Universal credits , Redundancy payment + deprivation of assets

CRAIGSVILLE1

Hi all,

My girlfriend has her own flat, with a mortgage, currently has a low paid part-time job, and claims some universal credits. She is about to be made redundant, and her redundancy payment will be approx. £15K , putting her over the savings entitlement for claiming any universal credits.

Could she put some of the redundancy payment towards her mortgage, and still get the universal credits payment if she was under the £6K savings, or would this count as deprivation of assets?   I cant find anything about paying money into a mortgage not to receive a payment with savings

thanks

Craig

poppy12345

Paying off any debts, which include a mortgage is not classed as deprivation of capital for a UC claim.

calcotti

CRAIGSVILLE1 said:

Hi all,

My girlfriend has her own flat, with a mortgage, currently has a low paid part-time job, and claims some universal credits. She is about to be made redundant, and her redundancy payment will be approx. £15K , putting her over the savings entitlement for claiming any universal credits.

Could she put some of the redundancy payment towards her mortgage, and still get the universal credits payment if she was under the £6K savings, or would this count as deprivation of assets?   I cant find anything about paying money into a mortgage not to receive a payment with savings

I think you may have misunderstood the savings/capital rules for Universal Credit.

She would only be prevented from claiming Universal Credit if she has more than £16,000 (including money in current account). If she has more than £6,000 (but less than £16,000) then UC is reduced by £4.35/month for every £250, or part thereof, over £6,000. She can, as poppy says, pay off debt without this being deprivation of capital but that may not be the best thing to do. She will not get help with her mortgage payments on UC, the only help available is a loan to help pay the existing interest but even this is only available after she has had 9 consecutive months on UC with no earned income. It may be more prudent to retain the redundancy pay and use it to pay the mortgage each month. Each time the capital drops by more than £250 she can report this to UC and and savings deduction will be reduced in the next assessment period.

CRAIGSVILLE1

calcotti said:

CRAIGSVILLE1 said:

Hi all,

My girlfriend has her own flat, with a mortgage, currently has a low paid part-time job, and claims some universal credits. She is about to be made redundant, and her redundancy payment will be approx. £15K , putting her over the savings entitlement for claiming any universal credits.

Could she put some of the redundancy payment towards her mortgage, and still get the universal credits payment if she was under the £6K savings, or would this count as deprivation of assets?   I cant find anything about paying money into a mortgage not to receive a payment with savings

I think you may have misunderstood the savings/capital rules for Universal Credit.

She would only be prevented from claiming Universal Credit if she has more than £16,000 (including money in current account). If she has more than £6,000 (but less than £16,000) then UC is reduced by £4.35/month for every £250, or part thereof, over £6,000. She can, as poppy says, pay off debt without this being deprivation of capital but that may not be the best thing to do. She will not get help with her mortgage payments on UC, the only help available is a loan to help pay the existing interest but even this is only available after she has had 9 consecutive months on UC with no earned income. It may be more prudent to retain the redundancy pay and use it to pay the mortgage each month. Each time the capital drops by more than £250 she can report this to UC and and savings deduction will be reduced in the next assessment period.

Yep, the £15k redundancy would take her well over the £16k for the UC payment.

She also knows about the 9 month period with no mortgage interest payments, but taking that payment off, she would still be a lot more better off than having next to nothing if she has over £16K savings.

What about putting most of it in her private pension, would that count as deprivation of assets ?

Thanks

Craig

NedS

CRAIGSVILLE1 said:

Yep, the £15k redundancy would take her well over the £16k for the UC payment.

She also knows about the 9 month period with no mortgage interest payments, but taking that payment off, she would still be a lot more better off than having next to nothing if she has over £16K savings.

What about putting most of it in her private pension, would that count as deprivation of assets ?

Thanks

Craig

Redundancy pay is treated as capital under UC and you can only make pension payments from income, so paying redundancy pay into your pension could be classed as deprivation of capital. If redundancy pay were treated as income then it would probably be OK.

calcotti

CRAIGSVILLE1 said:

Yep, the £15k redundancy would take her well over the £16k for the UC payment.

She also knows about the 9 month period with no mortgage interest payments, but taking that payment off, she would still be a lot more better off than having next to nothing if she has over £16K savings.

