Universal Credit: Advisers Warned About the “£4.35 Rule” and Savings Deductions
Advisers are being urged to ensure Universal Credit claimants understand how savings and other factors can impact their benefit payments, particularly in light of the so-called “£4.35 rule.”
What is the “£4.35 Rule”?
· The Department for Work and Pensions (DWP) applies a “tariff income” to Universal Credit (UC) claimants who have savings or investments between £6,000 and £16,000.
· For every £250 (or part thereof) above £6,000, the DWP deducts £4.35 per month from the claimant’s UC award. This means even a small amount over the threshold can result in a reduction.
Example:
A claimant with £6,500 in savings would see a deduction of £8.70 per month (£4.35 for each £250 over £6,000).
Other Reasons for Deductions
UC payments may also be reduced for several other reasons, including:
· Repayment of advances or overpayments.
· Exceeding the benefit cap.
· Deductions for debts such as Council Tax, court fines, utilities, or Child Maintenance.
· Direct payments for gas or electricity bills.
· Income from paid work, pensions, or certain other benefits.
What Doesn’t Count as Savings?
Not all assets are counted towards the savings threshold. Exclusions include:
· Personal possessions.
· Bereavement Support Payments.
· Proceeds from selling a home (in some circumstances).
· Money set aside for tax if self-employed.
· Personal injury or illness compensation.
· Certain welfare support and special compensation schemes.
Adviser Action Points
· Check Savings: Always ask claimants about their current savings and investments, including recent changes.
· Clarify Deductions: Explain all possible reasons for deductions to avoid surprises in payment amounts.
· Signpost Official Guidance: Refer claimants to the official DWP guidance on savings and deductions for the most up-to-date information.
· Review Exclusions: Ensure claimants are aware of what does and does not count towards the savings threshold.
· Further Information: For more details, visit the https://www.gov.uk/guidance/find-out-about-money-taken-off-your-universal-credit-payment.