Savings Affect on Income-Based JSA / Avoiding Penalties

mrobsessed

Hi All,

I'm currently under the threat of redundancy so I am looking into my options should I become Unemployed.

I have worked in my current job for 5 years and as I understand it, I will be elligible for Contribution Based Job Seekers Allowance for 6 months with any savings or redundancy payments being irrelevant to myself being eligible.

If I am still unemployed after the six months I go onto Income Based JSA which does take into consideration any money I have in the bank. I believe the figures are that if a claimant has over £16,000 he gets nothing and if he has less than £6,000K he gets the full benefit. Presumably any savings between 6k and 16k will mean a sliding scale of benefit reduction up to nothing at 16K.

I expect to get about 9K in redundancy, so it's possible that I'll have above £6K after six months if I budget wisely.

Does redundancy payments count as savings?
Is it better to spend all but 6K before going onto Income Based JSA?
Is deliberately spending the cash just to get below 6K savings allowed?
Would overpaying the mortgage be an acceptable use for the savings?
How much does the savings reduce the benefits paid?

Any Help would be appreciated! Thanks,
Mr O

benefitbaby

Hi,

Redundancy payments are counted as savings.

If you spend cash for the purpose of becoming entitled to, or increasing entitlement to means-tested benefits then the DWP can treat you as still having it.

Savings between £6-16k reduce entitlement at a rate of £1 deduction for every £250 (or part £250) of savings, so £3k = £12 reduction of JSA per week.

mrobsessed

Thanks.

How would they prove money was being deliberately 'frittered away' rather than spent on something important?

I could understand that if I spent 2K on a holiday or a huge telly it could be interpreted as deliberate wastage, but what if I wanted to decorate or fit new carpets in order to rent out a room? Would this also be classed as deliberately wasting money?

What about overpaying the mortgage? Would I have to explain any large expenditures on my bank account in the preceding six months? Is that how it works?

Many thanks for your help.

benefitbaby

They don't have to prove it they just have to show in the balance of probabilities your intent was to spend money to gain/increase benefit entitlement.

Generally speaking anything for which you have received a demand for payment (e.g. credit card bill, mortgage monthly liabilities) will not be considered deprivation however they could suggest that paying £10k off your mortgage was for the intent of gaining benefits, whilst you would argue it was to safeguard against not finding a job soon and thus safeguarding yourself against reposession!

It is all swings and roundabouts but it boils down to the operative purpose of your expenditure.... benefits or not?!

benefitbaby

See the DWP decision maker's guidance here - http://www.dwp.gov.uk/docs/v14-am26.pdf

missapril75

benefitbaby wrote: »

they could suggest that paying £10k off your mortgage was for the intent of gaining benefits, whilst you would argue it was to safeguard against not finding a job soon and thus safeguarding yourself against reposession!

@benefitbaby...I'm using your quote but addressing the OP.

If it's a first time claim, there's no reason for you to know about the rule - although obviously you do - and that can influence DWP thinking.

A lot would depend on whether you have capital already.

If the only reason you had £6k was because of redundancy pay of £9k, then getting through (up to) £3k over 6 months wouldn't seem that excessive anyway. Even if you were on JSA(c) the whole time.

Whenever these subjects crop up, replies always suggest a much tougher response from the DWP than I ever came across.

I left in 2004. There certainly seem to be tougher rules regarding sanctions and the like - and all the other 'sick' or disability things - but I don't think there have been similarly tough legislative/guidance changes on this issue. Perhaps someone else can comment on that.

People might have come across a deprivation decision that seemed harsh, but that doesn't make it the norm and there are examples on this site where seemingly generous decisions have been made.

Remember that you can challenge a decision and an appeal tribunal may have an opinion that differs from a member of staff.

But you wouldn't want to risk a loss of income (as well as the money spent) for what might only be a few quid a week reduction in benefit.