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.

How notional capital affects Universal Credit

Deprivation of capital is when you knowingly reduce or transfer elsewhere your savings or other capital to get, or increase your award of Universal Credit. This may be before making a claim or during an existing claim.
If your capital has reduced significantly you may be asked for evidence that you no longer have it. This may include:
documents to show that ownership of property has been transferred to another person
deeds to show that money has been given to another person in trust, settlement or as a gift
receipts to show what your cash or savings has been spent on
An Advisor will contact you if you need to send more evidence.
The DWP will look at the evidence to decide if you have reduced your savings or other capital, by how much and why you did this. You will be treated as still having the capital if it is decided that you did this to get, or increase your award of Universal Credit. This is called notional capital.
When working out the Universal Credit you may get, notional capital is added to any actual capital that you may have.

I imagine OP that if you have a saving account, based on the above they will look into that and ask you where your 30k went. Seeing as overpaying a mortgage isn't essential, it may well be treated as notional capital effecting your claim and likely reducing it to 0 especially since you won't have the housing element.

You are projecting massively. The OP has just pointed out some of the hypocrisies in the system. I don’t see her taking about people “less worthy”.

I don't think keeping 30K savings towards rather abstract future home is wise. I would pay off some of the mortgage regardless of the benefits thresholds. More equity will help you with upsizing more than keeping all these savings in the bank, I think. You just need to check how much you can overpay without penalty.

I'd say you are looking at this the wrong way round. It wasn't sensible to save £30k rather than making bigger contributions to your mortgage. If you redress that, top up your mortgage by the sensible and appropriate amount, then the other questions take care of themselves.

Your benefits should be assessed on your income, which is low while child care wipes out any wage you might earn. When you go back to work, that all balances out and you will be off benefits again.

Using savings is what most people do to get by in lean times. I can't imagine sitting on a pot of £30k and then deciding the Govt should bail me out.

Why do people think it's not fair to have to live off savings? That's what they're for. I spent most of my savings during the pandemic because in my sector there was no work and I'm self employed and got no government help. It was disappointing but it is what it is.

Also as nice as it is to put by for a new house I would use your savings first for bills etc. Then claim benefits when you have depleted them enough to qualify. Or you could work around your husband and keep some of the savings. 🤷‍♀️

If I had to choose between struggling but having savings and a mortgage (my situation now, same as yours) and the time I was on universal credit I would choose the ‘struggle’ every damn time.

I think it should only take ONE meeting with a ‘job coach’ to make you change your mind op. You will have to (unless you are receiving carer’s allowance) meet whenever they want you to, sometimes multiple times a week.

And it doesn’t matter if you think you will be the ‘good’ type of benefit claimant. They will sneer at and treat you like absolute shit just the same, not worth the air you are breathing.

I really don’t begrudge anyone on benefits their increase (I’m assuming that it what has triggered this latest wave of resentful bashing threads).

The anger, as usual, is being pointed downwards, in the wrong direction.

It’s not 16k it’s 6k onwards that affects your award

Not fair to live off your own money? Hmm.

If you're allowed then do it I say 💐

With the rise in interest rates I don’t think it’s as clear cut as that. Paying down a mortgage with a higher interest rate than you are getting with savings is sensible.

Hmm are you sure?

I had to claim UC last year, mortgage, two school age children and a household income of £24,500. I got £154 a month.

You will be expected to job search if you’re not in work (37 hours a week and document it), and have to have regular meetings with a job coach.

YANBU

@GoonerGirl5231 but if she’d paid her mortgage off with it 3 years ago, she would now be able to claim and therefore be better off.

It’s less with children under 3

www.moneyhelper.org.uk/en/benefits/problems-with-benefits/how-do-savings-and-lump-sum-pay-outs-affect-benefits

If you scroll down to deprivation of assets, I think this shows you can’t do it. It doesn’t specifically mention paying a lump sum off your mortgage, but the people who look into it aren’t stupid so I think it’d be clear why you had done it.

I agree as we have two children, with a mortgage and earn less than £22k between us and get similar to you. I reckon she would get £100ish.

I think you are allowed to do this for a house. Try asking a few questions on the Martin Lewis MSE forum, they seem to be pretty knowledgeable there. And I don't blame you/flame you, because paying interest on a large mortgage is insane when the capital is there to reduce it. But act quickly whatever you do.

Benefits aside, it would be MUCH more wise to overpay the mortgage than keep the savings as cash. With a 10% rate of inflation, your 30k cash is losing value every day, whereas if you paid into the mortgage not only are you saving yourself future payments at god knows what rate - but you are also investing into your property, and property prices generally go up faster than inflation if the last few decades are anything to go by.

so would the same apply if you splashed £25K on a car? Or a holiday? And then pleaded poverty?

OP if you also earn 24k, you would he able to claim UC for childcare, make use of the tax free childcare for you and dh, and put yourself in a position where your income could grow over time (promotions etc).

That would be deprivation of capital.

@IsedtoK am I misunderstanding you, or are you saying £30k is 'such a small amount of savings'??