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Your Savings and Benefits

By: Paul Geraghty - Updated: 16 Jan 2018 | comments*Discuss
 
Your Savings And Benefits

In the old days people had to fend for themselves, and would put money away in the good times so they could cope with the bad times. Today, the government provides a safety net for everyone, making a stock of savings less of a necessity than it was before. Some people still do accumulate significant savings, though. So will your eligibility for benefits be affected if you are one of those?

It seems rather paradoxical that those who have acted responsibly by building up a stock of savings to help them cope with adversity are penalised for doing so by the government. That is how it is, however. Your savings do affect your eligibility to receive some government benefits, potentially either reducing the amount you get or even meaning that you will get nothing whatsoever.

For those who have just been made redundant, this is an especially important issue because, in most cases, you will have received a lump sum redundancy payment. Sometimes, this can be a very large amount. Up to £30,000 can be paid free of tax, but if you just retain it, it will affect your eligibility for some state benefits.

Benefits Which are Affected By Your Savings

If you’ve just been made redundant, unless you have a new job lined up, you will naturally want to claim Jobseeker’s Allowance. There are two forms of Jobseeker’s Allowance : contribution-based and income-based.

Contribution-based Jobseeker’s Allowance is only available to those who have made enough national insurance contributions and is only payable for six months. It does not take account of your level of savings. Income-based Jobseeker’s Allowance does take your savings into account when determining you eligibility. It is not time-limited. Both contribution-based and income-based Jobseeker’s Allowance can be claimed at the same time.

The main state benefits which take savings into account when determining eligibility include income-based Jobseeker’s Allowance, Council Tax Benefit, Income Support and Housing Benefit.

How the Amount of Your Savings Affects Your Eligibility for State Benefits

For those benefits which are affected by savings, the basic rule is that if you have savings above the upper savings limit, which is currently £16,000, you will not be eligible to receive any benefit. If you have savings below the lower savings limit, currently £6000, your benefits will be unaffected. (Note that these values can change over time, so you will need to check for the latest values.)

For savings in between the two limits, your savings are assumed to yield a weekly “tariff income” of £1 for every £250 of savings. This equates to an assumed annual tariff income of approximately £50 for every £250 of savings, equivalent to an interest rate of 20%, which is clearly absurd and unattainable in the real world. Nonetheless, this is the basis the government uses for their calculations. The benefit payments you receive each week will be reduced by your assumed tariff income. So, if the lower limit is £6000, and you have £10,000 saved, £4000 of that will be counted. £4000 divided by 250 is 16, so you will get £16 less per week in benefits.

Savings and Benefits – Conclusion

When you’re made redundant, the payment you get from your employer is the silver lining to the cloud. Just be aware that, when it comes to Applying for Benefits, the silver lining may have a whole new cloud of its own.

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[Add a Comment]
@Lottie - you can apply for Jobseekers Allowance if you're looking for work, despite your redundancy payment as it doesn't take your savings into consideration. Have you thought of doing that?
Mac - 18-Jan-18 @ 3:17 PM
I have just been made redundant and the payout was over the £16k savings limit to be able to apply for Universal Credit. However, I was advised by DWP that I should still apply in order to get NI credits. It was quite a lot of work to go through the application jointly with my husband, as they wanted lots of documentation regarding savings and investments. They now have everything in hand and have simply closed the claim 'due to the level of savings and investment'. I made it completely clear from the beginning that I wasn't expecting any benefit payments apart from NI credits and it now looks as though I will have to do the whole application again simply to speak to them. Grateful for your advice on whether I am actually eligible for NI credits (I'm sure it's based on NI contributions, so there's no reason why not) and if so, is there a quicker way to apply for them? Thanks.
Lottie - 16-Jan-18 @ 11:02 PM
Donna - Your Question:
I have just come into the situation where I will need to be claiming Universal Credits, but was wondering regarding the savings.?I have been saving to get a deposit for a house, and these savings now come to around £8.5k.However I also have another account in my name that my daughters child benefit allowance goes straight into that I don't touch so she will have a nest egg when she turns 18. There is roughly around £2k in there at the moment. This money obviously isn't for me, but is in my name. Therefore my savings total comes to around £10.5k. I know this still comes under the £16k threshold so can still claim, but what I receive would be reduced. My question is, what about if I transferred this money to my parents to look after? Would the benefits people check accounts and see that I've just transferred £2k from my account and think I'm trying to cheat them? Also would it be possible to transfer more to my parents so that my savings then go below the £6k and therefore benefits received won't be affected at all?

