House deposits are being wiped out by Britain’s £16k benefits trap

17 comments

1. Does this Labour Government contradict itself? To paraphrase the American poet Walt Whitman, very well then, it contradicts itself.

   Sir Keir Starmer’s Government wants to encourage more people into work to cut the state’s benefits bill. They have also [pledged to increase homeownership](https://inews.co.uk/news/housing/labours-new-homes-economic-reality-3480032?ico=in-line_link).

   Why, then, you might reasonably ask, are they also penalising low-income families who do the right thing and try to save money?

   In 2013, the Lib-Dem-Conservative coalition government introduced a little-discussed rule, which is known as the capital limit for universal credit. This rule states that if you have capital, including savings or investments, of £16,000 or more, you are not eligible for universal credit if you fall on hard times.

   Labour has done nothing to change this, even though the amount has remained frozen for years and does not reflect the kind of safety net that low-income families today might need and want to save.

   There’s something quite Victorian about the way that capital thresholds enshrine and uphold moral judgements on benefits claimants.

   People who claim benefits are often demonised for being feckless and bad with money (even though this is rarely the case), but anyone who has savings above £6,000 will see their entitlement tapered off until it disappears entirely if they save more than £16,000.

   It is believed that around two million families with an average household income of only £15,700 who are eligible for universal credit could have been affected by these capital rules since 2020-22 when the number of people requiring benefits rose significantly.

   According to a new report from the independent think-tank, the Resolution Foundation, 830,000 families faced a partial reduction in their universal credit entitlement, while 1.2 million saw it wiped out entirely.

   For example, a family entitled to £750 a month in UC (based on income alone) would have their entitlement reduced to £576 if they had £16,000 in savings – but it would drop to zero if they saved a penny more.

   These rules are perverse and create a poverty trap.

   Consider how nonsensical they are:

2. This particular trap has existed in some form of decades – instead of the system giving you a hand up it pushes you further down.

3. Main problem with deposits is how much you bloody need.

   Especially if FTB, even with schemes and whatnot.

   Used to be 10% was standard, 20% was mega.

   Now, 10% is hardly scratching the surface and still huge mortgage amounts due to LTV as prices of property so high.

   Property costs so high, now 10% is knocking on 30k for a 2 bed in my area.

4. What’s that? The notoriously right-wing i is pushing this out? You weren’t when the Conservatives were killing the most vulnerable before covid. Then we were all scroungers.

5. The only ones increasing their home ownership are the big corporations.

6. If we imported homes, instead of migrants. The situation would be very different.

7. I don’t fucking know, what I do know is hate greedy people

8. [deleted]

9. Um, if someone is sitting on more than £16k in savings or shares then i tend to agree they should use that money to look after themselves if they fall on hard times. I know it’s not the ideal but at what point do we wonder whether anyone should have any responsibility to look after themselves at all any more.

10. Not something I’d thought about but a great example of being shafted for being responsible.

    The one that gets me is anyone with a mortgage or debt. if you rent it gets paid. If you’re 100k in debt but happen to have 16k of savings you get nothing.

    40k worth of pension you’re fine.

    Manage your own and you’re out of luck.

11. Buy gold. What savings sir? Check my bank balance if you want…

12. I mean, yeah, why should I subsidise someone else’s deposit when I can barely afford my own.

13. All good financial advise says build up an emergency fund before aiming for a house deposit or investing etc. you’re meant to aim to be able to support yourself for 3-6months if something goes wrong as a 1st priority

    If you have 16k in savings that’s 16k minus whatever 3-6 months of emergency fund is, NOT 16k of house deposit.

    While it’s v difficult to buy a house as an FTB these days, and it really sucks, the 16k cap is not the problem, it’s just diverting people from the real issues.

14. This £16k limit is a huge scam because it specifically excluded primary residence from the means testing. In theory some rich people could own a multi-million mansion and still receive full set of benefits and free council tax but other working people could not be eligible for any government help just because they saved £16k into their bank account.

    Basically the government dictates now what type of asset people should be owning. If you own correct assets and are rich you would be getting even richer.

15. I think this is absolutely fine. Benefits are a social security net.

    If you have 16k in your bank then you shouldn’t get benefits. That’s more than many people that are working full time have.

16. So it was a lib dem and conservative coalition policy, but it’s labours fault for not scrapping it whilst trying to balance the budget whilst also increasing defense spending? Right!!

    I’m getting pretty tired of these labour bad articles, when 90% of the time they’re written in completely bad faith knowing full well that the problems being written about are the product of 14 years of tory mismanagement of our economy.

17. It’s not wrong. I was very mindful to stay below the £6k limit on paper when I was on benefits many years ago. I started investing in assets I could sell to recoup the money, such as antique jewellery and art. It’s a ridiculous system. The amounts should be doubled at least.

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