Universal credit & childs savings

HillStreetBlues

jojaca said:

Another question child related, I'm in the savings bracket of £6k-£16K and eldest son has just asked can I lend him £400 towards his car insurance. I want to lend him the money, but I feel like big brother is watching over me now on Universal Credit and I could get sanctioned for that type of money.

I don't see any issue with that, you're not trying to deprive yourself of money  just doing what a caring parent wants to do.

Newcad

jojaca said:

Another question child related, I'm in the savings bracket of £6k-£16K and eldest son has just asked can I lend him £400 towards his car insurance. I want to lend him the money, but I feel like big brother is watching over me now on Universal Credit and I could get sanctioned for that type of money.

That is a bit of a trickier one, but no way would a sanction apply for that..

As long as it is a repayable loan (with 'something' in writing even if it's just something that you write yourself and both sign) then it's not been given away as a gift.

However if the DWP do query it, and they probably will because it will change your savings by more than £250,  then even if they do decide that you have "deprived" yourself of the money in order to increase your benefits they would simply regard it as if you still had the money yourself, and make deduction from you UC as if you still had the money yourself. (So no change to what they are already deducting currently for being over £6k).
That's know as having "Notional Capital/Savings".

You should still tell them if/when you do it, (you'll have to report the change in savings anyway),  so that they can decide if they do want to regard it as Notional Capital/Savings from the start and keep deducting as if you still had it.
That way you'll avoid possible overpayments building up if they were to make that decidion later.

atlantis187

Does it ask on the UC application about any childrens savings which are not in your name?

marcia_

atlantis187 said:

Does it ask on the UC application about any childrens savings which are not in your name?

 Unsure but it does ask about any accounts in your name which includes joint accounts. The applicant has to answer truthfully including if they have a partner, family or child account in their own name. Failure to do so is fraud. 

Grumpy_chap

Newcad said:

jojaca said:

Another question child related, I'm in the savings bracket of £6k-£16K and eldest son has just asked can I lend him £400 towards his car insurance. I want to lend him the money, but I feel like big brother is watching over me now on Universal Credit and I could get sanctioned for that type of money.

That is a bit of a trickier one, but no way would a sanction apply for that..

As long as it is a repayable loan (with 'something' in writing even if it's just something that you write yourself and both sign) then it's not been given away as a gift.

However if the DWP do query it, and they probably will because it will change your savings by more than £250,  then even if they do decide that you have "deprived" yourself of the money in order to increase your benefits they would simply regard it as if you still had the money yourself, and make deduction from you UC as if you still had the money yourself. (So no change to what they are already deducting currently for being over £6k).
That's know as having "Notional Capital/Savings".

You should still tell them if/when you do it, (you'll have to report the change in savings anyway),  so that they can decide if they do want to regard it as Notional Capital/Savings from the start and keep deducting as if you still had it.
That way you'll avoid possible overpayments building up if they were to make that decidion later.

If this is a loan of £400 to the eldest son, does it actually change the amount of savings the OP has?

The OP currently has, say £8,400 in a savings account with XYZ building society.  Those savings are effectively loaning the XYZ building society the money and interest is paid back to the OP in return.

If the OP loans £400 to eldest son for car insurance - and it is a loan (to be repaid), not a gift - then the OP will have:
£8k in a savings account with XYZ building society
£400 in savings with (loan to) eldest son
It is still savings, just in a different, but still repayable, place.

Whether my lay-person approach matches how UC defines this is something that others may be able to advise better.

Spoonie_Turtle

Grumpy_chap said:

Newcad said:

jojaca said:

Another question child related, I'm in the savings bracket of £6k-£16K and eldest son has just asked can I lend him £400 towards his car insurance. I want to lend him the money, but I feel like big brother is watching over me now on Universal Credit and I could get sanctioned for that type of money.

That is a bit of a trickier one, but no way would a sanction apply for that..

As long as it is a repayable loan (with 'something' in writing even if it's just something that you write yourself and both sign) then it's not been given away as a gift.

However if the DWP do query it, and they probably will because it will change your savings by more than £250,  then even if they do decide that you have "deprived" yourself of the money in order to increase your benefits they would simply regard it as if you still had the money yourself, and make deduction from you UC as if you still had the money yourself. (So no change to what they are already deducting currently for being over £6k).
That's know as having "Notional Capital/Savings".

You should still tell them if/when you do it, (you'll have to report the change in savings anyway),  so that they can decide if they do want to regard it as Notional Capital/Savings from the start and keep deducting as if you still had it.
That way you'll avoid possible overpayments building up if they were to make that decidion later.

If this is a loan of £400 to the eldest son, does it actually change the amount of savings the OP has?

The OP currently has, say £8,400 in a savings account with XYZ building society.  Those savings are effectively loaning the XYZ building society the money and interest is paid back to the OP in return.

If the OP loans £400 to eldest son for car insurance - and it is a loan (to be repaid), not a gift - then the OP will have:
£8k in a savings account with XYZ building society
£400 in savings with (loan to) eldest son
It is still savings, just in a different, but still repayable, place.

Whether my lay-person approach matches how UC defines this is something that others may be able to advise better.

Surely if you've loaned money to someone you don't still have it, you only have it again once they've repaid it.  (Note: maybe business accounts work on the principle of your post, I'm just talking about individuals and ordinary finances.)

The 'issue' (only a tiny one, at the very most it would affect their UC by £8.70!) would be whether a DM decides they've deliberately deprived themselves of it and to treat them as though they still have it. 
[Which looks ridiculous when typing it out, who would go to that bother and risk potentially not getting the £400 back just for the sake of £8.70‽  But the rules are the rules.  And if it came to the worst and the DM did decide that, hopefully they'd be able to cope with still having that reduction.]

