Redundancy/Benefits/Savings Question

sweetdaisy

Not really sure where I should post this as it concerns: Redundancy, Benefits and Savings.

I work full-time and so does my Husband but he is going to be made redundant this year, possibly between August and November, but waiting for a date from his company. He has been employed in his current job for over 7 years and is expected to get around £8,000 in redundancy money, so he is going to stay in his job until he is made redundant and then look for another job.

We have an Offset Mortgage and in total we have around £10,000 in savings (£5,000 of this is our children's savings which we don't touch) all of which is used to offset against the mortgage.

Someone told my husband that when he is made redundant he needs to apply for JSA so that it won't affect his pension? However I think that the the maximum amount of money you can have in savings is £16,000 so if this is right, with his redundancy money we will be going over the threshold.

As we have an offset mortgage we are able to claim back any overpayments should we need them in an emergency, but was wondering would it be a good idea to pay a lump sum off the mortagage from our savings to put us under the £16,000 so that my Husband can apply for JSA? Or are we not allowed to do this?

Sorry if this doesn't make any sense, I am just trying to find out how redundancy will affect benefits entitlement, considering that we have money in savings.

dampsquib

State Pension:
Whether you need to sign on just to get further credits towards your state pension depends on how many years National Insurance contributions you have already paid, and will pay when you find work again. The minimum required for a full pension is now only 30 years. You can find out how you are doing with a pension forecast here:
http://www.direct.gov.uk/en/Diol1/DoItOnline/DG_189931

Savings & JSA:
Initially, you get “Contribution Based” JSA for 6 months. This benefit doesn’t take account of any savings you have. After the first 6 months, you then switch to “Income Based” JSA, which does get reduced if you have substantial savings. Even if this gets reduced to zero, signing on can still be important if you have yet to satisfy the State Pension 30 year requirement.

sweetdaisy

Thanks for the information.

LittleVoice

dampsquib wrote: »

Savings & JSA:
. . . you then switch to “Income Based” JSA, which does get reduced if you have substantial savings.

And if you have paid off some of your mortgage with savings bringing them down to below £16K, it could be considered as evasive action and you would be treated as still having those funds at your disposal.

Whilst people want to know the worst case scenario, remember that people do get jobs without having reached the 6-months of claiming point.

sweetdaisy

LittleVoice wrote: »

And if you have paid off some of your mortgage with savings bringing them down to below £16K, it could be considered as evasive action and you would be treated as still having those funds at your disposal.

Whilst people want to know the worst case scenario, remember that people do get jobs without having reached the 6-months of claiming point.

Thanks. Hopefully DH won't need to claim JSA for long as he is willing to apply for any type of work, as he just wants/needs to be in full-time employment. However if he can't find work we will be able to live off his redundancy money for 8 months without us having to dip into savings.

BobQ

LittleVoice wrote: »

And if you have paid off some of your mortgage with savings bringing them down to below £16K, it could be considered as evasive action and you would be treated as still having those funds at your disposal.

Is this true? How can paying off your debts with your savings be regarded as evasive action? I do not know but would like to know if this is fact or opinion?

BigAunty

BobQ wrote: »

Is this true? How can paying off your debts with your savings be regarded as evasive action? I do not know but would like to know if this is fact or opinion?

It is fact.

It is known as deprivation of capital and is applied to people applying for means tested benefits who intentionally get rid of their capital to exploit the benefit system.

When this is determined by the DWP to have taken place, they will treat the claimant as if they still have the capital. This is known as notional capital.

You can find the DWP decision makers guides (the staff manuals) on the internet and there is a specific section which covers the early repayment of loans where there is no legal requirement to do so.

It covers other types of activity too, such as when owners transfer their properties to other people, give away cash to their relatives or transfer their shares, for example.

A household with capital is expected to live off it for their everyday living expenses over the threshold of 16k, not the public purse.

sweetdaisy

Thanks for all the replies. DH is going to apply for JSA so that he gets credits towards his State Pension and we will 'live' off his redundancy money until we get under the 16k threshold. In the meanwhile, hoping that he will be fortunate in finding work quickly.

BigAunty

I did once see a court judgement which overturned a DWP decision on deprivation of capital. From memory, I think the judge said it was appropriate for someone approaching retirement who had been made redundant to pay off their mortgage. I doubt that I can find the published findings now. The OP should double check with the DWP about the current policy.

xylophone

You say that the children's savings are in your account? If this money belongs to the children should it not be in their accounts?

sweetdaisy

xylophone wrote: »

You say that the children's savings are in your account? If this money belongs to the children should it not be in their accounts?

We save monthly in a Stocks and Shares ISA for our children and the money will be used towards university/college costs, house deposits etc. They won't have access to this account or be aware of it and my reason for this is that hopefully there will be a nice sum in there by the time they are 18 years old and I don't want the money to be wasted. DH and I will decide what the money will be spent on. Obviously, it will be devided equally between our two children.

I then have a savings account each for the children where any Christmas/Birthday money is paid into. We are offsetting these accounts against the mortgage so not gaining interest on these accounts (so it's being used to reduce our mortgage), but I add to the accounts on a monthly basis the interest they would have earned so that they don't miss out.

These accounts will be transferred over to our children when they are older and I will open a bank account for them.

Our children are under 4 years old and we aim to pay off the mortgage in 10 years. The quicker we do this the more money we will be able to save for our children for the future .