Pilon and Redundancy Pay with Universal Credit

davecarr2000

Hi,

I'm currently facing redundancy and will be receiving redundancy of about £21,000 and Pilon of £7000.
That does take us over the £16,000 capital limit, and also probably surplus earnings.

Does anyone know if the claim would just terminate, and we would need to reapply at some point in the future, or does the claim go on hold while we use up the capital, and if so does it reduce the capital each month by the amount that we would be deemed to be entitled to, if we didn't have the capital.
I'm looking at the regulation 50 for nominal capital, however that seems to be only for people who have spent the capital, and shouldn't have, and is potentially fraudulent, but then why have a clause that deals with a fraudulent activity, and talk about when they can receive the benefit again.

Thanks

tacpot12

The claim would terminate, but can be reopened within six months. If you can get below £16,000 in six months, you can reopen the claim. You should keep the same assessment period and payment dates. 

Obviously you need to be careful about any suggestion that you have deliberately deprived yourself of the capital by spending it ways that aren't reasonable under your circumstances. I've not seen this discussed anywhere, but I would expect that the DWP would expect you to claim JSA if you are entitled to it and looking for work, rather than live off the redundancy payment to use it up more quickly.  

davecarr2000

I'm hoping to have a job by then. My last day will be 31/12, then my Pilon will start which will be 12 weeks.

Just had a quick look at JSA, I didn't realise I would be able to claim it as savings don't affect it.
I actually thought I would be able to claim 0, hence living off the redundancy.

Looking at JSA it's £400 a month.
That's a massive drop to what I get each month, and our UC payment, I reckon it would go quick at that rate, hopefully i get a job.

Thanks for your reply.

huckster

Jobs market if the same as previous was very slow between December and March. Many of those that got into permanent work types early this year, applied in October and November of 2024.

Generally, employers allow a longer recruitment process time period.

Advice is to start making as many job applications as you can ASAP. Don't wait until next year, as if you do that you may find that you don't find work until Spring at the earliest.

Of course it depends on skills, as Electricians and Engineers are in high demand, but other professionals find it more challenging.

davecarr2000

Appreciate that.
I have applied for 1 job already it seemed really good for hours and the actual job, so went for that.
I have a list of saved ones to go through, I'll get those blasted off when I'm not working

There's loads of start immediately ones, but they are for delivery, and its for the Christmas rush.

TimeLord1

Even if your Universal Credit claim is terminated, you can still be credited with Class 1 National Insurance credits if you are actively looking for work, provided you are available for and actively seeking work (i.e., you meet the entitlement conditions for a benefit like New Style Jobseeker's Allowance (NSJSA)), so apply anyway when you are made redundant. Good luck!

NedS

TimeLord1 said:

Even if your Universal Credit claim is terminated, you can still be credited with Class 1 National Insurance credits if you are actively looking for work, provided you are available for and actively seeking work (i.e., you meet the entitlement conditions for a benefit like New Style Jobseeker's Allowance (NSJSA)), so apply anyway when you are made redundant. Good luck!

The OP has probably paid enough NI this tax year, but that's certainly worth considering come next April if they are still out of work and unable to claim UC due to excess capital.

Yamor

The PILON is earned income for UC purposes, and can therefore mean surplus earnings are carried forward. However, the redundancy pay is not income, and won't cause any surplus earnings. It is simply capital straight when you receive it.

Your award should terminate automatically even without you reporting anything to UC, because of the earnings, but reporting the capital will simply mean another reason for it to terminate.

Often, when an award terminates due to income, then UC will treat you as making a new claim immediately in each following month for up to five months. However, if you have reported the capital, then they presumably won't do that.

As you will have surplus earnings from the PILON, you should therefore ensure to reclaim yourself the month after receiving the PILON, even if you still have the capital and won't be entitled to anything, to ensure that the surplus earnings are eroded (as they only erode if you've made a claim). And then again the following month, if required. This will ensure that when your capital has reduced sufficiently that you will not have any surplus earnings brought forward.

(If you will be off UC for at least six months, then you don't have to bother, as surplus earnings are not carried forward for more than six months.)

(There is an interesting legal question about how much exactly of the surplus earnings should erode in a case where someone has capital over £16k, but that shouldn't make a big difference to you in any event.

There is another interesting legal question about when exactly income becomes capital in a case of surplus earnings, but that also probably won't affect you.)

And just to clarify, the rule in Reg. 50 about reducing notional capital by the amount of UC lost due to the capital does indeed only apply where you do not actually have the capital any more. It won't apply in your case if you still have the capital.

You asked about why the rule is then needed, as it is anyway fraudulent; the answer is that it isn't fraudulent to spend your money however you wish, it's just that the notional capital rule will then apply to stop you getting benefit because of that spending.

Regarding the possibility that not claiming JSA would mean that you could be treated as depriving yourself of capital; I don't think that is possible. As long as you have spent your money in a reasonable way, then the spending cannot in itself be deprivation (see Reg. 50(2)(b)). Not claiming a new income could only possibly be considered "notional unearned income", but that doesn't apply to JSA (see Reg. 74).