Universal Credit and savings: What you need to know
More than five million people are now in receipt of Universal Credit after the benefit saw a spike in applicants amid the coronavirus pandemic.
Those on low incomes, people who cannot work or are out of work can claim Universal Credit with the standard allowance for single people aged 25 and over currently standing at £409.89 per month.
Generally if you and your partner have less than £16,000 in savings, you may be eligible for Universal Credit.
Kay Ingram, director of public policy at financial planning group LEBC said those who have savings may see their entitlement to the benefit reduced.
Savings under £6,000 are disregarded, but between this amount and £16,000, each £250 of savings reduces the credit by £4.35 per month. Those with savings may however still be eligible to claim.
Below, Ingram shares six tips to help those with savings protect their eligibility to claim Universal Credit:
- Ring fence any money owed for your 2018/19 tax bill. Tax due via self-assessment is usually paid in two instalments in July and January of the following tax year. This year taxpayers can defer making the July payment until 31 January. Money set aside for tax is not counted as savings for the Universal Credit means test, so will not reduce entitlement to benefits
- Money in pension pots is not counted for the Universal Credit means test, unless the claimant is over the age of 66. But, if money is withdrawn, it will count towards the means test
- The self-employed should ensure that any money belonging to their business is ring fenced, and ideally held in a separate account, or it too will be counted towards the means test for Universal Credit
- Young people saving for a house deposit through a Lifetime ISA will see their savings count towards the means test for Universal Credit. If the money is withdrawn, they will lose the 25% bonus added to the LISA by the government, so if possible, other savings should be spent first.
- Universal Credit claimants are eligible to start a Help to Save account, which can be maintained for up to four years after their Universal Credit claim ceases. So, those able to get back into work may be able to rebuild their savings with the Help to Save scheme which includes a 50% government bonus. Eligible claimants with household income of £604.56 per month or more may open an account. Maximum savings are £50 per month over four years, with a bonus of 50% of the highest balance paid after year two and year four. Access to these savings is permitted without losing the bonus
- Parents who claim Universal Credit can continue to receive Childcare Vouchers but are ineligible for a Tax-Free Childcare Account – but they can receive help with up to 85% of childcare costs as a Universal Credit claimant