Savings and income support

Legacy_user · 19 May 2004 at 12:20PM

Hello all,
In the very near future I intend to leave work for a couple of months to look after my son who has a chronic illness. He is in receipt of DLA at the highest rate care component. My wife also cares for another of our sons on this.
My dilemma is I have over the £8000 limit which will exclude me form claiming income support, but I also have quite a bit of outstanding debt.
So my question is can I pay off some of this debt, which will bring my savings to well below the threshold for claiming, and receive income support with no problems? Will the DSS have a dim view on this?
Also my next poser is that some of my debt is in the form of a personal loan and mortgage which are both flexible. So if I pay off some of this debt in order to claim my benefit and once I have finished claiming draw some of it back from my loan and mortgage if I really needed it?
Any Help on this would be greatly appreciated

Ted_Hutchinson · 19 May 2004 at 1:11PM

Hello all,
In the very near future I intend to leave work for a couple of months to look after my son who has a chronic illness. He is in receipt of DLA at the highest rate care component. My wife also cares for another of our sons on this.
My dilemma is I have over the £8000 limit which will exclude me form claiming income support, but I also have quite a bit of outstanding debt.
So my question is can I pay off some of this debt, which will bring my savings to well below the threshold for claiming, and receive income support with no problems? Will the DSS have a dim view on this?

While you are not claiming Income Support how you spend your money is up to you. If you look at the money saving pages about managing debt you will I am sure find good advice about not paying on servicing debt more than you get from interest on savings. There is no point in paying 6% interest on a loan when your savings are only getting 3% in the building society. If you are rationalising your finances in order to get the best economic return on your money everyone would support that and should you have to attend an appeal regarding a failed Income Support claim you would be able to defend your actions.

If the intention is to obtain benefit and hide capital and savings to take advantage of the benefit system and they can prove this was your INTENTION then they would continue to treat you has having that notional capital.

Also my next poser is that some of my debt is in the form of a personal loan and mortgage which are both flexible. So if I pay off some of this debt in order to claim my benefit and once I have finished claiming draw some of it back from my loan and mortgage if I really needed it?
Any Help on this would be greatly appreciated

The advantages of a flexible mortgage in this regard are worth thinking about for anyone in your position.
You may have to show your savings and bank account statements. The powers the DWP have of requesting information from banks and utilities is staggering and where fraud is suspected they can and will obtain evidence from whoever has it. It's even been suggested that spending patterns on loyalty cards have been presented to claimants as evidence that their spending is in excess of their declared income.
You must therefore be in a position of justifying on common sense financial grounds your decisions regarding the disposition of your capital and savings. If the economics of borrowing at 6+% while your savings are only getting 4% make you realise you could make your money work harder for you by reducing the savings and also decreasing the debt and this is the driving force behind your decision then do it as soon as possible.
If your bank statement shows that the week before you claim income support you suddenly lose your savings and capital in excess of the £3000 lower limit then it will be very hard to dissociate one action from the other and you will continue to be treated as if you had the capital.

Ted_Hutchinson · 19 May 2004 at 4:20PM

As you haven't provided any details of the current interest rates you are paying on your mortgage or getting on your savings or the amounts of money involved it may be a good idea to set these out in a further post together with the sums involved, possibly using a different username, and without any reference to the Means tested benefit scenario.

If you post this request in one of the other forums dealing with mortgages, savings or debt management and see what the experts there feel about your proposals as financial common sense.

If the consensus of advice is that it is a financially sensible thing to do (regardless of any possible later effect on means tested benefit) then I would do it. You are not to know now what the future holds for you later.

Fran · 19 May 2004 at 4:32PM

Peter -

I would suggest that you find out what your local Citizens Advice Bureau have to say about "disposal of capital", also a phone call anonymously to the DWP to ask them what the rules are and how they apply them (are there exceptional circumstances for example?). Then you will know what you are dealing with and can plan accordingly. Best Wishes, Fran

Ted_Hutchinson · 19 May 2004 at 4:46PM

While Fran's advice to check with the CAB is as always useful I can tell you from past experience that the DWP are in a catch 22 situation when it comes to giving official advice regarding Deprivation of Capital information.

