When applying for means-tested benefits in the UK, understanding how your savings affect your eligibility is crucial. Savings, including money in bank accounts and other assets, can impact whether you qualify for payments from Universal Credit, Pension Credit, and other key benefits. While there are strict limits in place, it’s not just cash that counts – other assets, such as property and investments, are also considered.
What Are Means-Tested Benefits?
Means-tested benefits are financial aids designed to support individuals or families based on their income and savings. These benefits are only available to those who meet specific criteria, including having savings below a defined threshold. According to MoneyHelper, the Department for Work and Pensions (DWP) scrutinises your financial situation to determine whether you qualify.
Universal Credit, for instance, has a savings limit of £16,000. This includes cash in any bank or building society account, as well as investments and any savings accrued over time. Other benefits, like Pension Credit and Income-Related Employment and Support Allowance, also impose similar savings limits. However, different benefits have different thresholds. For instance, Pension Credit allows for only £10,000 in savings to qualify for the full benefit.
The Impact of Savings on Your Eligibility
The DWP doesn’t simply look at the money in your bank account when determining eligibility for means-tested benefits. Non-cash assets are also included in the assessment, and these can have a significant impact.
According to MoneyHelper experts, savings in National Savings and Investments accounts, premium bonds, stocks and shares, and even the value of any property you own (excluding your primary residence) are all factored into the overall calculation. Additionally, certain lump-sum payments, like redundancy pay or compensation, are considered as savings.
However, not all assets count towards the savings limit. Personal items such as jewellery, cars, and furniture are disregarded in the assessment. Similarly, pensions that have not yet been accessed, life insurance policies, and pre-paid funeral plans are also excluded from the calculation. These exclusions ensure that individuals aren’t penalised for assets that are not readily liquid or accessible.
Preventing Deprivation of Assets
A common concern when applying for benefits is whether you can decrease your savings intentionally to qualify. This practice, known as deprivation of assets, is prohibited. For example, transferring money to family members or buying exempt assets in an effort to reduce your savings would be flagged by the DWP.
If the department suspects that assets were deliberately reduced to gain higher benefits, they may apply the concept of notional capital. This means they would treat you as though you still possess the assets you’ve given away, potentially affecting your eligibility.
It’s important to be aware that the DWP will examine the reasons behind the reduction of savings. If you spent money on necessities such as food or debt repayment, it is unlikely to be considered deprivation of assets. However, if funds were spent with the clear intent of qualifying for more benefits, the claim may be denied.
