal Credit system. 

Can you claim benefits with savings ? 

Yes and No ! The ability to claim benefits and the extent of benefits that a person is eligible for, all depend on the amount of savings and income that a person has. i.e. it is means-tested and depends on individual circumstance and income.

Overall, higher savings/investment in saving instruments, means increased likelihood that benefits which are means-tested under Universal Credit will be reduced or even withdrawn completely. 

Universal Credit has been rolled out more or less completely in the United Kingdom and has replaced most other benefits such as Housing Benefit, Tax Credits or Income Support etc. 

As a consequence, the Universal Credit system, which is means-tested (meaning it depends on the level of income and savings of the claimant), will be determined on a case-to-case basis that depends on the unique circumstances of each individual. 

There are a few general rules that apply, which will be detailed in the sections below. 

What is included in ‘savings’ when claiming benefits under the Universal Credit system ? 

Now, claims for benefits are only under the Universal Credit system; those who were claiming ‘legacy benefits’ would have to switch over to the UC system to claim equivalent means tested benefits.  

Under the Universal Credit system, savings include money which is easily accessible or financial products which can be liquidated/sold easily. These include the following : 

  • Cash holdings
  • Bank deposits i.e. money held in bank accounts whether current or savings
  • Contributions/deposits in Building Society accounts 
  • Equity instruments e.g. stock and shares in various companies, trusts, organizations etc. 
  • National Savings and Investment accounts 
  • Debts instruments such as bonds, be they premium or income bonds 
  • Any other immovable property that you own, that is not your main/primary home/is not used as a home
  • Money invested in a tax-free ‘Child-care’ account 

The Universal Credit system does not take into account your home/household ( which is an asset) or your business assets such as office space, equipment etc. into consideration when calculating savings or capital/investments. 

What is not included in the definition of ‘savings’ for the purpose of claiming benefits ? 

The following assets/income/capital , are not included in the definition of ‘savings’,  for the purpose of calculating benefits : 

  • Personal property such as jewellery, furniture, cars etc. 
  • Life Insurance policies that have not been withdrawn or partially/fully surrendered
  • The property of an ‘incapacitated’ relative or extended family member , who may have an illness, injury due to accident, inability to live alone due to old-age etc. 

This also applies to a relative /extended family member who has reached or crossed the state pension credit qualifying age.

  • Property that has been purchased with the intent of utilizing it as a home/household does not qualify as savings. 

It also does not qualify as savings, if a property is bought and repairs are being conducted in order to make it habitable as a home. 

The sale of such a property, that is/was used as a home, in order to use the proceeds of such a sale to acquire another home/house, also does not meet the definition of savings. 

  • Any property that is legally yours or acquired as a part of a legal process after the end of a relationship e.g. divorce. 

This could be property acquired via divorce settlements, division of property and assets etc.

These do not come within the purview of savings for the purposes of calculating benefits. 

  • Money from insurance claims to be utilized for repairs, refurbishment or replacement are not counted as savings 
  • Loans from banks or other financial institutions or grants from trusts provided to you for the purpose of repairs, home improvements etc. also do not qualify as savings. 

It has to be emphasized that the Department for Work and Pensions (DWP), decided which of these categories and how many of them the definition of ‘savings’ will be inclusive of. 

Keep in mind that the DWP can also alter these inclusions/exclusions based on an individual’s personal circumstance as well. 

Now that we have delineated what comprises savings and what does not, the actual monetary value/amount of savings and the consequent impact on benefits and the extent of claims that can be made should be discussed in detail. 

The relationship between savings and UC benefits entitlements

An individual is eligible for UC benefits if : 

  • You are above 18 years of age 
  • Have not yet reached State Pension Credit qualifying age 
  • You are presently not engaged in any full time educational program or training program
  • Most importantly perhaps , your savings are less than £16000 

What are the savings limits ? 

This obviously means that if you or your  partner/spouse that you reside with has more than  £16000 in savings, you will be ineligible for Universal Credit benefits. 

