Savings and income support

[Westie1]

Hi

I receive income support (as well as other benefits due to a spinal injury). I also have an endowment mortgage which I am looking to change to a repayment mortgage. This will result in me cashing in my endowment policy which will pay out £13500. I am going to replace my car, pay off a few debts and do some long overdue house improvements, all of which will reduce the ammount left to about 5 or 6 thousand. What I need to know is do I need to inform the benefits agency about this, and if so, what will happen? I will be spending the money within a week or 2 of receiving it.

Your advice will be very much appreciated.

Thank you

[Life-Goes-On]

Once you get the £13500 you will need to inform them as until it is under £6k your benefits will be cut.

 

Paying off debts etc could be seen as deprivation of capital, depends on the nature of debt/ spending

They can also look as you buying a car home improvements, depending on price and need.

 

Not reporting it could be seen a fraud.

[Nystagmite]

Paying off debts etc could be seen as deprivation of capital, depends on the nature of debt/ spending

 

If it's minimum repayments, it's fine. There's something about how if it's got to the stage where it's reached court and it must be paid off (ie, £1000 of unpaid council tax) that's reasonable too.

 

You need to keep receipts of everything you buy.

 

Any car / home improvement stuff needs to be seen as reasonable. This would depend on your disability too.

[Life-Goes-On]

I would have thought the OP would be investigated for spending 8 grand in a few days so that capital is under the limit that affects IS.

[Nystagmite]

I thought that too. There's nothing to stop anyone from doing that - you'd still be treated as having the capital. ("notional capital")

[Westie1]

Thanks all

 

I have decided to apply the endowment directly to the repayment mortgage, which is what the mortgage company wants me to do anyway. The endowment is assigned to them, but they are willing to release it if I insist. At least this way, the money (which was never going to be life-changing) will be assigned to its original purpose.

 

Thanks for the good advice, as always.

[Nystagmite]

That may still be seen as deprivation - unless it's minimum repayments.

[Life-Goes-On]

That may still be seen as deprivation - unless it's minimum repayments.

 

I agree.

 

As the OP was thinking of using money elsewhere, that would show that it doesn't have to go into a repayment mortgage, so deprivation could still apply.

 

When the policy is cashed in the OP has a duty to inform DWP.

[Westie1]

Good grief

It's probably going to be better to just leave the whole thing as it was. I don't think I can cope with the stress of explaining it all to the DSS. I think they will think I'm trying to fiddle them, which I'm not. I only started looking into this because my endowment is going to be about £15k short when the mortgage finishes in 9 yrs time, so I was looking to change the mortgage to a repayment one as there is no way I will be able to find the shortfall. As things stand we will need to sell the house and either live with our elderly parents or rent.

This has been quite a learning curve, thanks again for the advice, glad I didn't just go straight into it.

Edited June 21, 2011 by Westie1

[Life-Goes-On]

You have to be so careful

Example

You could buy a £20k car with HP

but if you borrowed it from a bank, and had access to money before you bought the car (say money was transferred into your account) then the £20k would be classed as capital.

Then buying the car could been seen as deprivation of capital.

[Westie1]

I can't thank you enough. I'm so relieved I asked before I actually did anything!

[Life-Goes-On]

I only found it out on this site, something I wouldn't have thought about.

 

Another thing I leant, if someone's parents were helping a person out by putting £50 per month in their bank to help pay bills, this could be classed as income and benefits could be reduced.

 

Being on IS is a minefield (I'm on it myself), so I'm trying to learn the different rules so I don't fall foul of them, and also share what I have learnt.

 

EDIT

People with much more experience than me do read the threads, and all comment if they don't agree with me.

[Nystagmite]

I think you should discuss this with DWP and ask for their response in writing. This way, if someone says you have disposed of capital in order to get benefits, you can show them the letter.