What can I do if my savings exceed the allowance for Universal Credit eligibility?

Hi,

Do you have any articles or advice for people on Universal Credit? I’ve had a look but couldn’t find anything on your website. However, I did see information aimed at higher earners on how to stay within lower tax bands and keep their child benefit. There doesn’t seem to be much for those on lower incomes who have decent savings but stand to lose far more than just the child benefit allowance—despite having a much lower monthly income.

I’m a single mum of two kids (one is now an adult but still living at home). I own my house outright, with no mortgage, and earn about £22,000 after tax. I currently receive £270 per month in Universal Credit due to being migrated from tax credits last April. Under tax credits, savings weren’t taken into account, but with Universal Credit, you can have up to £6,000 in savings before your benefits start to reduce on a sliding scale. If you have more than £16,000 in savings, you lose Universal Credit entirely, regardless of how low your salary is.

I understand this won’t affect most people on Universal Credit, but it will impact many who were forced to migrate. Have you had this query before? If so, are there any options that would allow me to keep receiving Universal Credit without having to spend my savings just to get them below £16,000?

I will only receive Universal Credit for 12 months under the migration rules. After April, my guaranteed entitlement will end unless my savings drop below £16,000. My payments were already stopped last month because I received a backdated pay rise as a lump sum in December, which led to my £270 Universal Credit being cut in January without warning. It feels like I may as well have not received the pay rise at all. When I asked if I could appeal, I was told no.

It seems unfair that working hard and saving for years now puts me at a disadvantage—essentially forcing me to spend my savings just to qualify again. Do you have any advice?

Thanks.

Hi,

Thanks for your question. We are not regulated to give personalised financial advice, however there are some things you could potentially do to protect your Universal Credit (UC) eligibility without spending all your savings.

First of all, it's crucial to note that if the Department for Work and Pensions (DWP) believes you deliberately got rid of money just to keep receiving UC, they may still count the money as if you have it. This is called "deprivation of capital" and includes actions such as:

• Gifting large sums of money to family or friends

• Spending money on luxury items (holidays, expensive electronics, etc.)

• Transferring savings to someone else without a valid reason

However, there are a couple of ways you could potentially manage your savings to keep them below the £16k allowance and continue receiving UC:

Put money into your pension

Money paid into your personal or workplace pension does not count as savings for UC. If you're able to, consider contributing to a personal pension or increasing contributions to your workplace scheme. You could shave off just enough of the money from your savings to stay within the allowance while also topping up your retirement savings.

Overpay on bills

Some essential expenses allow prepayment, such as council tax, energy bills, or home insurance. Paying in advance can reduce your savings while covering future costs, without it being considered as deliberately depriving yourself of capital. Though be careful to ensure payments are reasonable - DWP may investigate large one-off payments if they think you’re trying to manipulate your savings.

Ultimately, there is no single solution to this issue and many people in similar positions are struggling with the transition. In any case, we recommend that you contact the Universal Credit helpline or Citizens Advice before taking any actions to get personalised guidance and ensure you do not break any rules.

We hope this helped to point you in the right direction!