People with more than  £16000 in savings or capital will generally be ineligible for most of the means-tested benefits under the Universal Credit Scheme. 

In addition, a person’s income ( assuming they are employed/working) will affect their entitlements. So will any amount of savings equal to or more than  £6000. 

Any savings amount more than £6000 means that the extent of your entitlements and eligibility will be reduced in tandem. 

Savings less than  £6000,  means you will receive all the means-tested benefits. Savings below the threshold of  £16000, mean-tested benefits will also progressively decrease. 

I.e. between  £6000 and  £16000, the first  £6000 is ignored and for the rest of the amount you receive benefits of £4.35 for every £250 or part of £250 , almost like a monthly income. 

Can I receive other means-tested benefits if I have savings ? 

Most means-tested benefits have now been transferred under the rubric of Universal Credit, for example- Income Support and Employment and Support Allowance, Housing Benefits, Income based Job-seekers Allowance etc. 

Therefore, you cannot claim these benefits , except under the Universal Credit scheme and rules as laid out above. 

The exception to this rule is the Tax Credit System that predated the Universal Credit system. This will be detailed below. 

Is the Tax Credit or UC system better for someone with savings ? 

As previously pointed out, Universal Credit covers several ‘legacy benefits’, which an individual cannot access if they remain with the tax credit system. 

At the same time, the UC system does dis-incentivize saving and investment by reducing the benefits an individual can claim as their savings increase. 

On the contrary, the Tax Credit system does not place a limit on individual savings as the benchmark to determine benefits. 

Instead Tax Credits are claimed on the interest that a person earns from their savings i.e. savings income. 

If the savings income is less than £300, then it will not be considered. However, if it is more than £300, then £300 will be deducted from your annual income. 

For more detailed information on how to calculate your tax credits please refer to – https://www.litrg.org.uk/tax-guides/tax-credits-and-benefits/tax-credits/what-counts-income-tax-credits

Movement to Universal Credit will make the above detailed savings limits and their conditions applicable. Please refer to page 4-5 of this same blog. 

If you are asked by the Department of Work and Pension to move to the Universal Credit system i.e. a process known as managed migration, then your savings, including savings equal to or above £16000 will not be considered for a period of 1 year ( 12 months ) from the date of movement to the UC system. 

After a financial year elapses, then the standard rules under Universal Credit will apply. 

If you intend to move from a Tax Credit to the Universal Credit system, then these pros and cons need to be calculated carefully and on the basis of your own specific needs, responsibilities and circumstances. 

When benefits themselves form part of savings ! 

This section is slightly ironic, in that the receipt of certain types of benefits themselves could be considered part of your savings/capital and thus cause your savings to increase or cause you to exceed the savings limit under the Universal Credit scheme. 

Needless to say, if these benefits increase your savings, then they will decrease the benefits you can claim from UC or even make you ineligible for them. 

The different possibilities are explored below. 

Redundancy Pay and Workplace Compensation 

If your employer terminates your employment, you lose your job or you’re out of work , the redundancy pay you receive will be considered a part of your savings when you claim any/all means-tested benefits under UC. 

Similarly, if you receive compensation from your employer/organization for any accident ,illness or injury resulting from the workplace, you must inform the DWP. They deduct the compensation payout from any benefits you have been receiving under UC. 

Backdated Lump-Sum Benefit Payment 

At times, due to system errors or issues with legalese or human error, the DWP may delay your benefit payments or could have paid you less than the amount you are entitled to.

If the DWP has arrears in your benefit payment, the payment made therein or the amount, rather, is counted as savings and could cause the beneficiary to exceed their savings limit under the UC system. 

These include the following benefits : 

  • Income Support 
  • Income related Employment and Support Allowance 
  • Income based Job-seeker’s Allowance 
  • Pensions Credit 
  • Universal Credit 
  • Personal Independence Payment (PIP) 

In some of these cases , however, the lump-sum arrear payment is disregarded in the calculation of benefits for a period of 1 year i.e. 52 weeks. 

