The government plans to set the capital limit under Universal Credit at £16,000 (both for single claimants and couples making a joint claim).
This means that households with savings greater than £16,000 will not be eligible to claim any Universal Credit. The government argues that this is necessary to focus Universal Credit support on those with insufficient resources to meet their needs, while controlling costs. Critics argue that this creates a disincentive to save and penalising, for example,those saving for a deposit to buy their own home.
According to the Family Resources Survey (FRS), fewer than one in five families have savings above £16,000 and the government will allow a 26 week period for those transitioning onto Universal Credit with higher savings (~100,000 tax credit households) and for those receiving a lump sum payment (i.e. redundancy / inheritance) that pushes their savings above this limit.
Capital in excess of £6,000 will reduce the Universal Credit award by £1 per week for each complete £250 over this £6,000 floor. Capital under £6,000 will be disregarded. These rules will apply to all elements of Universal Credit.
‘Capital’ will include savings, stocks and shares, property and trusts. It will not include the value of the main residence; business assets; certain other compensation payments; personal pension schemes and retirement annuity contracts.
Further information from the DWP is available here.