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Universal Credit
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# 1
annewads
Old 17-01-2011, 9:56 AM
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Default Universal Credit

Does anyone know about the changes to child tax credit. We are on quite a low income but have savings of over 20,000. I've heard that you will not be able to get the new universal credit if you have savings over 16,000. Does that include money in a childs account? Is it best to just spend the money rather than save it?
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# 2
MX5huggy
Old 17-01-2011, 11:04 AM
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Universal credit is years away, for people that are working. The 16k figure is the current level where you don't get income based JSA or ESA these benefits will be replaced by the Universal Credit and I would expect them to keep the saving levels.

Keep saving.
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# 3
Jowo
Old 17-01-2011, 11:13 AM
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Quote:
Originally Posted by annewads View Post
... Is it best to just spend the money rather than save it?
Google 'Deprivation of capital' and 'notional capital'

There are rules in place to discourage benefit claimants from frittering away their capital in order to take advantage of means tested benefits.

Guidance exists which support the need for benefit claimants with capital to use it on their ordinary living expenses, not squander it on a flash car, expensive holiday, gifts of cash to relatives and so forth.

If a benefit claimant comes into cash, they are expected to spend it on their rent, council tax, groceries and all the typical things they'd spend their benefit money on, and not go on a consumer spree in order to qualify for means tested benefits.
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# 4
zagfles
Old 17-01-2011, 7:37 PM
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Yes you are right in that universal credit will replace tax credits, and universal credit will have capital rules the same as IS, HB etc do now - ie you get nothing if you have capital over 16k and a tariff is applied to captial between 6k and 16k.

However there are transitional rules which state that nobody will lose "in cash terms" but how exactly this will work is unclear. Taken literally if you have an existing claim then that should continue even if you have capital, but what happens if your circumstances change is unclear.

But as someone else said it's years off (plan is to move tax credits claimants across in 2014-2017).

If you spend your savings now there is virtually no chance of them pulling the "deprivation of capital" rules, if you spend it just before the switchover, and they decided to change the transitional rules so they don't apply to those with capital, then they might.

If you have a flexible mortgage, ie one where you can withdraw overpayments, you could use that instead of a savings account. You have the advantages of a savings account (ie you can put money in and take it out) plus the advantages that you don't pay tax on interest (because you're not earning interest, you're paying less interest on your mortgage) and the added advantage that you have no actual savings so you won't be disqualified from means tested benefits should the need to claim arise. It's what I do - i simply never build up "capital"! Not till my mortgage is paid off anyway.
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# 5
skater_kat
Old 18-01-2011, 1:55 PM
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Quote:
Originally Posted by zagfles View Post
If you have a flexible mortgage, ie one where you can withdraw overpayments, you could use that instead of a savings account. You have the advantages of a savings account (ie you can put money in and take it out) plus the advantages that you don't pay tax on interest (because you're not earning interest, you're paying less interest on your mortgage) and the added advantage that you have no actual savings so you won't be disqualified from means tested benefits should the need to claim arise. It's what I do - i simply never build up "capital"! Not till my mortgage is paid off anyway.

don't you think this is still classed as DoC? if you were to apply for SMI for example, wouldnt the lender confirm to JCP that there is an overpayment 'credit' on your account? after all if you have an overpayment facility, you can usually withdraw that amount back with no penalty. so even though so don't have a credit amount showing anywhere as such, you still have x amount of money readily available to you the same as if it was sat in a regualr bank account as a credit sum. it is an interesting area! i wonder if this has been tested before?
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# 6
HappyMJ
Old 18-01-2011, 2:30 PM
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Quote:
Originally Posted by skater_kat View Post
don't you think this is still classed as DoC? if you were to apply for SMI for example, wouldnt the lender confirm to JCP that there is an overpayment 'credit' on your account? after all if you have an overpayment facility, you can usually withdraw that amount back with no penalty. so even though so don't have a credit amount showing anywhere as such, you still have x amount of money readily available to you the same as if it was sat in a regualr bank account as a credit sum. it is an interesting area! i wonder if this has been tested before?
Not 4 years before a change comes into effect it won't be DoC. If you were to apply for SMI it's based on the lowest balance the account has ever been. For example years ago I used 0% balance transfer offers to temporarily pay the mortgage off completely. The banks offered so much credit way back then. Now I'm lucky to get 1000 on a CC limit. I can now never get SMI as the minimum balance ever was 0. I now have a mortgage balance again as the credit cards were paid off at the end of the introductory period using the redraw facility.

Quite weird when I think about it I had 50,000 owing on 0% CC's and no mortgage interest to pay saving around 200 per month.

