Sensible money management involves saving. How much money you have in the bank may affect your benefits, or even whether you can claim at all. Here’s a brief guide to how much you are allowed to have in savings without losing out on benefits.
Plot your path towards financial freedom with our Hero’s Journey tool!
MyWalletHero is here to help you learn about taking control of your money, whether that’s paying off debt, working towards a short-term money goal, or investing for your future.
This tool can help you understand the next steps on your journey – simply choose a goal that best describes your current interests to get started.
How much can you have in savings when claiming benefits?
Working-age single people and couples can have up to £6,000 in savings without any impact on the amount they receive in benefits.
Each £250 in savings above £6,000 counts as £4.35 a month in income. Therefore, this amount will be deducted from benefits.
Do you have more than £16,000 saved? You won’t be entitled to any of the following means-tested benefits:
- Universal Credit
- Council Tax Support
- Income Support
- Housing Benefit
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
Savings only affect tax credits if the interest is enough to count as income.
Pension credit and savings
Those entitled to Pension Credit can save up to £10,000 before any deductions. Each £500 over £10,000 in savings counts as £1 per week in income. So £1 per £500 is deducted. Therefore, pensioners can keep a little more for a rainy day.
What counts as savings when you’re on benefits?
Money doesn’t have to be in a savings account to affect how much you are allowed in benefits. All spare money in any current account counts as savings.
Claimants must declare any form of wealth from cash in a jam jar to stocks and shares, property other than your actual home and even Premium Bonds. The authorities may regard any asset that could provide an income as ‘savings’, not including your personal possessions.
What if my savings go up while I’m on benefits?
Inherited a large amount of money or property? Won the lottery? Then your savings may well increase beyond what is allowed on benefits. Not surprisingly, it is not permitted to gift windfalls to friends or family, or go on a spending spree, to deliberately reduce your capital.
Sensible and necessary purchases, like a new washing machine or a school trip, are reasonable ways to drop savings below the accountable threshold.
Can the DWP check my savings?
When applying for benefits, claimants must provide information about their income and savings. This includes bank statements.
A claimant who hides savings can be suspected of fraud, and the Department of Work and Pensions are permitted to investigate. It pays to be open and honest about savings, not least because the DWP can stop benefits if a claim is fraudulent.
It will be necessary to report any significant change in savings so that the DWP can recalculate.
Non-means-tested benefits: are savings allowed?
It doesn’t matter how much you have in savings, you can still get the full amount for some benefits. This is because they are not means tested. These benefits include:
- Attendance Allowance
- Personal Independence Payment
- Maternity Allowance
- Carers Allowance
- Child Benefit
Any government grant paid out due to the coronavirus restrictions will not be counted as savings for 52 weeks.
Help with benefits
Single parents can also get in touch with Gingerbread for advice on benefits.
Age UK has plenty of information on claiming benefits and managing finances for the older generation.
Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.