Can I pay off my mortgage with my redundancy payment and claim benefits

jamescl

Hi there, 

I'm being made redundant and I've been with the company for a very long time, the redundancy payment would clear any debts and mortgage and leave me with 6k.

I'm looking to get back into work soon, not to sponge off the taxpayer but I have paid into the system significant sums for decades. The eligibility check for benefits says that if you have less than 16k in savings you'd be entitled to benefits and more if you have less than 6K in savings. 

There has to be a catch somewhere though, if I paid all my redundancy money on debts and mortgage so that I have little to no monthly costs, could I use benefits as a buffer to help pay for food and low cost expenses while job searching for my next role?

Hopefully you can see where I'm coming from in considering this, I'd save a huge amount in interest by clearing those debts and could survive on benefits alone for however many weeks / months it takes to get into a new job. I don't own anything else except my own house and car and a pension. 

Thanks in advance for the advice. 

sharpe106

For benefits you can use saving to pay of any debts before it being calculated, the mortgage is a debt as well so I do not see why not. 

jamescl

It seems like there would be some rule to stop you putting redundancy money into debts and mortgage and then be eligible to claim benefits within a few weeks as long as any leftover money is within the savings threshold. 

It is the catch I'm looking for, but I can't see it... It may well be better to do this than to have the redundancy money in the bank or savings account and then repaying the debt monthly and incurring interest every month. 

If anyone can think of any disadvantages of this approach please post. 

sharpe106

If you have outstanding debts you can use any savings you have to reduce debts so can't see why the same can't be done for mortgage as it is a debt. If you go and buy a brand new top of the range car instead then that is different.   Have a look at 
https://www.moneyadviceservice.org.uk/en/articles/how-do-savings-and-lump-sum-pay-outs-affect-benefits

jamescl

sharpe106 said:

If you have outstanding debts you can use any savings you have to reduce debts so can't see why the same can't be done for mortgage as it is a debt. If you go and buy a brand new top of the range car instead then that is different.   Have a look at 
https://www.moneyadviceservice.org.uk/en/articles/how-do-savings-and-lump-sum-pay-outs-affect-benefits

Seems the issue might be it could be considered deprivation of assets, but nowhere online says whether this is the case or not. 

, 

jamescl

https://forums.moneysavingexpert.com/discussion/3565077/if-i-pay-off-debts-from-my-redundancy-will-it-affect-any-benefits/p2
Sound like I can't do it, which is a shame as I was hoping to only use it as a safety net. Now I have to find some way to save my redundancy payout in a way in which it earns interest and just keep up standard repayments until I'm in work. 

It is such a complicated area because I can't predict the future at the moment and I don't know how long I'll be out of work. It would be nice to save interest by putting a lump sum down, but that would then invalidate any future benefit claim entirely, leaving me with no food, gas, electric etc. 

lincroft1710

jamescl said:

sharpe106 said:

If you have outstanding debts you can use any savings you have to reduce debts so can't see why the same can't be done for mortgage as it is a debt. If you go and buy a brand new top of the range car instead then that is different.   Have a look at 
https://www.moneyadviceservice.org.uk/en/articles/how-do-savings-and-lump-sum-pay-outs-affect-benefits

Seems the issue might be it could be considered deprivation of assets, but nowhere online says whether this is the case or not. 

, 

I would have thought deprivation of assets was giving money or possessions or property away, rather than settling debts

sharpe106

Deprivation of assets is basically just spending money to get rid of it. A debt is not an asset, not good one anyway. If you have £20,000 in a bank and owe £10,000 then basically you only have £10,000. Whatever you decide to do pay the debt anyway as the interest rate on that will probably be higher then anything you will get in a savings account. 

Xbigman

sharpe106 said:

Deprivation of assets is basically just spending money to get rid of it. A debt is not an asset, not good one anyway. If you have £20,000 in a bank and owe £10,000 then basically you only have £10,000. Whatever you decide to do pay the debt anyway as the interest rate on that will probably be higher then anything you will get in a savings account. 

This is completely wrong. 
Debts that are repayable on demand, like an overdraft, can be paid off.  Things like 0% cards that have come to the end of their deal can be paid. You can also use savings to make regular debt payments. Anything you choose to pay before you are contractually obliged to can be classed as deprivation of assets and is usually not allowed. 
Depending on what benefits you want to claim it can still make sense to pay things off early but a lot more information would be needed. You should post on the benefits board for much more detailed advice as the redundancy board isn't the place where the benefits board regulars hang out.


Darren

daveyjp

If you have paid NI for the last few years you can get JSA.  Its less than UC and time limited, but savings aren't taken into account.

If you have a mortgage the interest you save paying it off will cover the difference between UC and JSA.  It is certainly what I would be considering.

calcotti

Xbigman said:

This is completely wrong. 
Debts that are repayable on demand, like an overdraft, can be paid off.  Things like 0% cards that have come to the end of their deal can be paid. You can also use savings to make regular debt payments. Anything you choose to pay before you are contractually obliged to can be classed as deprivation of assets and is usually not allowed. 
Depending on what benefits you want to claim it can still make sense to pay things off early but a lot more information would be needed. You should post on the benefits board for much more detailed advice as the redundancy board isn't the place where the benefits board regulars hang out.
Darren

This is incorrect for UC. Paying off debt is not deprivation of capital for UC
Universal Credit Regulations 2013 regulation 50 (2)
https://www.legislation.gov.uk/uksi/2013/376/regulation/50/made

Notional capital
50.—(1) A person is to be treated as possessing capital of which the person has deprived themselves for the purpose of securing entitlement to universal credit or to an increased amount of universal credit.
(2) A person is not to be treated as depriving themselves of capital if the person disposes of it for the purposes of—
(a) reducing or paying a debt owed by the person; or
(b) purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case.
(3) ...