LISA / universal credit question.

kimplus8

I am currently saving in a LISA account for my mortgage but I am due to change from WTC/CTC to universal credit in the nearish future.
Under universal credit you are exempt from claiming if you have saving above £16,000.
As the Lisa has a withdraw penalty of 25% I am confused as to what the limit really is.
The universal credit page on DWP suggests that it has to be accessible saving of £16,000 but if I had £16,000 I would actually only have £12,000 of accessible savings.
Does this mean they would still apply the £16,000 exemption once your LISA hits £16,000 or would you have to have £20,000 as £21,000 minus the 25% penalty is £16,000.
hope this is the right place to post this.
warm regards

kimplus8

maybe I should have posted this in the benefits section??

dunstonh

Unlike pensions, Lifetime ISAs are included in means-tested benefits (including Universal Credit)

So, it would go towards the limit.

kimplus8

dunstonh wrote: »

Unlike pensions, Lifetime ISAs are included in means-tested benefits (including Universal Credit)

So, it would go towards the limit.

I know it counts towards the limit what I am asking is how much?
The savings limit is £16,000 of accessible savings but if you withdraw from an LISA before retirement age and not for a mortgage then a 25% penalty applies.
That said if I had £16,000 in my LISA does the DWP regard this as £16,000 or £12,000 as only £12,000 is actually accessible as the other £4000 will be deducted as a penalty for early withdrawal.

silvercar

I'm going to move your thread to the benefits section of the forum; I hope there are people on there who can help you.

Alice_Holt

"I am due to change from WTC/CTC to universal credit in the nearish future."

Why? Will the change be natural or managed migration?
If managed then you will have some transitional protection.

Detailed rules about capital are contained in the advice for decision makers - DWP ADM Chapters H1 (Capital) and H2 (Capital disregards).
Google DWP ADM Chapter H1 (Capital), to see if a specific reference is made to the treatment of LISA's.
You may also wish to try searching on Rightsnet to see if there is any relevant case law on this topic.

If nothing comes up, then your best bet would be to write to the DWP asking for a decision maker's ruling (via your MP).

My instinct would be to tell you the capital value should be assessed at the realisable value (i.e after deduction of the penalty).
But I'm sure you would want confirmation of this - either from the DWP (if not included in the DM guide), or by case law.

https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/capital-rules/#More%20detailed%20information

https://www.reddit.com/r/UKPersonalFinance/comments/aa8gvg/lisa_contributions_counting_against_universal/

calcotti

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/778104/admh1.pdf

H1659
The Lifetime individual savings account is available for people who are aged 18 to 40 when it is opened. It is similar in many ways to a normal individual savings account with the addition of a government bonus of 25% paid on the contributions made by the saver of up to a limit of £4000 annually. This Lifetime individual savings account should be treated as capital from the outset with a value of
1. 75% of the surrender value where the person is under age 60 or
2. 100% of the surrender value where the person is over age 60
taken into account.

kimplus8

I don’t know if it’s managed or natural, apparently everyone is being moved over and I assumed this means I will be too? Does this mean o don’t have to?

calcotti

If you are talked about managed migration when you will be required to move to UC even if there is no change in your circumstances that process is going to take three to four years. In the current year only a selected number of claimants are being moved (in Harrowgate I think).

In the meantime there are some changes in your circumstances that might oblige to claim UC thereby ending your existing benefits (for example if you changed from single person to a couple or vice versa as this would end your existing tax credits award). However if your circumstances do not change I wouldn’t worry about it yet (unless you live in Harrogate).

Sheepski

And as for managed migration, there was talk the last I heard of protecting savings levels for those on tax credits (which does not have a savings limit), though I've heard nothing concrete yet about how they will implement this.

calcotti

Sheepski wrote: »

And as for managed migration, there was talk the last I heard of protecting savings levels for those on tax credits (which does not have a savings limit), though I've heard nothing concrete yet about how they will implement this.

I believe it was said that the savings limit would be waived for 12 months for those migrating. See regulation 51 of these draft regulations http://www.legislation.gov.uk/ukdsi/2019/9780111178317.

The draft regulations have not been laid before parliament because it is preoccupied by other matters.