This Morning: Martin Lewis discusses Help to Save scheme
Universal Credit claims have surged this year; on October 8, 2020, 5.7 million people were on Universal Credit. This was up two percent from September 10, 2020, official Department for Work and Pensions (DWP) statistics show.
On October 8, 2020, compared with March 12, 2020, there had been an increase of 2.7 million people (90 percent) on Universal Credit.
Clearly, during the unprecedented crisis, many have needed to turn to the benefit for support.
However, eligibility – and the amount a person can get – is affected by savings.
Among the eligibility rules, a person and their partner must have £16,000 or less in savings between them.
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Furthermore, the amount a person gets may be reduced depending on their savings.
It’s something which Kay Ingram, Director of Public Policy at national financial planning group LEBC, has highlighted recently.
In a recent alert, she addressed the topic of protecting eligibility to Universal Credit if an individual has savings.
The chartered financial planner said: “With the Office for Budget Responsibility forecasting a rise in unemployment in the second half of next year to 7.5 percent of the working population, many may be forced to seek Universal Credit for the first time.
“Those who have savings may see their entitlement to the benefit reduced; savings under £6,000 are disregarded, but between this boundary and £16,000, each £250 of savings reduces the credit by £4.35 per month.
“Those with savings may however still be eligible to claim.”
For those who do qualify for Universal Credit but have savings, Ms Ingram had some suggestions to protect eligibility.
First of all, she explained some types of savings – specifically money in pension pots – may not count for the means-test.
“Money in pension pots is not counted for the Universal Credit means-test, unless the claimant is over age 66, but if money is withdrawn it will count towards the means-test,” she said.
However, other forms of saving do count.
Ms Ingram commented: “Younger people saving for a house purchase deposit through a Lifetime ISA will see their savings count towards the means-test for Universal Credit.
“If these are drawn out, they will lose the 25 percent bonus added to the LISA by the Government on the amount withdrawn, so if possible, other savings should be spent first.”
The chartered financial planner also shared some insight into how Universal Credit claimants may be able to “rebuild” their savings in the future, should they have depleted this year.
This is via Help to Save, a type of savings account which is backed by the government.
Ms Ingram explained it may be some “Universal Credit claimants are eligible to start a Help to Save account, which can be maintained for up to four years after their Universal Credit claim ceases”.
She continued: “So, those able to get back into work may be able to rebuild their savings and the Help to Save scheme includes a 50 percent Government subsidy.
“Eligible claimants with household income of £604.56 per month or more may open an account.
“Maximum savings are £50 per month over four years, with a bonus of 50 percent of the highest balance paid after year two and year four.
“Access to these savings is permitted without losing the bonus.”
Considering the maximum monthly contributions, over the four year period, a total of £2,400 can be saved in the account.
As such, it’s possibly to get up to £1,200 as a tax-free bonus over this time.
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