Can I use my savings to pay off some of my mortgage, and then claim benefits?

[BzzzzzOff]

Well aware that I'm about to get flamed for this, but I am fed up with being penalised for being responsible with my money.

DH and I have £30k in savings, which was intended to go towards our next house when the DC start school and I go back to work. Currently I am a SAHM with two toddlers, and DH is on a low income (£24k). We just about manage without needing to dip into our savings, but from next year they will start depleting pretty rapidly as our energy fix comes to an end.

I know how lucky we are to have plenty of savings, but I am really upset that if we'd been reckless and bought the bigger house before having children then we could be on benefits now and receiving all this extra help. As it is, we'll probably never be able upsize as our savings will be gone.

So, I think I'm going to stick £25k onto our mortgage, keeping £5k in the bank, and start claiming Universal Credit. Could this be considered deprivation of assets? Frankly don't care if this is "immoral", I am just wondering how careful I need to be in order to protect the savings I worked so hard for.

NO. you can't. That's called "Deprivation of capital".

Why can't you work? If 2 of you were working even in pretty low paid jobs you'd be bringing in a much better income. People space their children in order to afford childcare, did this never cross your mind? Clear your mortgage by all means but don't expect the state to prop you up. Benefits aren't a lifestyle choice, you make it sound like they are.

That’s bollocks - no-one NEEDS to have a child, of course it’s a choice! A need is food, water, clothes etc

Before you do this first check you are entitled to something.

www.uceplus.co.uk

they won’t pay towards your mortgage (which is silly as most rent payments are paying someone’s mortgage)
but your husband will have a work allowance so he can earn £544 before it then reduces the UC payment by 55p for every pound earned.
you will get money for each child and a couples payment so your claim might only be £1095per month- reduce this by your husbands pay at 24k he likely brings home maybe £1700 pm so 1700 - 544 = 1156 x0.55 = 655 deduct that from your entitlement and you’ll be about £550 up pm.

if you have savings over 16k you can’t claim but anything between 6-15999 is deducted off at 4.35 per £250
so for that 10k you will have 174 reduced off your entitlement - still £400 up and with the savings banked.

universal credit is there to help working families.
be mindful though that if your youngest is 1+ you will have to have meetings with a work coach to discuss you getting back to work. This is every 6 months until you hear is 3 then you will be expected to look for work (however because of your husbands earnings you will be in light touch and likely not need to do much this could change)

You need to reed the thread! Payment of debt is not considered deprivation of assets.

I do get where you are coming from about Person A/B, OP. The capital rule with UC is unfair in that it discourages people from saving for a deposit or towards children's HE costs. In fact, it almost rewards the spendthrift and those who can't budget at all. My ex partner inherited £30K two years ago and apparently has little left; if he lost his job tomorrow he would be fully eligible for all out of work benefits, mortgage interest help etc. No one from DWP would be breathing down his neck asking him why his garage was full of expensive toys, that's for sure.

As several posters have said, UC regulations specifically state that the paying off of debts (including a mortgage) is not considered deprivation of capital, so I think the op would be fine doing what she proposes. This is different to the rules around other income-related benefits like ESA, which would not have allowed this.

The poster saying that "A low income young family paying off a proportion of mortgage at a time of rocketing inflation rates would NEVER EVER be regarded as intentional deprivation... by DWP" is wrong because it would be with the old means-tested benefits. Using savings or a large windfall to buy a home outright would likely be considered okay whatever the benefit(s) being claimed. The term is deprivation of capital, not assets, so other posters saying that the op would be okay because she wouldn't be depriving herself of anything, just moving assets around, are also incorrect, but as stated this argument is not needed with UC because paying off debt is fine.

I would.

@Whoopy you can use savings to pay off mortgage, it's not counted as deprivation. Also some home improvements might not be if considered reasonable (maybe something like fixing the roof or a new boiler).

www.legislation.gov.uk/uksi/2013/376/regulation/50

To add- my partner is a sahd.
we decided to do this until my daughter starts school as I am the higher earner- if he worked it wouldn’t cover child care costs in our area and my wage is just enough to cover our monthly
expenditure.we claim UC for that extra support towards rent and other costs.
I have to be bringing home 2400pm before I no longer qualify for universal credit.
I don’t feel any shame in claiming, universal credit is there to support working families.
I encourage anyone who has children to check if they are able to claim something- I say with children because if you don’t have children you don’t get the work allowance so your whole earnings reduce your claim by 55p for every pound so most times you can’t claim.
but for working families even if you are both working check if you are entitled to anything.

other support for working parents is the tax free childcare for every 8 you put in the government pay £2. Up to 10k per year - you pay 8 they pay 2k.

