Savings and means-tested benefits

The amount of savings you and your partner have will affect the money you receive from certain benefits. These benefits are called means-tested. You can have savings and claim means-tested benefits, but you must stay within Department for Work and Pensions (DWP) limits.

Means-tested benefits

An increase in savings can affect how much you receive in benefits. This could be a big amount, such as an inheritance, or because you are not spending as much as you receive.

Benefits affected by savings are:

  • Income-based Jobseeker’s Allowance

  • Income-related Employment and Support Allowance

  • Income Support

  • Pension Credit

  • Tax Credits (Child Tax Credit and Working Tax Credit)

  • Housing Benefit

  • Council Tax Support

  • Social Fund (Sure Start Maternity Grant, Funeral Payment, Cold Weather Payment)

  • Universal Credit

Use a benefits calculator to find out which means-tested benefits you’re entitled to.

How your benefits are means-tested (Age UK)

How savings affect means-tested benefits

Savings include:

  • cash
  • money in any bank or building society account
  • National Savings and Investments accounts such as Premium Bonds or Income Bonds
  • stocks, bonds and ISAs
  • property that is not your main home

Savings do not include:

  • work or private pensions (if not cashed in)
  • jewellery, antiques or family heirlooms
  • your car or business
  • life insurance
  • compensation payments held for less than 1 year your home

Savings limit

The amount you have in savings can affect the amount you receive in benefits payments. For all or part of every £250 over £6,000 you will lose some of your benefit payment.

Amount of savings (examples)Reduction in payment per week (all benefits excluding Universal Credit)

Reduction on in payment per month for Universal Credit 

£6,000 or lessEligible for the full amountEligible for the full amount
Between £6,001 to £6,250£1 £4.35
£7,500£6 £26.10
£10,800£20 £87
£16,200£41 £178.35
£16,001 and aboveNot eligible for benefits Not eligible for Universal Credit

Find out more from the Money Advice Service’s How do savings and lump sum pay-outs affect benefits.

Warning Avoid debt

Do not spend any extra money before you get it, such as using a credit or store card.

If you do, the DWP might consider it as savings, even if you do not receive the money.

If you inherit £10,000, you cannot give away £4,000 to family or friends, or spend the money on a luxury holiday, to bring your savings down to the £6,000 limit. DWP could consider money spent on non-essential items as ‘notional income’ and still use it to reduce your benefit payments.

Warning Selling your home

If you’ve sold your house, you have 26 weeks to buy a new one before the DWP will consider money from the sale as savings.

The DWP will count money left over from the sale of your home in assessing your benefits.

Using your savings

There are many reasons why your savings might increase. It could be a big amount from a compensation payment or inheritance in the form of property or cash. You could move in with someone who also has savings. Shares or bonds go up in value and pay dividends. You might have a private or work pension, or you’re receiving more in benefits than you’re spending. Whatever the reason, once you or your partner’s savings reach £6,000 they will affect your benefits.

If you try and reduce your savings by giving money to your children or grandchildren, the DWP may still consider this money as part of your savings. If you spend it they’ll want to see that you are spending wisely and on essential items. They’ll also want to see receipts and bank statements.

You could:

  • think about buying a new warm coat, thicker curtains, an upgrade to your central heating or installing double glazing
  • carry out essential repairs or adaptations to your home
  • buy a modest new car
  • move the money to a trust fund, but only if you already have one set up
  • consult an Independent Financial Advisor (IFA) with knowledge of welfare benefits who may charge you for advice

Help to save

If you want to save while on benefits, the government has introduced Help to Save. This is a new account for those on Working Tax Credit and Universal Credit.

Last reviewed by Scope on: 12/12/2018

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