Technical question - UC AP

itsthelittlethings

It’s all very complex, to say the least.

huckster

I don't think Parliament ever considered such complex financial arrangements when they discussed benefit legislation!

Could you imagine the Universal Credit review team receiving a van load of statements trying to work out the capital 🤔

Altior

Yes, it's evident why I'm keen on swerving a review!

It's not just the savings and current accounts, for example eToro gave a 10% bonus if you deposited and invested up to £5K for 90 days. Their software failed on me, but in trying to make it work I did two £5K deposits from two different bank accounts. I needed to take funds out of existing savings to fund them from current accounts. It was sorted in the end but they paid the £500 bonus in cash ($680). I can withdraw all the money from eToro at the start of next month, so will have £5.5K incoming from that, which I'll then be moving into the highest interest bearing account I can until I start to settle the 0% credit cards.

It was worth the hassle for £500, but in the backwash is lots of high value transactions flying around multiple accounts, over a long period of time. To collect just one (albeit very good) bonus. Because I used for example £4K out an Edge Saver to fund one of the eToro deposits (as it was immediate), I then took funds out of an account that was paying less than 6% temporarily to replace the Edge Saver cash.

When you've been stoozing for a good while, the lines become blurred between what's your actual money, and what's borrowed. It all effectively merges together, and you try to maximise yield from all resources available. Unwinding it is quite a significant undertaking, I still don't want to do anything daft, and those locked cash bonds pose a significant challenge.

Grumpy_chap

Looking at the OP's comments in this thread and their past threads, is the OP really down to around £6k of capital?

Given they just mentioned moving £5k from two different accounts. That's £10k.

In past threads, they took a £20k pension lump sum (possibly used for reducing outstanding mortgage) and there is a share trading account with £3.5k.

Then another long thread from as recently as January about reducing capital and DoC.

The OP needs to be aware that it is capital in all forms that counts and the DoC rules include the element of intent:

"If you knowingly reduce your money, savings and investments, or transfer them elsewhere to get or increase your Universal Credit, this is known as ‘deprivation of capital’."

https://www.gov.uk/guidance/universal-credit-money-savings-and-investments#reducing-your-money-savings-and-investments-on-purpose

Given the comments the OP has made, it is difficult to see how that intent is not real.

NedS

Unless there is significant debt (mortgage and 0% credit card balances) that can be repaid before making a claim.

Does anyone know what the rules are for council tax reduction re DoC? Is repaying debt allowed there, or would that still be seen as DoC by the local authority as it was for legacy benefits?

Altior

If I was considering doing anything wrong, I wouldn't be sharing it on this forum :)

I can understand the confusion if you're not familiar with stoozing. A lot of the capital I am/was playing with is borrowed. It's not really mine. At some point, it all has to be paid back to a lender. But if you are a big stoozer, you have lots of cards with lots of credit available. Invariably, at least one will be offering you a 0% BT deal, and you can simply roll the debt forward. The ideal scenario is a 0% fee free MT, then you 0% BT to that card, increasing your stoozing pot.

So as I noted, the lines become blurred between what is yours, and what is borrowed. As one can imagine, I run these activities via a detailed spreadsheet, so I do always know my true liquid cash (capital) position.

Most BTs you pay a fee, so you don't really want to settle credit at 0% unless you have to, as the cost was front loaded.

Means tested benefits don't care about the net position, just the total positive capital. Therefore to claim MT benefits, I need to unwind stoozing and only have capital that is actually mine (with no future liability attached). ie my savings and investments reflect the true position, not the leveraged one.

I've never taken a pension lump sum, I'm not old enough for pension access. Fears of DoC were related to pension contributions, as this is likely to be my last year of income through paid work, so naturally I want to take advantage of tax relief by April 5th, as future years I'll be limited to £2880 net annual contribution. UC positively incentivises claimant to contribute to their pension and increase their benefits, so in my view the principle is established. But I want to be sure that the principle applies before an application as well as when a claimant.

As NedS alludes to, the position is very clear with UC, I am absolutely permitted to diminish capital to pay debt off (including mortgage). The CT discount is linked to the UC application, I believe the DWP sorts that following the application if I request it during the application (along with SMI).

The way it's all fallen for me is a perfect (or imperfect!) storm if you like. How it's all dovetailed with the end of the tax year, and the end of several of my 0% liabilities, and locked bonds, and the change of UC legislation is all purely coincidental. And yes, I do have the option of holding on to £6.5K capital or £15.9K capital or anything in between. As I have 0% credit card liabilities going into next year, and a mortgage that can be overpaid.

There is not a major advantage in UC over ESA alone unless I get CT support, which for my council means having capital below £6K, and I can only achieve that after June (due to the fixed term bonds).

Grumpy_chap

I've never taken a pension lump sum, I'm not old enough for pension access.

Oh, that is not what you said less than a month ago, 7th March:

Does anyone have a good source of information in regard to accessing DC pension pots when on state benefits, before state pension age.

Specifically I am endeavouring to identify, under current legislation, the impact on NS ESA and UC if, for example, a £20K lump sum is withdrawn from a DC pot, and the whole net amount received is paid over to reduce debt (ie mortgage) on the same day.

https://forums.moneysavingexpert.com/discussion/6658531/pension-lump-sum-and-benefits

Altior

https://forums.moneysavingexpert.com/discussion/comment/81933958#Comment_81933958

This is future planning, it's several years until I can access DC, unless I request it via ill health. As noted, before state pension age.

If UC is reduced by pension withdrawal £ for £, there's not much point in contributing to a pension now at all. As effectively I wouldn't be able to access it for over a decade. The calculation here also relates to SMI, as I can reduce the SMI liability with pension lump sums before it gets out of hand. Of course I do have the option of never paying off SMI but then I would be effectively trapped in my current property. Preference is to settle SMI liabilities and keep my options open.

NedS

@Altior wrote:

As NedS alludes to, the position is very clear with UC, I am absolutely permitted to diminish capital to pay debt off (including mortgage). The CT discount is linked to the UC application, I believe the DWP sorts that following the application if I request it during the application (along with SMI).

I'm pretty sure you have to apply directly with the LA for council tax reduction. DWP will share data with the LA, so the LA will have any earnings data from UC, as provided by your employer to HMRC → UC → LA.

If at any point your UC claim is closed, DWP will notify the LA and any means-tested entitlement to CTR linked to being in receipt of UC will also end, and you must reapply if you later reapply for UC. Have seen this happen many times where people have had their UC claims closed for failing to accept commitments, etc, and then 6 months later received a hefty CT bill that they were not expecting.

Yamor

@Altior

Of course I do have the option of never paying off SMI but then I would be effectively trapped in my current property.

There is an option to transfer the loan to a new property.