Our Response:
Once you begin to transfer money in order to claim benefits, it becomes tricky, please see link here and here .
RedundancyExpert - 16-Jan-18 @ 10:40 AM
Hi, I am keen to add a comment of mine and learn more from people like me who are on the doorstep of retirement.
Peter - 16-Jan-18 @ 8:01 AM
I am keen to find out more and join the stream which can benefit people jointly who are on the doorstep to retire.
Peter - 16-Jan-18 @ 7:57 AM
I have just come into the situation where I will need to be claiming Universal Credits, but was wondering regarding the savings...? I have been saving to get a deposit for a house, and these savings now come to around £8.5k. However I also have another account in my name that my daughters child benefit allowance goes straight into that I don't touch so she will have a nest egg when she turns 18. There is roughly around £2k in there at the moment. This money obviously isn't for me, but is in my name. Therefore my savings total comes to around £10.5k. I know this still comes under the £16k threshold so can still claim, but what I receive would be reduced. My question is, what about if I transferred this money to my parents to look after? Would the benefits people check accounts and see that I've just transferred £2k from my account and think I'm trying to cheat them? Also would it be possible to transfer more to my parents so that my savings then go below the £6k and therefore benefits received won't be affected at all?
Donna - 15-Jan-18 @ 3:46 PM
Krystal - Your Question:
I am 67 and l have just been to an interview with dwp l get housing benefit and council tax benefit l have £10000 in an account it was redundancy money that l lost in stocks and shares 20years ago but l got it back through ppl two years ago l put it into a bond for two years and now it is in an ordinary account l have not told the dwp because l thought you could have 10000 in savings but l went to an interview and they asked me about it but l panicked and said l didn't have it and l have signed my name l am now worrying myself silly how do l stand under the circumstances.

Our Response:
You can see more via the gov.uk link here, which should answer your question. However, it is always best to declare what you do have honestly, so that your benefits can be worked out accurately and to save you any sleepless nights.
RedundancyExpert - 11-Jan-18 @ 11:09 AM
I am 67 and l have just been to an interview with dwp l get housing benefit and council tax benefit l have £10000 in an account it was redundancy money that l lost in stocks and shares 20years ago but l got it back through ppl two years ago l put it into a bond for two years and now it is in an ordinary account l have not told the dwp because l thought you could have 10000 in savings but l went to an interview and they asked me about it but l panicked and said l didn't have it and l have signed my name l am now worrying myself silly how do l stand under the circumstances .
Krystal - 10-Jan-18 @ 11:44 AM
@Seren - they may ask you to verify when you received the amount it may make a difference to your ESA and you may have to repay some money back (which is not what you need to hear after having gone through cancer). :(
JaneN - 19-Dec-17 @ 3:33 PM
I've been on ESA for a year due to having cancer. I recently received a letter to prove that my savings are still the same. It was £6000 last year. I never received the first letter, so I phoned up to ask for an extension. The lady on the phone said that they will carry on with my payments until I send the bank statements to prove nothing had changed or had changed. The lady on the phone asked if my savings were still the same, and I said yes. But at the time I wasn't very well and when I got off the phone I realised I had made a mistake. As I have recently inherited more money (£3000) from my granddad after he died. I feel awful as the lady on the phone made a note that my savings had not changed but now they have. I literally just didn't think at the time on the phone. Will I be in trouble when I send my new statements to ESA and they see that I have more savings now, than the original £6000?
Seren - 12-Dec-17 @ 10:16 PM
J - Your Question:
My brother has been living off his savings for 9 years after he lost his job he suffers from anxiety and doesn't leave the house much circumstances have changed and he is in the last of his savings 10.000 roughly and has been threatened with eviction after my other brother moved out if he can't prove he has benefits or a job to the housing assosiate. What I'm asking is would he be entitled to benefits even know he has these savings that he's living off. Would he be eligible for job seekers and help with rent etc