Last edited by HappyMJ; 18-01-2011 at 2:32 PM.
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# 7
zagfles
Old 18-01-2011, 5:50 PM
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Quote:
Originally Posted by skater_kat View Post
don't you think this is still classed as DoC? if you were to apply for SMI for example, wouldnt the lender confirm to JCP that there is an overpayment 'credit' on your account? after all if you have an overpayment facility, you can usually withdraw that amount back with no penalty. so even though so don't have a credit amount showing anywhere as such, you still have x amount of money readily available to you the same as if it was sat in a regualr bank account as a credit sum. it is an interesting area! i wonder if this has been tested before?
It's just a credit line - if you have a credit card with a 5000 credit limit, or an overdraft facility, that's also "money readily available" - but just like the overpaid mortgage, they are available credit lines, not savings. You don't need to declare available credit lines to the DWP.
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# 8
annewads
Old 18-01-2011, 6:29 PM
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Thank you for this. I thought that everyone would be moved over in 2013. I will wait a while before I start juggling money around. Do you know any good sites that explain the rules about universal credit?
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# 9
zagfles
Old 18-01-2011, 6:34 PM
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Originally Posted by annewads View Post
Thank you for this. I thought that everyone would be moved over in 2013. I will wait a while before I start juggling money around. Do you know any good sites that explain the rules about universal credit?
http://www.dwp.gov.uk/policy/welfare...versal-credit/
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# 10
ubesco
Old 18-01-2011, 6:37 PM
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err, that is not quite right. I decided to reduce my capital to below the 6000 limit in March 2007, in the knowledge that I would leave work in 2009. I needed a good car that would serve me and the family for a few years and not cost a lot to run. I paid 16500 cash for a BMW.
When I claimed benefit if 2009, nobody even asked me what had happened to the money 2 years earlier. They don't go back very far to check up. If you have capital best to use it a couple of years before you claim

If things ever get tight, I could always give it to my son and he sells it and gets near enough back what I paid for it.

Last edited by ubesco; 18-01-2011 at 6:41 PM.
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# 11
real1314
Old 18-01-2011, 7:09 PM
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Quote:
Originally Posted by zagfles View Post
Yes you are right in that universal credit will replace tax credits, and universal credit will have capital rules the same as IS, HB etc do now - ie you get nothing if you have capital over 16k and a tariff is applied to captial between 6k and 16k.
No-one actually knows what the rules will be yet. The capital limit might be 16k, it might be 10k, it might be 20k or it might be 25k.
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# 12
zagfles
Old 18-01-2011, 7:13 PM
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Originally Posted by real1314 View Post
No-one actually knows what the rules will be yet. The capital limit might be 16k, it might be 10k, it might be 20k or it might be 25k.
The white paper says the capital rules will be same as for IS.
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# 13
real1314
Old 18-01-2011, 7:35 PM
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Quote:
Originally Posted by zagfles View Post
The white paper says the capital rules will be same as for IS.
Does it? I didn't spot that when I read it - can you save me the bother of a full read and tell me where it was?

Forget that - I've just re-read it and seen what you are referring to, however it doesn't say what the upper and lower limits will be. It just says the "same rules" - the IS rates have been changed over the years since 1988, so there's no basis to assume the same rates will automatically be used.

Last edited by real1314; 18-01-2011 at 7:39 PM.
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# 14
MS1998
Old 12-02-2012, 12:27 AM
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Default Tax credits

I've been reading about the welfare reform. My husband and I have worked hard over the last ten years and tried to save, also saving for our son's future education, to now find it's the same old story. Work, save and be penalised. Don't work, don't save and get everything. Where is the justice and what's the point in trying to help yourself (which is what the government keep trying to push). I myself am in a low paid job, there are no good paying jobs in the area I live in. The Government need to get in the real world!!!
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# 15
rotoguys
Old 12-02-2012, 8:51 AM
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Originally Posted by MS1998 View Post
I've been reading about the welfare reform. My husband and I have worked hard over the last ten years and tried to save, also saving for our son's future education, to now find it's the same old story. Work, save and be penalised. Don't work, don't save and get everything. Where is the justice and what's the point in trying to help yourself (which is what the government keep trying to push). I myself am in a low paid job, there are no good paying jobs in the area I live in. The Government need to get in the real world!!!
Unfortunately it doesn't pay to work and save, that is unless you are a high earner or have considerable capital wealth.

For example everybody over 61 will get a minimum on means tested benfits of 142 a week if you are single or 218 for a couple. Along with that you pay no Council Tax or Rent/have the mortage interest paid for you.
If you are disabled in any way - that figure goes sky high!!!!
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# 16
Sixer
Old 12-02-2012, 9:19 AM
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Originally Posted by real1314 View Post
Does it? I didn't spot that when I read it - can you save me the bother of a full read and tell me where it was?

