UC and deprivation of capital... Need some advice :/

WelshPaul

I’m looking for some advice in regard to deprivation of capital. We were moved from tax credits to UC almost one year ago. My wife works full-time, I work part-time and am a carer to our youngest son. Over the last year we have received a regular UC payment and every month I have provided up-to-date statements regarding our capital. (We had savings of £13,500).

In January, I purchased a pre-paid funeral plan to the tune of £3,850. I paid for this using my Virgin Money credit card. I didn’t want to pay by instalments over an extended period of time as doing so would have raised the cost to over £7,000 depending on the length of the plan. Also, paying for the plan using a credit card brings some additional protection? All this left me with a balance owing of around £5,000 on a Virgin Money credit card. I also owed a couple of hundred pounds on my Tesco credit card.

I made two withdrawals from my savings account:

On 6/1/24 £611.70 was transferred from my savings account to my current account. That same day, a payment of £120.98 was made via bank transfer from my current account to my Tesco Credit Card account, reducing the balance owed. A second payment of £451.57 was also made via bank transfer from my current account to my Virgin Money Credit.

On 13/1/25 £3032.99 was transferred from my savings account to my current account. That same day, a payment of £3100.00 was made via bank transfer from my current account to the same Virgin Money Credit Card account above, leaving me with a balance due of just over a grand.

I purchased this funeral plan because I have no family other than my wife and children. My eldest son has autism spectrum disorder and global learning difficulties (he receives full PIP and LCWRA) and my youngest has autism spectrum disorder with hearing impairment (I receive DLA on his behalf). I figured if my wife and I ever split up, my funeral would be taken care of as my children wouldn’t be in a position to pay for it or arrange it.

On the 19th of January, I provided UC with our usual monthly capital figures, which is now just over £10,000, but the following day an appointment was arranged for my wife to attend an appointment at our local job centre requesting we bring further evidence supporting our capital figures.  Our UC payment/account appears to have a hold on it, although we have had no official notification of anything other than a note in our journal regarding the appointment being made and my wife attending. Our UC statement was due on 22/1/25 and a payment was due today but neither have been made available.

I genuinely thought I was doing the right thing by planning ahead and the only reason for making the payments was to prevent us paying large amounts of interest on the plan or credit card by paying monthly amounts instead.

I’m not worried about any ‘fraud’ or ‘over payments. We have been 100% transparent over the past year regarding our income, capital and savings. I’m not that worried about being accused of depriving ourselves of capital. Instead of £10,200 savings, they will say we still have £13,500, which I would try and appeal, but how long would the DWP penalise us?

andrewmp

You've repaid a debt which is isn't deprivation of capital under UC rules, so it shouldn't really be an issue.

If they somehow think you've deprived yourself of capital it'll be considered notional capital and you'll receive the usual deduction on that amount.

WelshPaul

I appreciate you taking the time to reply to my post.

The thing is, I could have withdrawn an additional £1,500 from my ISA account, lowering our capital further because even after making payments on both credit cards using the monies withdrawn from my ISA, I still had an outstanding amount of around £1,500 owed between the two credit cards for which we have since made additional payments using our salary I might add. Our plan of action was to use some of our savings and the majority of our income from this month's salary so that we would be debt free by the end of the month of January. That way, they need not worry about my funeral needs when the time comes and no more credit card debt. We are saving a few grand in the long term doing it this way compared to making minimum monthly payments over a prolonged period of time.

HillStreetBlues

andrewmp said:

You've repaid a debt which is isn't deprivation of capital under UC rules, so it shouldn't really be an issue.

That raises an interesting issue about DoC

If OP paid via a debit card then DoC is possible as would have to be decide if buying it was a "significant purpose" to increasing  UC. (by £69.60 a month), as the capital would be reduced. It wouldn't be DoC if it was reasonable in the claimant's circumstances

It's known that a credit doesn't counterbalance a debit, so if OP have £13,500 of capital & £5K (just a made up figure) of debit, the OP's capital is still £13.5k
When buying the funeral plan OP capital never changed, just the debt did, so can it be DoC as the actual capital wasn't reduced.
The OP then paid the CC with some of the capital, and it's also known repaying a debt is allowed with UC.

The question I now have is can it ever be DoC with a credit card (or other loan) as the only time capital was reduced was to pay a debt.

Grumpy_chap

The capital has been used to repay a debt.  Repaying debt is not DoC.

The question is, therefore, about whether the debt being increased by the purchase of the funeral plan counts as managed to create DoC.

I recall reading something recently (possibly - probably - in these forums) about paying for funeral plans being something that specifically does not get classed as DoC.  It is a vague recollection I have so I may have got totally confused or mixed things up with something else or the incorrect context entirely.  I will try to look up what I think I saw.  In the meantime, others more knowledgeable may be able to advise with better certainty.

I apologise if the comment about funeral plans turns out to be wholly incorrect.