The answer I got from the DWP when attempting to resolve a similar dilemma is posted in this thread and sets out the legal basis for their refusal to provide any elucidation in these situations.

http://makeashorterlink.com/?S3D822758

For people with specific disability needs a home visit request from a DWP adviser may provide a scenario where one is given a nod and a wink about how a Decision Maker may understand a particular expenditure. But as Fran says the CAB have probably experience of how previous situations have been resolved.

Ted_Hutchinson · 19 May 2004 at 4:52PM

http://!!!!!!.com/2lyt8

this one appears to work.

System · 19 May 2004 at 6:19PM

Thank you very much for some very imformative and knowledgeable replies, which i am trying to digest. Currently i am with intelligent finance using their offset facility, so i am offsetting my savings againsy my mortgage. I think i will use the idea of managing my finances as a whole and see where that leaves me.

Peter

System · 19 May 2004 at 7:10PM

I have been in contact with welfare Rights and they have told me that if i reduce legally enforceable debt such as credit cards and personal loans, and by doing so reduce my overall savings to below the £8k then i would be entitled to IS and it would not be deemed as suspicious.

Ted_Hutchinson · 19 May 2004 at 8:19PM

This table shows how your Income support will be reduced for each £250 of capital above the £3000 limit up to the £8000 upper limit.
Capital held by you and your partner
£
3,000.01 – 3,250.00= £1
3,250.01 – 3,500.00= £2
3,500.01 – 3,750.00= £3
3,750.01 – 4,000.00= £4
4,000.01 – 4,250.00= £5
4,250.01 – 4,500.00= £6
4,500.01 – 4,750.00= £7
4,750.01 – 5,000.00= £8
5,000.01 – 5,250.00= £9
5,250.01 – 5,500.00= £10
5,500.01 – 5,750.00= £11
5,750.01 – 6,000.00= £12
6,000.01 – 6,250.00= £13
6,250.01 – 6,500.00= £14
6,500.01 – 6,750.00= £15
6,750.01 – 7,000.00= £16
7,000.01 – 7,250.00= £17
7,250.01 – 7,500.00= £18
7,500.01 – 7,750.00= £19
7,750.01 – 8,000.00= £20
over 8,000.00=You will not be eligible for Income Support

With regard to the payments reducing your credit card debt you need to know this has to be done before an Income Support claim is in place. Once the award is made the guidance to Decision Makers in the DMG makes it clear that any payment above the minimum monthly payment should be interpreted as Deprivation of Capital.

System · 19 May 2004 at 9:13PM

Thank you very much for your information which has been most useful. i now have a much clearer picture of my situation should i make a claim. Thank you very much

Milarky · 22 May 2004 at 12:20PM

(Just a query really)

If Peter has money in offset savings/mortgage account, then he pays IF the difference in iterest and receives no income from his savings - it all goes to pay the mortgage in effect.

While this gets around any tax liability, and he gets no 'benefit' from his savings directly, the rules on notional income mean he will still be treated as receiving an income fron it [and a pretty hypocritical assumption of income it is too, at 20.8% pa] since he still has that money sat in his offset savings account.

When I first saw where he said

''some of my debt is in the form of a personal loan and mortgage which are both flexible. So if I pay off some of this debt in order to claim my benefit and once I have finished claiming draw some of it back from my loan and mortgage if I really needed it?''

I thought he might be referring to a mortgage which simply allows prior over-payment and subsequent payment holidays/further advances at the same rate - and that his savings where in non-linked accounts [I've got my lender - Nationwide - in mind as an example].

I think that, in 'IF' terms, he would have to actually repay most/all of his linked savings before any IS claim was presented and retain much smaller savings (still offsetting) outside the 'wrapper' of the mortgage.

In the 'Nationwide' example (above), you would have to overpay the mortgage, reduce the savings, and (provided 'intent' wasn't proved) you couldn't later be shown to possess the overpaid amounts.

[I'm assuming that Peter is intending to genuinely reduce his savings by this method, but thought it worth flagging up the difference between 'offseting' and 'reducing' savings. Any clarifications/corrections to this?]

Savings and income support

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