PPI Refund and Income Based Benefits

[madam6789]

I have just successfully had my PPI refunded after I put a claim in. I have been awarded £8,500 and I am worrying sick now about my benefits not thinking much about it when I put the claim in and didnt expect to win.

 

From my understanding and I would like some clarification on this...PPI is treated as capital.

 

When I declare this refund to the DWP it would affect my benefits.

 

Is this correct anything over £6,000 you must declare as capital as it is taken into consideration. Anything between £6,000 and £16,000. For every £250 over £6,000 is treated as a £1 deduction each week.

 

So for £8,500 it is 10 X £1 so my deduction would be £10.00 per week.

 

What happens if I end up spending £2,500 on something would the deduction still continue for the rest of the year.

 

I am really confused about this........

[martin2006]

Im not fantastic in this area but i do have some experience with it.

 

You are correct in your assumptions re the 6k savings limit and the subsequent assumption of the £1 per week deductions for every £250 over 6k.

 

This is all true for means tested benefits only.

 

Moving onto you spending £2.5k to get down to 6k limit.

 

If the expense was necessary than you may be ok but if its jjust frittered away to reduce the balance then it will be classed as deliberate capital deprivation and you will still be sanctioned for it as though you hadnt spent the money.

 

More knowledgeable will be along soon to advise further

[madam6789]

But what would frittering it way mean?

 

I do have some unsecure debts that I would like to pay off using this money but I have read unless they are secure DWP will not treat them as essential???

 

I am confused what if anything I can actually spend from the money which was missold to me on what?

[madam6789]

Also I have some house repairs also that I would like to do

[martin2006]

Essential house repairs would no doubt be ok but i am all too aware this is a very complicated area.

 

Frittering it away would mean spending on non essential items but there is little information available as to what constitutes non essential spending.

[madam6789]

Anyone else with some advice please?

[dx100uk]

As an aside

Don't forget to reclaim the 20% tax you lost on the refund

[antone]

Right.

You are correct that an £8500 PPI windfall will be treated as capital and will result in a £1 per week deduction from your benefits for each £250 (or part thereof) capital that you have.

This applies to working age benefits

- if you are receiving State Pension Credit please let us know as the rules are a bit different.

 

If you spend the money, or some of it, the DWP will consider whether or not "Deprivation of capital" rules should be applied.

 

 

If you are deemed to have deprived yourself of capital, you will be treated as still having the money when your benefit entitlement is calculated.

 

Deprivation of capital is a complex area, and each case is decided on its merits.

 

 

For that reason it's quite difficult to say for sure what you can and can't spend the money on.

Things that will generally be seen as OK would be overdue bills or debts,

essential repairs to your house,

a replacement for a car that is falling to bits

(or the purchase of a reasonable car if you don't have one but need one),

replacement of essential household furnishings or other household items, and so on.

 

For people of working age,

you can also use the money to pay debts as they fall due,

but paying off unsecured debt early would generally be seen as deprivation

(note: this does not apply to recipients of State Pension Credit, who are able to pay off debts early).

 

 

The DWP would also be likely to regard obvious extravagance as deprivation

- expensive cars, holidays and so on.

 

 

The matter is further complicated because it's not enough to merely spend the money

- to be seen as depriving yourself of capital you have to have done so

with the intention of increasing your entitlement to benefit.

 

OK, so

I realise that's all a bit vague, and I do apologise for that.

 

 

But the problem is that we can't exactly say what will or will not be OK to spend your money on,

because there isn't a list of "acceptable" things when it comes to deprivation cases.

 

 

If you're unsure, you could call or write to the DWP and tell them what you're planning to do with the money.

 

 

This is useful because if you do that,

and they tell you that it's OK

and will not be seen as deprivation,

and you then do exactly what you said you were going to do with the money,

then they can't change their minds and argue for deprivation later.

[neword]

Well having talked to several people on this matter wrt my own situation, spending money to lower your savings below a certain level is ok if what you are spending on is deemed "essential".

 

WRT "Essential" there appears to be some very vague guidelines for this but I do believe that items such as :-

 

New Cooker, Washing machine, possibly new mattress, repairs to your current vehicle, paying off some debts may all be OK (but don't quote me on this).

[Nystagmite]

If you receive council tax support, the rules regarding savings might be different. You need to check with your local council.

[trebormoinet]

If it were me I would take a statement to the DWP each time my savings decreased by £250 or more to have my deductions amended, I would use the money on items which are covered by budgeting loans as a guide as to what might be considered essential items and once my savings have gone below the threshold then as far as I know, it would not be an issue any more.