What about putting most of it in her private pension, would that count as deprivation of assets ?

I wasn’t saying she shouldn’t pay off any of the mortgage. I just wanted to be sure that you understood the rules as from your opening post I read it that you might think she could not claim UC if she had more than £6000.
There are two issues.
1) Use some of the capital to pay down the mortgage makes sense, the thing to then consider is how much capital to retain.
2) Unless the mortgage is to be fully paid off there will be ongoing monthly mortgage payments to be made. How are these to be met? The point is that if she is going to need to use her retained capital to make the ongoing payments and she only retains £6000 she may not be maintain the mortgage for very long (depending on the size of the payments) if she doesn’t find new work quickly. It may therefore be better to retain more than £6000, notwithstanding that this will reduce the UC payable, in order to give herself a longer buffer period within which she knows that she has the means to pay the mortgage.

Although understanding how to maximise the support available is an important consideration it isn’t necessarily the best thing to do.

Obviously if she can pay the mortgage off in full the situation is different.

I agree with Ned that putting the money into a pension pot would likely be treated as deprivation of capital.

CRAIGSVILLE1

calcotti said:

CRAIGSVILLE1 said:

Yep, the £15k redundancy would take her well over the £16k for the UC payment.

She also knows about the 9 month period with no mortgage interest payments, but taking that payment off, she would still be a lot more better off than having next to nothing if she has over £16K savings.

What about putting most of it in her private pension, would that count as deprivation of assets ?

I wasn’t saying she shouldn’t pay off any of the mortgage. I just wanted to be sure that you understood the rules as from your opening post I read it that you might think she could not claim UC if she had more than £6000.
There are two issues.
1) Use some of the capital to pay down the mortgage makes sense, the thing to then consider is how much capital to retain.
2) Unless the mortgage is to be fully paid off there will be ongoing monthly mortgage payments to be made. How are these to be met? The point is that if she is going to need to use her retained capital to make the ongoing payments and she only retains £6000 she may not be maintain the mortgage for very long (depending on the size of the payments) if she doesn’t find new work quickly. It may therefore be better to retain more than £6000, notwithstanding that this will reduce the UC payable, in order to give herself a longer buffer period within which she knows that she has the means to pay the mortgage.

Although understanding how to maximise the support available is an important consideration it isn’t necessarily the best thing to do.

Obviously if she can pay the mortgage off in full the situation is different.

I agree with Ned that putting the money into a pension pot would likely be treated as deprivation of capital.

Thanks for all the info  guys :-)

I will get her to pay some towards the mortgage, to bring it down to approx £10K savings, and that will be a happy medium for her I think.

Thanks again for our help with the deprivation of assets answers

craig

Numberwang_2

Earmark some for home improvements, new kitchen, bathroom etc won’t be classed as capital? 

Get a decent safe and keep some at home.

poppy12345

Numberwang_2 said:

Get a decent safe and keep some at home.

That won't make any difference. Where ever you put your savings, in a bank, ISA or at home, it's all added to your savings and will count for means tested benefits like UC.

[Deleted User]

Numberwang_2 said:

Earmark some for home improvements, new kitchen, bathroom etc won’t be classed as capital? 

Get a decent safe and keep some at home.

Why do people always think they can do that and potentially commit fraud? 

A_Lert

The "rule of thumb" is that if the intention for spending the capital is to increase eligibility for benefits, that's not allowed. Now for Universal Credit repaying debts is expressly considered as not being deprivation of capital, so it's fine to do that.

But I agree calcotti. You'll still need to make your monthly mortgage payments, and paying off a lump sum doesn't change that. You could find yourself out of work a lot longer than you expected. The jobseeker's rate of Universal Credit is a pittance, £409 a month if you're 25 or over and £342 a month if you're under 25. Do you really want to be trying to pay for all your bills including your mortgage, plus the costs of looking for work which you're expected to do full time, on that kind of money because you threw 10 grand at the mortgage now?

Edit: So in my view the more sensible thing is to consider paying off a mortgage chunk when you have a new job and you feel it's reasonably secure. If you find a job soon you'll still have most of the 15 grand left. If you're out of work for ages, I think you'll have been glad of that 15 grand for paying essential bills.