Some benefits are affected by the amount of money you have in savings, such as cash in a savings account, or investments in shares. These benefits are called means-tested benefits. Find out more about which benefits are affected by savings or a lump sum payout, such as redundancy pay or compensation.
Which benefits are affected by savings?
The main means-tested benefits that are affected by both income and savings include:
- Universal Credit
- Pension Credit
- Tax Credits (Child Tax Credit and Working Tax Credit)
- Council Tax Support
- income-based Jobseeker’s Allowance
- income-related Employment and Support Allowance
- Income Support
- Housing Benefit.
What are the savings limits?
Universal Credit
If you or your partner have £6,000 or less in savings, this won’t affect your claim for these benefits.
If you and/or your partner have £16,000 or more in savings, you won’t be entitled to Universal Credit.
If you and/or your partner have any savings or capital of between £6,000 and £16,000, the first £6,000 is ignored. The rest is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250.
An example of how savings affect Universal Credit
- You’re claiming Universal Credit and have £7,000 in a savings account.
- The first £6,000 of it is ignored.
- The remaining £1,000 is counted as giving you a monthly income of £17.40.
- £1,000 ÷ £250 = 4.
- 4 × £4.35 = £17.40.
- £17.40 will be taken off your monthly Universal Credit payment.
How your savings are affected if you move from tax credits to Universal Credit
This depends on if you’ve been told by the Department for Work and Pensions (DWP) you’ll be moving to Universal Credit. This is known as managed migration. Or if your circumstances have changed – for example, a change in employment status, family circumstances or housing situation.
If you’re moving from tax credits because of a change in circumstances, and you have over £16,000 in savings, you won’t usually qualify for Universal Credit. Any savings you have between £6,000 and £16,000 will reduce the amount of Universal Credit you’ll get.
If you’re moving as part of managed migration, any savings you have over £16,000 will be disregarded for 12 months from when you move to Universal Credit. After 12 months, the normal rules apply.
Try to get advice from a benefits specialist before you move from tax credits to Universal Credit to make sure you understand the impact of doing so.
Citizens Advice Help to Claim service
If you’re claiming Universal Credit for the first time, Citizens Advice Help to Claim service is free and confidential. They can help you:
- check if you’re entitled to Universal Credit
- get your important paperwork and documents together to speed up your application
- fill out your application online
- work out what the impact of any savings will be on your claim.
If you live in England or Wales, find out more on the Citizens Advice website
Or, in England, call 0800 144 8444. In Wales, call 0800 024 1220
If you live in Scotland, visit Citizens Advice Scotland or call 0800 023 2581
In Northern Ireland, Universal Credit works differently. Find out more on the nidirect website
How savings affect Council Tax Support
Council Tax Support is run by local councils.
If you’re of working age, the amount of savings you’re allowed to have depends on the rules of the Council Tax Supoort scheme in your area.
Your local council can tell you more about how the scheme works where you live.
Find your local council on the GOV.UK website
If you’re getting Pension Credit and qualify for Council Tax Support, your savings could affect how much you get.
Find out more about how getting Pension Credit affects Council Tax Support on the Citizens Advice website
Most people can’t make new claims for these benefits as they’re being replaced by Universal Credit.
Are you already claiming one of these benefits and you have savings worth £6,000 or more? Then you’ll need to let the office that pays your benefit know.
If you suddenly have a windfall of £16,000 or more this can also affect your right to claim these benefits.
How savings affect Pension Credit
There is no upper capital limit for Pension Credit. But you might get a reduced amount if you have more than £10,000 of capital.
For every £500, or part of £500, of capital over £10,000 – you’ll be treated as having an income of £1 a week. This is added to any other income you have, such as a pension.
Find out more in our guide Pension Credit
Find out more about savings rules for benefits if you’re over 60 on the entitledto website
What counts as savings?
Savings are counted as any money you can get hold of relatively easily, or financial products that can be sold on. These include:
- cash and money in bank or building society accounts, including current accounts that don’t pay interest
- National Savings & Investments savings accounts, and Premium Bonds
- stocks and shares
- property, which isn’t your main home.
Under certain circumstances, other properties you own but don’t live in might be disregarded.
Find out more on the entitledto website
Other savings and capital are disregarded, including:
- personal possessions, such as jewellery, furniture or a car
- value of any pre-paid funeral plans
- life insurance policies that haven't been cashed in
- insurance claims will be ignored for six months if used to replace or repair.
