Disabled child saving for the future

Plasticman

Hi. My daughter is 21 and is receiving universal credit and PIP due to long term (permanent) disabilities. I've always tried to encourage my children to set some money aside for their future but with my daughter if she saves more than £6K her UC will be reduced and she will then have to use her savings to pay living costs so saving any more than that feels a bit pointless. She already has some savings (less than £6K) due to an inheritance. I'm wondering if she would be wise to start paying into a private pension so at least she has some provision when she's older. Has anybody got any experience of doing this while on benefits? 

Rubyroobs

her Universal credit only reduces slightly by having savings over 6k. It reduces by about £17 per month for each 1k over 6k.

Spoonie_Turtle

Rubyroobs said:

her Universal credit only reduces slightly by having savings over 6k. It reduces by about £17 per month for each 1k over 6k.

Exactly.  The deduction from UC for substantial savings is relatively small - £4.35 for each £250 or part thereof over £6000.  Having to use a small amount of savings to top up living expenses purely due to that deduction will not drain those savings by any means, and if it does then the reduction will be reduced each month anyway.

As for a pension, she could but would need to be aware there are limits for those with no earnings; I can't remember what they are.

poppy12345

Plasticman said:

 I'm wondering if she would be wise to start paying into a private pension so at least she has some provision when she's older. Has anybody got any experience of doing this while on benefits? 

If you have no earnings or earn less than £3,600 a year, you can still pay into a pension scheme and qualify to have tax relief added to your contributions up to a certain amount.

The maximum you can pay is £2,880 a year. Tax relief is added to your contribution so if you pay £2,880, a total of £3,600 a year will be paid into your pension scheme, even if you earn less than this or have no income at all.

https://www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions#how-much-can-you-build-up-in-your-pension

calcotti

Spoonie_Turtle said: Having to use a small amount of savings to top up living expenses purely due to that deduction will not drain those savings by any means, and if it does then the reduction will be reduced each month anyway.

I assume that the situation OP seeks to address is that daughter is spending less than her regular income so savings could actually be building up.

OP, I think what you need to consider is that paying regular small payments into a pension is probably only worthwhile if they will be maintained over a long period of time. Although money may be building up now is that due to the extraordinary circumstances of the last year and unlikely to continue.

In terms of provision for old age she is getting NI credits through UC so, assuming nothing changes, will be entitled to a State Pension when she reaches pension age. She may then be entitled to Housing Benefit and help with Council Tax and possibly some Pension Credit depending on her circumstances and the rules at that time. Having a small private pension is of little benefit to someone on means tested benefits because it simply reduces the benefit support.

Having said that, we don'y know how benefit system may change in the future and, given her youth, even small savings if maintained throughout her life could, depending on the returns, create a reasonable pension pot.

TELLIT01

If your daughter is living at home you might consider increasing how much you charge her for her 'keep' and put this money directly into a trust fund for her.  This is assuming you aren't claiming benefits yourself as they may be affected by the extra income (I don't know if that could happen).

Alice_Holt

The difficultly with a SIpp / personal pension is that as calcotti says it may only serve to reduce possible benefits at retirement, and it's inflexible (in that funds can only be accessed 10 yrs before SPA).

This scheme may be worth looking at - https://www.gov.uk/get-help-savings-low-income.

calcotti

Alice_Holt said:

The difficultly with a SIpp / personal pension is that as calcotti says it may only serve to reduce possible benefits at retirement, and it's inflexible (in that funds can only be accessed 10 yrs before SPA).

This scheme may be worth looking at - https://www.gov.uk/get-help-savings-low-income.

But Help to Save, unlike pensions, would not be disregarded as capital for UC.

poppy12345

Alice_Holt said:

This scheme may be worth looking at - https://www.gov.uk/get-help-savings-low-income.

This may not be possible unless they are working and earned more than £617 in their last AP. https://www.gov.uk/get-help-savings-low-income/eligibility

Plasticman

Thanks for the helpful advice everybody