Examples of these include the Personal Independence Payment (especially for mobility and mental health support) and the back-dated payments/compensation from the DWP for Employment and Support Allowance (ESA). 

Moreover, in cases where the payment has been delayed or underpaid due to DWP error or issues of legalese, the DWP will extend the concession period till the end date of the claim or award.

In either case, whether 52 weeks or till the end of the award period, the lump-sum payments will not be considered as part of savings and thus the benefits received will not be affected. 

Some legal issues i.e. ‘Deprivation of Assets’ 

A key legal point that all beneficiaries must keep in mind, is that of ‘deprivation of assets’.  

It is essential that if a person intends to register as a beneficiary under UC , they cannot attempt to reduce their savings or capital in  order to increase the possible benefits that they could receive. 

For example, people might attempt to : 

  • Transfer the ownership of their house/property to another to avoid its inclusion in savings 
  • Give away money by any means in order to reduce cash holdings 
  • Purchase assets that can be excluded from the definition of savings/capital such as jewellery, cars, furniture etc. 

This is a method used by people to reduce the amount of capital/savings that can be considered for the computation of means-tested benefits under UC. 

Be aware that the DWP will look into the date and other evidence of such activities, sales, or purchases to establish its legality and legitimacy. 

In certain cases, the individual may have sold property or made purchases of equity or made other investments without the intention of ever claiming the concerned benefits. 

However, the burden of proof is on the beneficiary who needs to provide dates and other evidentiary reasons/requirements that establish that these activities were done separate from the consideration of benefits. 

If not, then the reduction in asset/capital/cash/savings value by any means, during the time preceding the claim to benefits will be considered a ‘deprivation of assets’.

In addition, the value of such reduced assets or savings/investments will be retained as ‘notional capital’. I.e. it will be as if these properties, cash, investments, etc. were all still owned by the beneficiary and form part of their savings. 

Benefits will thus be reduced accordingly. So ensure that any financial activities can be proven to be for a legal and purposeful cause unrelated to your claim for benefits. 

This blog has attempted to clarify the question of whether one can claim benefits with savings. It has defined the scope of savings and has described the different benefits that you can claim at varying levels of savings. 

The monetary limit for savings in accessing benefits and the conditionalities or requirements needed to establish a right to entitlements under the Universal Credit system have been delineated. 

If you have any comments, suggestions or questions , kindly contact us and leave your message. We welcome your input. 

Frequently Asked Questions (FAQs)- Can you claim benefits with savings ? 

Will my savings affect my Pension Credit ? 

Yes. Although there is no upper limit on capital that causes a retraction of the pension entitlement, if an individual has savings of more than £10000, then the Pension Credit provided will be proportionately less. 

So the amount of savings will not make a person ineligible in and of itself, but it could reduce the benefit amount. 

For more information please refer to the following websites- Pension Credit (moneyhelper.org.uk) and How do savings and lump sum payouts affect benefits? (moneyhelper.org.uk)

Is the DWP allowed to check my bank details etc. to verify my savings status ? 

Yes, with the presence of various kinds of fraud and the large amounts of claims that come through, the DWP has been given the right to conduct checks if they suspect any foul play. 

DWP officials are permitted to conduct : 

  • Plainclothes home inspection
  • Check your bank accounts and/or social media handles/profiles
  • Surveillance of financial activity
  • Face-to-face interviews or questioning and
  • Inspection of documentary evidence/document tracing to ensure that you are not claiming overpayments under any circumstances. 

Overpayments could be due to human error, machine error, official errors or due to misinformation by claimants ( such as fraud through non-disclosure of key facts or circumstances). 

For more information about which circumstances of overpayment or savings foul-play the DWP inspects , please refer to – DWP will check your bank account for these 7 things looking for benefit fraud – Wales Online

Does money that I saved for my business purposes count as savings ? Will it affect the benefits I receive ? 

If you have set aside money in a business bank account in order to use it for purposes of continuing trade or financing business needs or paying business tax bills, it will not be considered as savings. 

