How and where to save around £18k (on income support)?! Please help!

wiiinning

Hi all, I really hope you can help me as I am clueless!

My friend has always been pretty money savvy but I am concerned she knows very little about savings and where to save.

Basically she is on income support and has a little boy who is nearly 6. She went through a really really rough time and is now doing an Open Uni course whilst her son is at school. She has just been awarded just over £18,000 compensation. I know she wants to learn to drive, buy a car and pay for the insurance, so thats around £2000-£3000 for the car, around £1500 for the insurance (based on a few quotes she got) and however much it costs to start driving lessons and passing (if we include tax, mot, the liscence itself, the test and theory test etc) lets say £1000. So that is around £5000 gone already.

My question is, what and where and how should the other £13,000 be dealt with?! Also, she is concerned it will effect her benefits and the funding for her university degree. Is this the case? If so, can it be avoided?

I hope someone can give me advice Please no comments about she should be working and should have benefits taken away as she worked from 13 until 21 and has suffered a very awful time, without the benefits she would not be able to afford to study her degree.

Many Thanks (in advance)

Jai_M

She's still got to declare the money to the state, and im sure theres a cut off before she looses her IS. "If so, can it be avoided?" Benefits are for those up the creek without a paddle. If she's lucky enough not to be in that situation anymore, then she should'nt be claiming. Surely saving the money would be a better idea than trying to spend it as quickly as possible.

rogerblack

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Has this actually been paid to her - in which case, it will definately effect benefits.
Or is it due to be paid?
If it's due to be paid, then if it's for personal injury, it can be put in trust, and avoid the effect on benefits.
If it has been paid, it is ignored for one year.

tagq2

As for capital, I understand that £16,000 is the cut off for the standard means-tested benefits (IS and income-related JSA and ESA), but there are disregards - sometimes time-limited - for certain types of windfall. Compensation has specific (favourable) rules detailed in DMG chapter 29.

Anyone with earnings sufficiently small to be on IS (even if they don't qualify for IS for some other reason) should be eligible for financial support from the Open University. On the pre-2012 arrangements, this means a grant. As of some time next year, this will be in the form of an SLC loan which has income-contingent repayment terms. IOW while you don't earn much you won't have to pay anything back. The major precondition in normal circumstances is not already having a qualification of equal or higher standing. But eligibility for DSA (not DLA), if relevant to your friend, can in some cases even remove that condition.

Jai_M wrote:

Surely saving the money would be a better idea than trying to spend it as quickly as possible.

As far as I can tell, being frugal is (increasingly - see Universal Credit and the changes to ESA) punished by the benefits system: the more you save, the more is taken away. In particular, you would be better off to spend any money above £16,000. This doesn't mean you can spend for the purpose of getting benefit - you may get caught out for that - but denying yourself quality of life today because you want to be responsible and save for tomorrow is unrewarded.

Pollycat

The OP has already had advice on exactly the same subject here:
https://forums.moneysavingexpert.com/discussion/3529503=

wiiinning

Jai_M - The point is not for her to spend as much as possible, it's for her to do things she was previously unable to because of the situational factors (ie learn to drive and get a car). She does want to save the money, that is why she doesn't want to lose her benefits. Of course, she could live off the 18k for a year or two but would be left with nothing. She wants to learn to drive before saving the rest and continuing life as she has been. If she had been fiddling the system for years then I would tell her to finally get off benefits etc but she is not that sort of person, she is the sort of person that needs and deserves the chance to get back on her feet.

Rogerblack - I don't think she has received it yet, but when she does I think she will want to use some of it and save some of it, rather than have a trust that pays a certain amount a month (think I understand that right??)

Tagq2 - Yes you are correct, by saving she will be punished, and by spending she could also be punished. I think my main question is there any way she can save the £12-£13k without being penalised for it? Can money be put in her childs name? Or in ISAs or premium bonds or such like? I have spent a long time looking but still don't feel I understand enough to advise.

Many Thanks for the replies

wiiinning

Pollycat:

Yes I am aware I have already posted this, I was advised within the post and also received a message in my inbox saying that I may have better luck/greater range of advice posting it here. I didn't realise you weren't allowed to post more than once?!

Pollycat

It might have been helpful if you'd said you'd already posted elsewhere.
It saves people going over the same ground.

You were actually advised to ask on this borad about a specific thing:

Wilma33 wrote: »

What benefits is she getting. I think having £18K will affected them. Although you might be better asking that part of the question on the benefits board or looking on direct.gov. The fact it is compensation (through the courts?) might make a difference.

You were also advised (by several people) to seek specialist advice from CAB - have you done that?

Pollycat

wiiinning wrote: »

Tagq2 - Yes you are correct, by saving she will be punished, and by spending she could also be punished. I think my main question is there any way she can save the £12-£13k without being penalised for it? Can money be put in her childs name? Or in ISAs or premium bonds or such like? I have spent a long time looking but still don't feel I understand enough to advise.

I don't think you should be advising.

I think you should take the advice you've already been given and make her an appointment with a CAB Welfare and Benefits specialist.

tagq2

wiiinning wrote: »

Can money be put in her childs name? Or in ISAs or premium bonds or such like?

In child's name - the effect on means-tested benefits will depend on whether the money has genuinely been given to the child (perhaps a trust?) or whether it's just been put into the kid's bank account as an attempt to give the appearance of reduction in capital. What matters in general is who the beneficial owner is, i.e. who gets to enjoy the money, rather than the legal owner, i.e. whose label is on the pot.

ISAs and premium bonds - an ISA might be a good place to start to save. At £5,340/year for a cash ISA (you might not want to go into stocks and shares if you're just starting out with saving) it won't hold all the money immediately. This site, Moneysupermarket, etc all quote rates: having a good amount of money to start off with will help you get the best. Don't lock in for too long as interest rates can only go in one direction.

For benefits purposes I understand that ISAs and premium bonds will count as capital as if put in any other account. Earnt interest will count as earnings. The only difference from most other places is that any earnings will be tax-free - but people on a low income should have filled in an R85 for all their accounts anyway.

[edit] And, looking over the other thread - if your friend has not been to the CAB then, as others have just said, please encourage them to go. If you are able to go with them then you might be able to steer the conversation using the information you have found. Advice is more than information and, while good-meaning friends often try to offer it, it is properly delivered with the help of a trained specialist.

wiiinning

Yes, I've looked on direct.gov, rung and booked an appointment with the CAB office but its not until a week on thurs as this was their first appointment.

I came on here to ask for some general advice, from people that I was told would give friendly help. I have followed the advice given but felt no harm in seeing if there was any further advice or maybe even someone with personal experience that could offer me anything further. I really don't see what the issue is, if I have done something wrong then please let me know, as you can see I am very new to this forum.