HillStreetBlues

Spoonie_Turtle said:

Surely if you've loaned money to someone you don't still have it, you only have it again once they've repaid it.  (Note: maybe business accounts work on the principle of your post, I'm just talking about individuals and ordinary finances.)

The 'issue' (only a tiny one, at the very most it would affect their UC by £8.70!) would be whether a DM decides they've deliberately deprived themselves of it and to treat them as though they still have it. 
[Which looks ridiculous when typing it out, who would go to that bother and risk potentially not getting the £400 back just for the sake of £8.70‽  But the rules are the rules.  And if it came to the worst and the DM did decide that, hopefully they'd be able to cope with still having that reduction.]

Just to point out to OP if that did happen they could ask for a mandatory reconsideration and if that failed appeal to a Tribunal.

Grumpy_chap

Spoonie_Turtle said:

Surely if you've loaned money to someone you don't still have it, you only have it again once they've repaid it.  (Note: maybe business accounts work on the principle of your post, I'm just talking about individuals and ordinary finances.)

I think if you have loaned money to someone you do still have it.  For individuals and ordinary finances, not just business scenario.

Consider an individual with £10k in a savings account with Nationwide.  That individual has lent Nationwide the £10k.  Nationwide lend the money to another individual who pays interest.  That is how Nationwide raise the money to pay the interest on the savings held by the individual.  I don't think it is being suggested that the individual does not have the money because they loaned it to someone.

Now consider the same individual, but they move £5k of the £10k to the NS&I 12-month bond for a better interest rate.  The individual has £5k in a savings account with (loaned to) Nationwide plus £5k in (loaned to) NS&I 12-month bond.  Still no-one will suggest that the individual does not have the money.

Now the individual lends £400 to their son.  So, £5k in (loaned to) NS&I 12-month bond plus £4,600 in (loaned to) Nationwide plus £400 loaned to (in) loan to son.  For consistency, I would say that the individual still has £10k. 
Your suggestion is that the individual now only has £9,600 as they no longer have the £400 loaned to the son.

I did put the scenario upthread in part as a challenge / question as I am not sure.

For further thoughts, if the individual in my developing case above were to die, then the full £10k (£5k NS&I plus £4.6k Nationwide plus £400 loan to son) would be an asset of the deceased's Estate...

As an extreme, but using values prompted from another thread currently live in the forum.
If an individual had "gifted" or "loaned" £300k to a daughter such that they were below the threshold for UC eligibility, that would clearly be DoA.

Is there any difference between loaning a family member £400 or £300k in UC rules?

From a practical perspective, the £400 loan for car insurance has little actual outcome and may well not be questioned by a DM.  Even if it were questioned, a DM may accept it is the ordinary actions of an average parent, exactly as HSB put it upthread and I cannot say any better:

HillStreetBlues said:

not trying to deprive yourself of money  just doing what a caring parent wants to do.

BUT, what are the rules?
Is there DM guidance that cover this scenario?
If a £400 loan to son for car insurance is OK, but a £300k loan or gift to daughter not OK, where is the boundary?

HillStreetBlues

Grumpy_chap said:

HillStreetBlues said:

not trying to deprive yourself of money  just doing what a caring parent wants to do.

BUT, what are the rules?
Is there DM guidance that cover this scenario?
If a £400 loan to son for car insurance is OK, but a £300k loan or gift to daughter not OK, where is the boundary?

In my opinion it will come down to if it's a hard or soft loan.
A parent loaning money to their child will normally be treated as a soft loan, as they parent will never take legal action to enforce the debt.
So the parents no longer have the money as they can't legally claim it, but if it is repaid then it becomes their money again.

Spoonie_Turtle

Grumpy_chap said:

Spoonie_Turtle said:

Surely if you've loaned money to someone you don't still have it, you only have it again once they've repaid it.  (Note: maybe business accounts work on the principle of your post, I'm just talking about individuals and ordinary finances.)

I think if you have loaned money to someone you do still have it.  For individuals and ordinary finances, not just business scenario.

Consider an individual with £10k in a savings account with Nationwide.  That individual has lent Nationwide the £10k.  Nationwide lend the money to another individual who pays interest.  That is how Nationwide raise the money to pay the interest on the savings held by the individual.  I don't think it is being suggested that the individual does not have the money because they loaned it to someone.

Now consider the same individual, but they move £5k of the £10k to the NS&I 12-month bond for a better interest rate.  The individual has £5k in a savings account with (loaned to) Nationwide plus £5k in (loaned to) NS&I 12-month bond.  Still no-one will suggest that the individual does not have the money.

Now the individual lends £400 to their son.  So, £5k in (loaned to) NS&I 12-month bond plus £4,600 in (loaned to) Nationwide plus £400 loaned to (in) loan to son.  For consistency, I would say that the individual still has £10k. 
Your suggestion is that the individual now only has £9,600 as they no longer have the £400 loaned to the son.

In your scenario if the individual has any debts, does that offset some of the money a person has in their bank accounts? 
For UC they don't, they just go by what the person actually has available to them in those accounts.  This principle is also evident in how things such as fixed ISAs locked away are valued, they are valued taking into account the penalty somebody would have to pay to access them early, i.e. the valuation is what would actually be available to them in such an account.

My main reservation about your scenario is that even if someone were to take a private borrower to court to try to make them repay, there's realistically no guarantee they'd actually get the money back.  Whereas with regulated institutions they have to follow the law and there are lots of processes in place to make sure lenders (e.g. bank account holders) can access the money when agreed.

But I'm aware my opinion doesn't matter, what matters is how UC actually views things.  And I don't know enough to be able to work out from the guidance how a loan between two private individuals would be viewed.  The guidance is here https://assets.publishing.service.gov.uk/media/65d336b3e1bdec2be1322238/admh1.pdf