Our Response:
With regards to housing benefit, if your brother has less than £10,000 of capital then he should be able to claim the full benefit. If he has between £10,000 and £16,000 then he should get a reduced amount. He may wish to see how much he may be entitled to via the link here . Also see gov. uk link here .
RedundancyExpert - 7-Dec-17 @ 2:44 PM
My brother has been living off his savings for 9 years after he lost his job he suffers from anxiety and doesn't leave the house much circumstances have changed and he is in the last of his savings 10.000 roughly and has been threatened with eviction after my other brother moved out if he can't prove he has benefits or a job to the housing assosiate. What I'm asking is would he be entitled to benefits even know he has these savings that he's living off. Would he be eligible for job seekers and help with rent etc
J - 6-Dec-17 @ 10:31 PM
Elliott - Your Question:
My current contract will in end Jan 2018 after 10 months. Prior to this I was made redundant and was out of work for year, almost exactly to the day of starting my current contract. Whilst out of work I never claimed any sort of benefit or signed-on, I just used my redundancy package, which only just covered me in my time of unemployment. Prior to this I have worked solidly full-time for many years, most of my life. Would the fact I was out of work for that year affect my claim? Will lower the amount I receive, seeing as I haven't been 2 years in continual employment? Does my previous years worth of contribution come into effect? Thank you!

Our Response:
Unfortunately, I cannot answer your question directly, as much depends upon whether you continued to pay National Insurance Contributions. You can see whether you are eligible via the link here . Or simply ring your JobCentre Plus who will inform you whether you are eligible.
RedundancyExpert - 1-Dec-17 @ 3:12 PM
Bonnie - Your Question:
I sold my house 3yrs ago I was on esa.they gave me 6 months grave to find another house. But I was having a radiation drink for my thyroid at the time I sold my house so I at to be isolated for 4 weeks an then months of blood test an hospital oppointments.i never found a house because I only had 60k an no one would give me a small mortgage cause I was on esa. When the 6 months was up they esa stopped my money completely. And made me pay back the 6 months grace they gave me. For 3 yrs now I have lived of my capital. Paying full for everything i.e council tax rent glasses prescription the lot.now I only have 3k left. Will they let me claim again as I have made it last as honest an long as I could. P.S. may I also point out the reason I was on esa in the first place was due to a operation that left me with permanent bowel damage.in which I still attend hospitals and see specialist cause the damage they caused is getting worse over time.

Our Response:
You won’t qualify for income-related ESA if you have savings over £16,000. If you have savings over £6,000, your ESA may be affected. If you have savings of £3,000, you should be able to claim, please see link here.
RedundancyExpert - 1-Dec-17 @ 2:44 PM
My current contract will in end Jan 2018 after 10 months. Prior to this i was made redundant and was out of work for year, almost exactly to the day of starting my currentcontract. Whilst out of work i never claimed any sort of benefit or signed-on, i just used my redundancy package, which only just covered me in my time of unemployment. Prior to this i have worked solidly full-time for many years, most of my life. Would the fact i was out of work for that year affect my claim?Will lower the amount i receive, seeing as i haven't been 2 years in continual employment? Does my previous years worth of contribution come into effect? Thank you!
Elliott - 1-Dec-17 @ 1:54 PM
Jobless - Your Question:
I am being made redundant end of Feb 2018, am I entitled to JSA? I have paid all contributions, My husband works 16 hours, we have 2 properties we rent out, and have done so for years.