The Department for Work and Pensions (DWP) are responsible for determining what savings are included or excluded in a benefits claim. This can be based on your personal circumstances.
Find out more about eligibility and claiming on the GOV.UK website
If you’re not happy with a benefits decision, you have the right to appeal.
Find out more about appealing on the GOV.UK website
The Universal Credit helpline
If you need help with your claim, call the Universal Credit helpline free on:
Telephone: 0800 328 5644
Textphone: 0800 328 1344
8am to 6pm, Monday to Friday (closed on bank and public holidays). Calls are free.
The helpline is currently very busy because of the coronavirus crisis. So you might prefer to use your online account if you can. Sign in on the GOV.UK website
Will my redundancy pay or other lump-sum payment affect my benefits?
Redundancy pay
If you get redundancy pay, this will be treated as savings for any means-tested benefits you claim.
Bear in mind that not all benefits are means tested. If you’ve lost your job, the main benefit you can claim is new style Jobseeker’s Allowance – and this isn’t affected by your savings.
Find out more in our guide Benefits and tax credits when you’ve lost your job
Compensation payouts
Compensation is treated as savings for any means-tested benefits you claim. You need to tell the office that pays your benefit as soon as you get your compensation payout.
When you claim compensation for an accident, injury or disease that wasn’t your fault, the organisation you’re claiming from must tell the Department for Work and Pensions (DWP).
If you’ve been getting benefits because of the accident, the organisation might have to pay back to the amount you’ve had in benefit to the DWP. This might be deducted from your payout.
Find out more about benefits and compensation on the GOV.UK website
Deprivation of assets
You’re not allowed to intentionally reduce your assets or savings to increase the amount you get in benefits. The DWP calls this deprivation of assets.
Deprivation of assets can include:
- giving away money
- transferring ownership of a property
- buying possessions that are excluded from means testing, for example cars and jewellery.
If you've done any of these things before making a claim for benefits, the DWP will look at when you got rid of your savings and assets.
The DWP, or your local council, will look at the evidence to decide if they consider it to be deliberate.
If, at the time, you wouldn’t have been able to predict needing benefits, it might not count as deprivation of assets.
You might be asked to provide paperwork and receipts to back up the date, and the reasons for getting rid of savings or assets.
If it’s decided you have deliberately deprived yourself of savings or assets, you’ll be treated as if you still had them. This is called notional capital.
The notional capital will be added to the assets and savings you do have. This will affect the amount you’ll get in benefits.
Find out more about deprivation of assets and notional capital on the entitledto website
Backdated lump sum payments from DWP
If your benefits have been underpaid, you could be entitled to a back payment from the DWP.
This might involve a substantial lump sum payment. This could push you over the savings limits for means-tested benefits, including:
- income-based Jobseeker’s Allowance
- income-related Employment and Support Allowance
- Income Support
- Universal Credit
- Housing Benefit
- Pension Credit.
In some cases, this payment isn’t counted as savings for one year, and won’t affect your income-related or means-tested benefits during this time.
However, where benefits have been underpaid because of an error, any payments over £5,000 can be disregarded for the length of the claim or until the award ends. This could be an official error or on a point of law
PIP mobility component and mental health
If you’re unable, or find it difficult, to plan or make a journey due to mental health conditions, you’re entitled to the Personal Independence Payment (PIP) mobility component.
If you're already getting PIP and think you might benefit from this, you don’t need to do anything. The DWP is currently reviewing all PIP claims and they'll contact you direct.
If you’ve already asked for your PIP award to be reviewed, simply continue with your request.
Claims will be backdated to 28 November 2016.
ESA underpayments
Around 70,000 people have been underpaid Employment and Support Allowance after transferring from older benefits, including Incapacity Benefit.
The people most affected are approximately the 20,000 who were entitled to the ‘severe disability premium’ and were not paid it. In some cases, people might be owed up to £20,000.
The DWP is now making backdated payments to affected customers. Payments will be made going back to the date of the original claim.
If you think you might be owed compensation, you don’t need to do anything - DWP will contact you.
If you're getting means tested benefits, any arrears of benefit you're owed under £5,000 are disregarded as capital for 52 weeks from the date they are paid.
If your payment is £5,000 or more, it will be disregarded for 52 weeks or until your benefit award ends, whichever is longer.
These rules also apply if you move onto Universal Credit (UC) and are owed arrears relating to legacy income-related benefit entitlement.