To pay myself extended maternity leave and then claim UC?

[ANightingaleSang]

I am a single mum with a 7 month old.
Ex military, worked my whole life and very keen to get back into work. Unfortunately I just can't afford childcare. I have no family support so would have to use nursery or a child minder (most likely option). A full time childminder costs upwards of £1300 per month in my area, nursery even more. I have been receiving maternity allowance which is approx £700 per month, but this ends in November and after that I will have no income).

I am expecting to receive a settlement payment soon (not sure when, nor how much, but this will most likely bring my savings to the £20k mark).

I am retraining and will be starting work at a lower grade (think £30k for the first 18 months before tax). I will be very stretched to pay rent, bills and childcare, let alone food. I'm trying to figure out the best way to approach this.

The best solution I can think of is this.
In November start using my savings (which are around £10k currently) and pay myself a "wage" to extend my maternity leave. After receiving the settlement, continue to do this for a year.

Once DD is eligible for free childcare hours (at that point my savings will be below £16k so I would be eligible for UC top up/reduction on childcare) put DD into nursery and return to work.

During the extended maternity leave I could continue to study so that my starting pay would be higher.

Does this sound like a sensible/reasonable plan? I'm sure I'm looking through rose tinted glasses. What's the catch? What could go wrong. Any other suggestions.

Please be gentle, I'm trying to come up with a solution that works and am open to anything at this point.

I think it sounds fair enough.

You are only allowed under £5000 in savings before it effects your eligibility for benefits. The reduction of benefits is on a sliding scale until you reach £16000 at which point you loose all eligibility.
You will be expected to top up your benefits from your savings by an amount/rate that the government decide is appropriate anymore and you will be considered to have depreciated your savings and you won't get full benefits.
Please look into this very carefully and only use your savings at a permissable rate

What’s your suggestion, then?

Have you accounted for the 15 hours of free childcare from 9 months old and the £2000 annually from tax free childcare in the £1300 monthly costs you mention? If not, it's worth checking as you're probably eligible for both once you're back in work www.gov.uk/apply-free-childcare-if-youre-working

Its sounds like OP has had some significant trauma so just starting working may not be an option for her right now.
I pay shit loads of tax and have never claimed any benefits so I have little time for people who want to "fiddle the benefits system" but I am happy that there is a safety net for people who need a bit of help temporarily to get back on their feet

The 85% is not 85% of any fees. Fees are capped and the highest amount that UC will pay is £1014 per month for 1 child. So it's up to 85% or £1014 whichever is the lower amount so if your childcare costs are £1300 85% would be £1105 which is above the maximum uc will pay so you'd only get the £1014 which is less than 85%.
I'm not judging you BTW but just want you to know all the facts so you can make the correct choice for you and your daughter.

Surely a settlement is either to redress a past loss (compensation) or to compensate someone for an upcoming period without income (e.g. in case of redundancy). Either way, it's meant to put someone back in the financial position s/he would have been in (rather than impoverished). Therefore, living off this settlement for a period - especially in order to retrain - seems entirely reasonable and I'm not sure why you're getting some of the "sponging" reactions!

It’s actually 6000 not 5000
and then on a sliding scale up to 16000

from my memory it’s something like 4.50 per 250 over 6k
rough maximum reduction of having 16k in savings is around 170 per month take on UC amount

In theory it sounds doable but the amount of UC you receive may be much less than you anticipate depending on your circumstances.

Savings are deducted from your total UC award at a rate of £4.35 for every £250 you have over £6k. And your UC ends completely if you have more than £16k which you know. That means a monthly deduction of roughly £170 if you have just under £16k.

A salary of £30k would be around £2090 per month after tax and NI, but not including pension deductions because you didn't say if you would be paying any, but assuming it's £2090 that would be another deduction of either around £780 if you have no housing element eg you have a mortgage or a deduction of around £925 if you rent. You will get housing element added to your award if you rent (the amount depends on whether it's a private or council property and bedroom entitlement etc) but you won't get anything for a mortgage.

Childcare will only be paid up to a maximum of £1014 for one child.