Our Response:
Yes, you are entitled to claim JSA regardless of your income, as long as you have paid NI for the past two years and you are actively looking for work, please see link here.
RedundancyExpert - 28-Nov-17 @ 12:49 PM
I sold my house 3yrs ago I was on esa .they gave me 6 months grave to find another house.But I was having a radiationdrink for my thyroid at the time I sold my house so I at to be isolated for 4 weeks an thenmonths of blood test an hospital oppointments .i never found a house because I only had 60k an no one would give me a small mortgage cause I was on esa. When the 6 months was up they esa stopped my money completely. And made me pay back the 6 months gracethey gave me. For 3 yrsnowI have lived of my capital . Paying full for everything i.e council tax rent glasses prescription the lot .now I only have 3k left. Will they let me claim again as I have made it last as honestan long as I could. P.S.may I also point out the reason I was on esa in the first place was due to a operation that left me with permanent bowel damage .in which I still attend hospitals and seespecialist cause the damage they caused is getting worse over time.
Bonnie - 27-Nov-17 @ 11:35 PM
I am being made redundant end of Feb 2018, am I entitled to JSA? I have paid all contributions, My husband works 16 hours, we have 2 properties we rent out, and have done so for years.
Jobless - 27-Nov-17 @ 7:29 AM
@Erinj - You may be asked to justify where this money has come from and how much money exactly your friend is keeping for you. They don't let anyone get away with anything these days!
Maia - 21-Nov-17 @ 3:16 PM
@Irishlady - it won't for JSA. It doesn't matter what your savings are- but it might for universal credit if it bumps any savings up to over £16,000. Abbie.
AB - 21-Nov-17 @ 9:24 AM
I had savings that a friend had for me about 500 in cash for Xmas over the year. They have been putting a bit in my bank the past 3 months so I can get Xmas bits I work 18 hours a week get a bit of housing benefit. At they going to penalise me for someone putting money into my account each months that are my own savings. Haven't slept in days worrying about it. Just trying to make a better Xmas for my daughter and feel really Intruded with having to show my bank statements!!!!
Erinj - 21-Nov-17 @ 8:48 AM
Hi My fiancé has died unexpectedly, I took a lump sum to purchase a motor home which I've now sold Therefore, I have money in the bank but it I'd pension money Will I still be able to claim sickness benefits
Deano - 20-Nov-17 @ 4:20 PM
Hello I've recently been made redundant.Would my husband's loan of £10K be taken into account (as "savings") for an application for JSA/Universal credit?If so, think this would be entirely unfair as he took the loan out to tide us over our financial crisis?
Irishlady - 20-Nov-17 @ 12:03 PM
Hi I am due to get compensation for a RTA of 10k. However I receive housing and CT benefit and working tax credit. Some of the award is for expenses I have already paid out and car loss. I owe out 3k for a car I bought and need to pay it back. Will they still penalise me for the 4k that is over the threshold. Any help will be appreciated.
Kay - 2-Nov-17 @ 12:54 PM
We have recently made a claim for esa they asked about bank account i declared the amount i have personally but my account shows alot more this is because i have my sons pip going in and as iam his appointee iam keeping it for him to start driving lessons and buy a car to help him but as yet hes not ready its just over 6000 but most of it is his
Juju - 26-Oct-17 @ 8:27 PM
I have recently been made redundant I am not due to get my state pension until July 2018. I do receive other pensions which amount to £9,000 a year. Am I entitled to any benefits for example jobseekers allowance?
Mo - 26-Oct-17 @ 12:59 PM
Miggs - Your Question:
My wife is on DLA , I'm on pension credits how much our we allowed to have in our current account

Our Response:
You can find out the answer to your question via the benefits calculators here.
RedundancyExpert - 12-Oct-17 @ 3:03 PM
My wife is on DLA , I'm on pension credits how much our we allowed to have in our current account
Miggs - 12-Oct-17 @ 9:18 AM
Husband has a retirement account can this affect my income support?
Nelly - 11-Oct-17 @ 2:56 PM
James- Your Question:
I have a question, I recently was given £1000 as a present from my nan. I put it into my bank, will the job centre deduct this from my money?

Our Response:
Much depends upon what benefits you are on and whether this takes you into having savings of over £16,000. If it doesn't, then the Job Centre should not penalise you.
RedundancyExpert - 3-Oct-17 @ 12:24 PM
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