How capital or savings might affect means tested benefits during Coronavirus?
Here at Renaissance Legal we are being asked a lot of questions about how the current Coronavirus (Covid-19) situation is affecting benefits, and you may have seen our recent blog about this – click here.
Of particular concern at the moment is the issue of how capital or savings might affect a person’s means tested benefits. During this period of lockdown, when people are not going out or are not spending money in their usual way, there is always the possibility that their level of savings might increase to the point where their benefits are affected or even stopped.
We thought it might be timely to explain the general principles of how the capital / savings rules work for people under pension age and how they might be interpreted by the DWP in the current Covid-19 situation.
Here are some basic golden rules:
- By ‘capital’ or ‘savings’ I mean anything at all in your bank, building society, post office, sock drawer, shares, premium bonds and so on. If it can be legally accessed, it generally counts. I am going to use the term ‘capital’, as that is what is used in the regulations.
- Only means tested benefits are affected by capital rules, such as Universal Credit, Housing Benefit, and income-related Employment and Support Allowance.
- Personal Independence Payment, Disability Living Allowance and Carers Allowance are unaffected by capital as they are not means tested.
- If you are under pension age, and getting a means tested benefit, you are legally obliged to notify the DWP if your capital goes over £6000.
- This is because your means tested benefits (under pension age only) are reduced if you have capital over £6000, and stop altogether if your capital goes over £16,000.
A common scenario for many Renaissance families is that the disabled person gets a relatively high amount of means tested benefits, and may also get PIP or DLA. In normal times, they will need this income for everyday living, care and social costs. . During lockdown, they may not be going out as much or spending so much. This means that the amount of capital they have can slowly creep up. If the capital level isn’t closely monitored, then the claimant, or whoever has the responsibility for managing their claim, can find that they are in breach of the capital rules and that the means tested benefits are being overpaid.
Our guidance on this aspect of the problem is that the level of capital must be looked at regularly, and preferably kept below £6000 in order to minimise complications and overpayment recovery.
We always recommend keeping the disabled person’s money in as few accounts as possible, with online access to monitor how much is in them. Check the combined balance every month if you know you are getting close to the threshold, because as soon as the total exceeds £6000, the disabled person will lose £1 PER WEEK of their main means tested benefit for every £250 (or part of £250) they have above £6000.
Here is an example: Ms A is 27, lives at home and gets income-related ESA (Support Group) and standard rates of daily living and mobility PIP. She has three bank/building society accounts totalling £5500 and £500 in an ISA.
The next week, she gets her normal benefits: two weeks’ ESA (worth £227.10) and a four-weekly payment of PIP (worth £333.20). This totals £560.30.This means she is now, technically, £560.30 over the £6000 threshold, and so therefore should have a £3 per week reduction in her ESA. Either she or her appointee / attorney should notify the DWP of this, as she is being overpaid.
In practice, especially as many DWP staff are being moved to the frontline of administering Universal Credit, these minor infringements will not be noticed or acted upon, but it remains the responsibility of the claimant, or their appointee/ attorney, to notify the DWP. That requirement has NOT changed in the current pandemic.
Spending your benefits is obviously what they are there for – to keep you fed, clothed, housed, and to enable you to fund your needs. PIP and DLA are designed to be spent on the extra costs of living with a disability, such as care and transport costs.
However, the DWP is always alert to cases where there has been some suspected ‘deprivation’ of capital, and many of you are worrying about whether suddenly spending an excess of capital, to keep below the thresholds, will be viewed as deprivation of capital.
The short answer is – it all depends on your intention!
The rules say that if you knowingly ‘deprive’ yourself of capital (by spending it or giving it away) in order to keep or increase the amount of means tested benefit you receive, then you can be treated as still being in possession of the capital (this is called the notional capital rule). This will not apply if you reduce or pay off a debt, or buy goods and services which are considered reasonable in your circumstances. You basically may have to show that there were good reasons for spending the capital, and that getting more in means-tested benefit was not a significant motive behind the expenditure.
So, if you find yourself with an excess of capital then, then proceed carefully. Only purchase reasonable goods or services, keep all receipts, and NEVER spend the money with the intention of gaining more means tested benefits. Then it may be tricky for the DWP to prove that you have knowingly deprived yourself of capital.
We think that it should be viewed by the DWP as perfectly reasonable for capital to be spent on goods and services which will improve the disabled person’s life during this period of lockdown (and the aftermath). This could be improving your technology for instance, or buying subscriptions to online activities or retail outlets. You might be eating more meals at home as you are not going to your normal day centre or doing usual activities , and so the expenditure on food might justifiably increase. You will all have your own ideas about what is reasonable – for example, many Renaissance clients are very talented artists, and an increase in expenditure on art materials would be easy to justify.
As with all matters related to benefits, our guidance is always to know your facts, be organised and keep full records, simplify your financial arrangements, and be aware of your legal responsibilities regarding notification.
If we can help with any benefits problems or queries, then please get in touch.