This concession stems from the business principle that assets belonging to the business are a separate entity from the proprietor and their personal assets. 

In addition a temporary measure was introduced from May 2020. 

Any benefits granted to individuals for carrying on their occupation or trade such as a furlough benefit, under the Employees Retention Scheme or grants/loans for people who need to carry on a vocation/business are not included in the calculation of savings. 

These specific concessions are to be granted for one year i.e. 12 months from the date it is provided, after which the benefits will be included in the consideration of savings. 

For more information on business and savings related matters refer – Capital rules « Entitlement to Universal credit « Guidance « Universal Credit (revenuebenefits.org.uk)

Will my inheritance reduce the benefits I am entitled to receive ? 

If you inherit an annual amount of money, then this is treated as income. If the annuity comes into an account, then this amount is included in the savings consideration. 

This could either reduce the benefits you receive or it could cause your savings to exceed the UC savings limit thus revoking your entitlements to the all means-tested benefits. 

However, if you receive your inheritance as a one-time payment, or if you inherit property, then these do not come under the purview of savings.

Any income you receive from them, however, will be considered as income e.g. rental income or interest of the money you have received and saved. 

For more information please refer to – Will the money I inherited affect my benefit? | Citizens Advice Bureau (cab.org.nz)

Are gifts of money considered part of savings ? Will my benefits be affected ? 

Any voluntary monetary gifts from family, friends or charitable organizations need not be considered as income/savings. 

Gifts during holidays, or once or twice a year, which can consist of cash or kind do not fall under the savings category and they will not affect your benefits. 

If, however, the gift is in the form of a monetary inheritance and it is given as a one-time payment- if the payment is made into a trust, any income the trust generates will be counted when calculating benefits. 

For more information on gifts, inheritances and benefits please refer to – Income from voluntary or charity sources – Entitledto

References 

  1. Building Better Opportunities – How much can I have in savings before it affects my benefits? (n.d.). Building Better Opportunities. Retrieved October 7, 2021, from https://bbostaffs.org/knowledge-advice/how-savings-affect-benefits/
  2. How do savings and lump sum payouts affect benefits? (n.d.). MaPS. Retrieved October 8, 2021, from https://www.moneyhelper.org.uk/en/benefits/problems-with-benefits/how-do-savings-and-lump-sum-pay-outs-affect-benefits
  3. What counts as income for tax credits? | Low Incomes Tax Reform Group. (n.d.). Www.litrg.org.uk. Retrieved October 8, 2021, from https://www.litrg.org.uk/tax-guides/tax-credits-and-benefits/tax-credits/what-counts-income-tax-credits
  4. Pension Credit. (n.d.). MaPS. Retrieved October 8, 2021, from https://www.moneyhelper.org.uk/en/pensions-and-retirement/state-pension/pension-credit
  5. Bentley, D. (2021, September 20). 7 things the DWP check your bank account  to check for benefit fraud. WalesOnline. https://www.walesonline.co.uk/news/uk-news/dwp-check-your-bank-account-21617189
  6. Capital rules «Entitlement to Universal credit «Guidance «Universal Credit. (n.d.). Revenuebenefits.org.uk. Retrieved October 8, 2021, from https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/capital-rules/
  7. Citizens Advice Bureau. (n.d.). Www.cab.org.nz. Retrieved October 8, 2021, from https://www.cab.org.nz/article/KB00001852
  8. Benefits Calculator – entitledto – independent | accurate | reliable | www.entitledto.co.uk. (n.d.). Www.entitledto.co.uk. Retrieved October 8, 2021, from https://www.entitledto.co.uk/help/benefits-charity
  9. Effect of savings on benefits | Disability charity Scope UK. (n.d.). Scope. Retrieved October 8, 2021, from https://www.scope.org.uk/advice-and-support/how-savings-affect-means-tested-benefits/
  10. Claiming Benefits | How your benefits my be means-tested. (n.d.). Age UK. https://www.ageuk.org.uk/information-advice/money-legal/benefits-entitlements/how-your-benefits-are-means-tested/

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.