Forget that - I've just re-read it and seen what you are referring to, however it doesn't say what the upper and lower limits will be. It just says the "same rules" - the IS rates have been changed over the years since 1988, so there's no basis to assume the same rates will automatically be used.
http://www.dwp.gov.uk/policy/welfare...edit-briefing/

If you read the treatment of capital briefing note here, you'll see they've done a fair bit of number-crunching work and have every intention of retaining 6k-16k.

Quite how this is fair when the environment will likely have been 5+ years of 5% inflation by the time UC comes in, I'm not sure.
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# 17
lily the pink
Old 12-02-2012, 9:26 AM
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"Quite how this is fair when the environment will likely have been 5+ years of 5% inflation by the time UC comes in, I'm not sure."

I don't think that the 6000 limit has been changed for a while so I would work to worst case scenario.

To the poster saving for son's education - could this be transferred in a trust to him (ie max the amount put in the child's trust fund or an ISA in his name) as from my understanding money in a child's name would not count.
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# 18
drwho2011
Old 12-02-2012, 10:01 AM
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Quote:
Originally Posted by Sixer View Post
http://www.dwp.gov.uk/policy/welfare...edit-briefing/

If you read the treatment of capital briefing note here, you'll see they've done a fair bit of number-crunching work and have every intention of retaining 6k-16k.

Quite how this is fair when the environment will likely have been 5+ years of 5% inflation by the time UC comes in, I'm not sure.
I would doubt you'd have inflation running at 5% for 5 years simply because wage inflation would occur and thus exacerbate inflation.

Try looking at inflation figures from 2007-2011 and you'll see they have fluctuated from inflation to deflation and back to inflation.

Averaged it worked out at: 2.64% annually

2007 = 2.32%
2008 = 3.61%
2009 = 2.16%
2010 = 3.28%
2011 = 4.47%

The later inflation increases were linked with the increases in VAT.

Last edited by drwho2011; 12-02-2012 at 2:13 PM.
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# 19
Sixer
Old 12-02-2012, 1:17 PM
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I would doubt you'd have inflation running at 5% for 5 years simply because wage inflation would occur and thus exacerbate inflation.

Try looking at inflation figures from 2007-2011 and you'll see they have fluctuated from inflation to deflation and back to inflation.

Averaged it worked out at: 2.64% annually

2007 = 2.32%
2008 = 3.61%
2009 = 2.16%
2010 = 3.28%
2011 = 4.47%

Later inflation increases can be linked with the increases in VAT.
Ok. Five years may be a bit of an exaggeration!

However, we are in a unique financial situation at the moment and, thanks to the eurozone, bank recapitalisation and QE, we are more than likely to see 4-5% ongoing inflation and no wage inflation at all, at least until the institution of UC. That's the policy. Inflate away the debt. Since the world economy is a teetering house of cards, there's no room whatsoever to allow the usual wage inflation to soothe away the damage of price inflation. Yet another reason we need the price of housing to come down.

I maintain that the 16k capital limit will be worth much less by the time UC comes in. I also maintain that this will entirely suit the rationale of the government, so they won't be too worried about it anyway.

Eventually, many people will decide the intrusiveness and conditionality of UC will not be worth the money it pays. So it'll be a benefit of the very poor.

Many hereabouts may think this is a good idea. Maybe it is. But it'll still leave us in a high labour tax environment in comparison to competing economies because all of the various tax allowances that merged into tax credits in addition to the old welfare payments will simply have disappeared.
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# 20
rotoguys
Old 12-02-2012, 1:26 PM
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Quote:
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Ok. Five years may be a bit of an exaggeration!

However, we are in a unique financial situation at the moment and, thanks to the eurozone, bank recapitalisation and QE, we are more than likely to see 4-5% ongoing inflation and no wage inflation at all, at least until the institution of UC. That's the policy. Inflate away the debt. Since the world economy is a teetering house of cards, there's no room whatsoever to allow the usual wage inflation to soothe away the damage of price inflation. Yet another reason we need the price of housing to come down.

I maintain that the 16k capital limit will be worth much less by the time UC comes in. I also maintain that this will entirely suit the rationale of the government, so they won't be too worried about it anyway.

Eventually, many people will decide the intrusiveness and conditionality of UC will not be worth the money it pays. So it'll be a benefit of the very poor.

Many hereabouts may think this is a good idea. Maybe it is. But it'll still leave us in a high labour tax environment in comparison to competing economies because all of the various tax allowances that merged into tax credits in addition to the old welfare payments will simply have disappeared.
I believe that if the government could get away with it, they would impose a '0' policy on savings. In that benefits would only be available to those with absolutely nothing in the bank!
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