HillStreetBlues

Grumpy_chap said:

I recall reading something recently (possibly - probably - in these forums) about paying for funeral plans being something that specifically does not get classed as DoC.  It is a vague recollection I have so I may have got totally confused or mixed things up with something else or the incorrect context entirely.  I will try to look up what I think I saw.  In the meantime, others more knowledgeable may be able to advise with better certainty.

I apologise if the comment about funeral plans turns out to be wholly incorrect.

That is only for people over state pension age.

andrewmp

HillStreetBlues said:

andrewmp said:

You've repaid a debt which is isn't deprivation of capital under UC rules, so it shouldn't really be an issue.

That raises an interesting issue about DoC

If OP paid via a debit card then DoC is possible as would have to be decide if buying it was a "significant purpose" to increasing  UC. (by £69.60 a month), as the capital would be reduced. It wouldn't be DoC if it was reasonable in the claimant's circumstances

It's known that a credit doesn't counterbalance a debit, so if OP have £13,500 of capital & £5K (just a made up figure) of debit, the OP's capital is still £13.5k
When buying the funeral plan OP capital never changed, just the debt did, so can it be DoC as the actual capital wasn't reduced.
The OP then paid the CC with some of the capital, and it's also known repaying a debt is allowed with UC.

The question I now have is can it ever be DoC with a credit card (or other loan) as the only time capital was reduced was to pay a debt.

According to the regulations, repaying a debt can not be deprivation of capital. 

It does raise some interesting issues though, as you mention. What if someone buys a 15k Rolex on credit then pays it off, is that deprivation? The regulations say no. Maybe it'll be tested one day?

Pension Credit have had the same/similar rules for years and I don't recall it being tested yet on that either?

HillStreetBlues

andrewmp said:

HillStreetBlues said:

andrewmp said:

You've repaid a debt which is isn't deprivation of capital under UC rules, so it shouldn't really be an issue.

That raises an interesting issue about DoC

If OP paid via a debit card then DoC is possible as would have to be decide if buying it was a "significant purpose" to increasing  UC. (by £69.60 a month), as the capital would be reduced. It wouldn't be DoC if it was reasonable in the claimant's circumstances

It's known that a credit doesn't counterbalance a debit, so if OP have £13,500 of capital & £5K (just a made up figure) of debit, the OP's capital is still £13.5k
When buying the funeral plan OP capital never changed, just the debt did, so can it be DoC as the actual capital wasn't reduced.
The OP then paid the CC with some of the capital, and it's also known repaying a debt is allowed with UC.

The question I now have is can it ever be DoC with a credit card (or other loan) as the only time capital was reduced was to pay a debt.

According to the regulations, repaying a debt can not be deprivation of capital. 

It does raise some interesting issues though, as you mention. What if someone buys a 15k Rolex on credit then pays it off, is that deprivation? The regulations say no. Maybe it'll be tested one day?

Pension Credit have had the same/similar rules for years and I don't recall it being tested yet on that either?

The current UC checks they are doing asking for bank statements, they never (AFAIK) asked for any credit card statements. Maybe they know that buying on a CC can't be DoC as capital isn't reduced so pointless looking at them.

Grumpy_chap

HillStreetBlues said:

Grumpy_chap said:

I recall reading something recently (possibly - probably - in these forums) about paying for funeral plans being something that specifically does not get classed as DoC.  It is a vague recollection I have so I may have got totally confused or mixed things up with something else or the incorrect context entirely.  I will try to look up what I think I saw.  In the meantime, others more knowledgeable may be able to advise with better certainty.

I apologise if the comment about funeral plans turns out to be wholly incorrect.

That is only for people over state pension age.

Thank you - it is nice to know my memory was not totally failing me.
Obviously, the comments are irrelevant for the OP in this thread.

WelshPaul

The basics is this, UC want to know what happened to the £3608.58 I transferred out of my savings account during the month of January 2025. The basic answer is this, I paid a large balance off my credit cards with it. 

I haven't been asked how I racked up credit card debt or a breakdown of those charges. I provided the most recent credit card statements as evidence that those cards exist. I wasn't asked for them!

It's worth mentioning that the withdrawals and payments I made are not listed on the latest statements I submitted as they happened after those statements were generated. However, they will be shown on the statements that are due to be generated at the end of this month, beginning of next month. I provided printed screenshots showing up-to-date information for all accounts, including my credit cards. These printed screenshots show the current balances, payments received, and any transactions made since the last statement was generated. I obviously expect to get asked for these, and I will provide them once I have received them.

I will provide an update when I hear more from DWP. The outcome might be useful to someone else at some point. 

HillStreetBlues

WelshPaul said:

The basics is this, UC want to know what happened to the £3608.58 I transferred out of my savings account during the month of January 2025. The basic answer is this, I paid a large balance off my credit cards with it. 

If that's all they want to know, it should be very simple, it was to pay a debit and you have nothing to worry about.
Sadly some DWP staff aren't always knowledgable with that actual UC law, so might take a while, if they faff around get them to refer it to a Decision Maker.