Universal Credit Deductions - Lifetime ISA

nerdygeek12

Hi all,
I could really use someones help and expertise please. This whole situation is really making me anxious. I apologize in advance for the long message.

Back in May, I had a claim review start and I provided all the documents that they needed. I was unaware before the review but I was meant to have declared that I had a Lifetime ISA and that it exceeded the £6000. I provided the full statement of my lifetime isa from when I first opened it. After a lot of back and forths, and much time afterwards, I was finally assigned too a different agent and my claim review was closed on the 5th November. Retroactive deductions had been made and going forward I would have deductions on my payments.

Throughout the process I tried to highlight to my assessors and the various people I've dealt with about the "rules" when it comes to how UC counts Lifetime ISA's as capital. Not one person I've spoken to at UC has ever heard of the 75% treatment when it comes to LISA's. So when I checked my latest statement I believe they used the full amount in my LISA and not the surrender value. I phoned the Helpline and the person had no idea what I was talking about and told me to leave a journal entry under the "Payment" section. Since then I had left 2 other entries. Finally on the 27th Nov I received a generic message just talking about how they treat all savings, without touching upon anything I said in my message. Today (3rd Dec) I just phoned the helpline again and to be honest the first agent I found rude from the get go. "It looks like they replied on the 27th, what don't you understand" and "In the 5 years I've worked here, I've never heard of the 75% thing when it comes to Lifetime ISA'S". I ended up hanging up and phoning again. I spoke to a much friendlier agent and they said they've never heard of it either but will write a message to my case manager. I quoted to him "ADM CHAPTER 1: CAPITAL, H1659".

I hope you dont mind, here is part of the journal message I sent last week and was wondering if I was correct in what I said. I have left out personal identifiers.
"From what I understand, for claimants under 60, 75% of the surrender value of a LISA should be treated as capital. The surrender value is what I could withdraw after the 25% government bonus penalty. I found this guidance on the GOV.UK website and in the Universal Credit “Treatments of Capital” document for LISA accounts. My calculations suggest my actual surrender value is around £7,264.45, which is just over the £6,000 threshold. Based on this, the monthly deductions should be lower than what’s currently showing—around £26.10 per month instead of £65.25 in October 2025. I also believe the deductions that are currently in place may have been calculated using the full LISA balance rather than the correct surrender value, which is why I am requesting clarification. When my LISA first went over £6,000 in April 2022, the surrender value would have been about £4,500, so deductions wouldn’t have applied at that time."

peteuk

One problem here might be you are speaking to people who are scripted and not benefit trained.   The people in the call centre are call handlers so have no need to know about the 25% discount. 

If you declare the full amount of the LISA then the DM will take into account the 25% reduction due to fees payable on “unauthorised” removal from the LISA.  If you have £6000 in your LISA and your car needed £3000 pounds of repair then yes you have access to the funds, but to remove them from your LISA will mean a 25% charge. 

Theres a few threads on here as to what you should and shouldn’t declare.  So hopefully someone with greater knowledge with be able to point you in the direction of the rules/regs.