you can even claim UC to help with childcare costs your entitlement might be zero once wages calculated but then once childcare added on you could get 85% of it back.
the government are making Uc work for working families take advantage of it while it’s there- and do what feels right for your family.

any chance you get to make an overpayment will greatly reduce your monthly outgoings which in these days in invaluable. People are right you can have some savings and would check how much you are allowed but you will still need enough to cover the six months till you can get the housing element

I would absolutely pay down my mortgage at this stage, probably you have made a mistake by not doing it sooner due to the 10% limit for overpayment each year. I would look to overpay by the 10% starting from now, with the good guidance already given by one or two posters on this thread. It is only now interest on savings are rising that it might make sense to keep money in savings (need to compare mortgage interest vs savings interest) but that's not a good use of your money right now. Paying down your mortgage reduces your outgoing payments per month- very sensible thing to do!

Having used your capital in a sensible manner, I would then consider what to do next. Either go on UC and all its crazy rules or think about p/t work.

A couple on 24k with 2 toddler DC would get more than £100. See a rough calculation below.

Standard allowance - £525.72 (assuming over 25)
Child element x2 - £244.58 x2
Total = £1014.88

Earnings minus work allowance
£1650 - £573 = £1077

Earnings x 0.55 = deduction
£1077 x 0.55 = £592.35

Total allowed - earnings deductions = total UC for month
£1014.88 - £592.35 = £422.53

medium.com/@rachel.ingleby/a-guide-to-deprivation-of-capital-income-a5f26cd9188c

This article suggests it’s not clear cut and the dwp decision makers have a fair amount of discretion making the decision.

You are unlikely to be getting more interest on your money than you are paying in interest on the mortgage .. if that money is to be part of your housing pot then it makes good sense to just pay off part of the mortgage - 5k still in savings will give you a buffer for broken washing machines etc .. that makes sense putting the universal credit issue to one side

@BzzzzzOff you are aware the Govt. has no money of its own aren't you? It's money is derived from tax payers.

Whether or not it's legal it's immoral. Would you Crowdfund on SM and ask people to contribute £400 a month to you so you can claim benefits? Because in effect that's what you're asking.

Go and ask that minimum wage earner who's busting their gut to stay afloat if they can pay their tax directly to you in order for you to claim benefits. <Shakes head in disgust>

Are you sure Person B is living the life of Riley on UC, new cars, big house etc?

Regardless of the benefit situation, as interest rates go up, it just makes sense to minimise your mortgage. Keeping savings ultimately destined for house purchase and paying for a higher than necessary mortgage makes no sense to me.

It really annoys me that Person B has their big house / new cars but is now eligible for benefits. But because I chose the sensible option, I will now lose my savings and never have the things that Person B recklessly splurged on.

I'm not putting this very well, but I am absolutely NOT saying that all/most people on benefits are reckless. Not at all. However, I really hate how the current system pays out for those who ARE reckless. I know a couple of Person B types and I'm afraid that yes, I do feel rather resentful about it.

Fascinating contradiction. Has it occurred to you there is a person C? All the middle and higher earners taxed to the hilt, fairly sure they feel they chose a “sensible” option too. They might be “rather resentful” and “really hate how the system pays out” for those who feel entitled to a larger house and to not have to work. Which also impacts indirectly through reduced production and lower GDP overall.

This epitomises one of the things wrong with the benefit system - those genuinely in need don’t get enough as the amount spread too thinly. It’s not just due to fraud, it’s due to an attitude of entitlement where it pays to not work by choice because someone else will foot the bill.

You’ve decided person B’s behaviour is deplorable but to me it’s not binary and what you’re suggesting is in a scale of not really being in need. I don’t doubt most people would do as you are and that’s why 20m+ are in receipt of benefits.

@SavingKitten Whether it is a considered deprivation of assets depends entirely on the UC benefit rules for the acceptable use of capital. In this case it would appear it is permissible - for paying off debt.

For many people, it's their lifestyle choices that led to them being on benefits. What the OP proposes is no worse (and in some ways better than) choosing to have children one can't support/in shit relationships/due to contraception fail/etc. and thus going on benefits.

Perfectly said.

I am person C. I don’t begrudge those on low wages needing extra help. I begrudge topping up company’s profits made artificially high by paying their workers bugger all and leaving their workers to rely on benefits, but not the workers who need help.

No I don't think that's acceptable actually.

As said, there is a household earnings threshold which, if met, will negate the normal looking for work guidelines based on a child's age.

IMO this would be an example of 'going on benefits as a lifestyle choice'. Not in the spirit of what UC should be for.