Millions of people across the UK rely on Universal Credit to help with the cost of living. However, not everyone receiving this benefit fully understands how savings can affect their entitlement. The Department for Work and Pensions (DWP) has strict rules about how much you can have in savings before it starts to impact the amount you receive, and in some cases, your claim could be stopped altogether.
Here’s what claimants need to know about the DWP savings thresholds and how they could potentially reduce or cut off your payments.
Understanding Universal Credit and Capital Rules
Universal Credit is a benefit designed to support those who are on a low income or out of work. It replaces a number of older benefits and is intended to simplify the welfare system. However, it also comes with specific eligibility requirements, including how much you have in capital – which includes your savings and other financial assets.
According to the official government guidance from the Department for Work and Pensions, savings and capital below a certain threshold will not affect your Universal Credit payments. But once those levels rise, so does the potential for reduced benefit.
Savings Below £6,000
If your total savings and capital are below £6,000, there is no impact on your Universal Credit payments. The DWP considers you to have a low enough level of capital that you need full support. This includes money in bank accounts, savings accounts, and any cash savings.
Between £6,000 and £16,000
Once your savings or capital rise above £6,000, your Universal Credit eligibility starts to be affected. The DWP assumes what is known as ‘tariff income’ from any amount of capital between £6,000 and £16,000. This means they will treat you as if you’re earning income from your savings, even if that’s not actually the case.
The tariff income is calculated as £4.35 for every £250 (or part thereof) you have over the £6,000 threshold. This assumed income is then deducted from your monthly Universal Credit payment.
For example, if you have £8,000 in savings, that is £2,000 over the £6,000 threshold. The DWP calculates this as eight units of £250, meaning an assumed monthly income of £34.80 (£4.35 x 8). This amount is then deducted from your Universal Credit.
Savings Over £16,000
If you have savings or capital of £16,000 or more, you are not eligible for Universal Credit at all. Your claim will be suspended or denied until your capital falls below this limit. This rule is in place regardless of your employment status or your expenses.
It’s important to note that this threshold applies per couple, not per individual. So, if you are part of a couple claiming Universal Credit together, and your combined savings exceed £16,000, your claim will be affected accordingly.
What Counts as Savings or Capital?
The DWP considers a wide range of assets when calculating your savings and capital. These include:
– Cash and money in bank or building society accounts (including current accounts)
– Stocks and shares
– Premium Bonds
– Property that you own which is not your main residence
– Lump-sum payments, such as redundancy payments, insurance payouts, or inheritances
Some assets are disregarded for a certain period. For example, if you’ve recently sold a house and are planning to buy another, the proceeds from the sale may be ignored for up to six months.
Deliberate Deprivation of Capital
Some individuals may be tempted to spend or give away their savings in order to qualify for Universal Credit. However, the DWP has measures in place to prevent people from doing this.
This is known as ‘deliberate deprivation of capital’. If the DWP believes you have intentionally reduced your savings to qualify for Universal Credit, they can still calculate benefits as if you still had the money. This could mean reduced or cancelled payments.
Advice and Support
For those approaching the savings thresholds, it’s important to keep track of your finances and regularly review your bank accounts and investment holdings. There are also various online tools and calculators that can help estimate how capital might affect your Universal Credit.
Conclusion
The DWP savings rules are clear – if your savings are above £6,000, you can expect to see a reduction in your Universal Credit payments, and if they are above £16,000, you may lose entitlement altogether.
Being aware of these thresholds and how they work can help you stay compliant and avoid any surprise losses in benefit payments. As the cost of living continues to be a challenge for many, it’s more important than ever to understand how your financial situation can affect the support you receive.