No elements are protected so they are all subject to deductions for wages and savings. They will add all your elements together to get your award total then reduce the whole amount.

But there shouldn't technically be anything wrong with using your savings to live off then claiming UC. They will want to enquire about what you used the money for so be prepared for that and keep a paper trail!

More info here
https://www.gov.uk/universal-credit

For example. If you're over 25, have no housing element, get the maximum of £1014 childcare costs, have just under £16k in savings and take home £2090 per month, your UC award would be roughly £1695 but would end up being roughly £745 after deductions for wages and savings.

Thank you for the helpful comments. @Hoardasurass I wasn't aware of this, thank you. That discount would enable me to return to work, without it I would really struggle. So useful to know.
@nextdoornightmares that is actually significantly more than I anticipated. The only thing I really need is the childcare discount, I wouldn't anticipate needing to be on UC very long. Just enough to cover the first year as I will be starting a lower paid job where I anticipate fast progression
@RiotAndAlarum you are 100% correct, in theory. Unfortunately, I don't know how much or when this will be paid, so I am trying not to factor it into my plans. It could be 5k or 50k. Obviously if it was a significant amount I would use it to pay for childcare without needing UC. The amount I will receive will not even come close to the full amount I have actually lost and doesn't factor in speculative loss of earnings. This means that I could not claim for future loss of earnings or childcare related expenses, which are the big ones.
@Hoppinggreen thank you for your understanding and kind words. I was medically discharged from the military. I lost my home and job and (the hardest thing to accept) future. I started retraining and during that process, whilst at my most vulnerable, was abused by a man (DDs biological father). He took most of my money (apart from a bank account I had hidden from him), I was forced to flee my home whilst 20 weeks pregnant. I am also living with medical conditions (which I have never claimed benefits for despite being eligible - just a pride thing). Above all, taking the year off to complete my degree would mean that when I re-enter the workforce I would take home significantly more. It seems a logical option as if I were to start work now, I would not be able to save anything and would most likely need to claim benefits for longer.

I had no plans to become pregnant. All the money I had was taken from me (except for a small amount I kept hidden). I was forced to flee my home. Biological father has been fired for sexually abusing girls for the past decade, so would receive a tuppence as CMS if I were to apply, but doing so would put both me and my DD at risk. I am trying to make the best of a fucking terrible situation.

If I were trying to fiddle the system I would be on benefits now 🙄 I am just trying to get back into work. If I were to start working, childcare, wrap around care and travel costs would take up nearly my entire salary. I wouldn't be able to save and would be on benefits longer than living off my savings while studying, entering the workforce at a higher salary, claiming UC for a short time whilst I get back on my feet. This would be the scenario where I would claim the least amount of benefits overall. If you have any better suggestions, please let me know.

Your plan sounds very very sensible. Supporting yourself financially, being there for your child and engaging in training/education. It's a great plan, I'd do it!

This is deprevation of capital and it'll still be counted as the OPs savings.

Yeah, this does sound dodgy imo

How aggressive. If not intended, time it down. If intended, tone it down.

I had 3 children in a marriage and he buggered off. I had INTENDED to pay for my babies within a marriage. Doesn't always work out that way.

She's not fiddling anything. What she is proposing is perfectly fine. Living off savings rather than claiming benefits is expected if you have them!

notacooldad
What was your original plan to pay for a baby before you got pregnant?
Is the baby's dad not going to contribute? Why is it all on you to support the baby?
@StMarieforme
How aggressive. If not intended, time it down. If intended, tone it down.
I had 3 children in a marriage and he buggered off. I had INTENDED to pay for my babies within a marriage. Doesn't always work out that way

Don't be ridiculous. It was a direct question and it is a fair question to wonder why it should be on OP's shoulders to deal with this situation all alone.

I had no plans to become pregnant. All the money I had was taken from me (except for a small amount I kept hidden). I was forced to flee my home. Biological father has been fired for sexually abusing girls for the past decade, so would receive a tuppence as CMS if I were to apply, but doing so would put both me and my DD at risk. I am trying to make the best of a fucking terrible situation
I am really sorry to hear that you are going through this. Is there a woman's charity that can help you? Have you got support in real life?