Navigating the UK benefits system can be overwhelming, especially when it comes to understanding how savings impact entitlement. For those receiving Employment and Support Allowance (ESA), particularly within the Support Group, knowing how much savings you’re allowed to have is critical.
This article provides a comprehensive overview of the rules surrounding savings and ESA, helping individuals in London and across the UK make informed decisions without risking their benefits.
What Is ESA Support Group and Who Qualifies for It?
ESA, or Employment and Support Allowance, is a UK government benefit designed to support individuals who are unable to work due to illness or disability. There are two types of ESA: income-related and contribution-based. The Support Group refers to a category within ESA for those whose conditions are severe enough that they are not expected to undertake any work-related activity.
To be placed in the Support Group, a claimant must undergo a Work Capability Assessment. If they are found to have a limited capability for work-related activity, they will be placed in this group and receive a higher ESA payment. Importantly, they are not required to look for work or participate in interviews with job advisors.
How Do Savings Affect Income-Related ESA?
If you’re on income-related ESA, your savings play a significant role in determining how much you receive. The Department for Work and Pensions (DWP) assesses your capital to determine eligibility and payment amounts.
If your total savings are £6,000 or below, your ESA payments are unaffected. However, once savings exceed £6,000, the DWP assumes you earn a small income from your capital, known as “tariff income.”
This tariff income reduces your weekly ESA payments by £1 for every £250 you have over £6,000. For instance, if your savings amount to £10,000, your ESA will be reduced by approximately £16 a week. If savings reach £16,000 or more, you are no longer eligible for income-related ESA. These savings rules also apply to your partner’s capital if you live together, as ESA is assessed on a household basis.
Can You Have Unlimited Savings on Contribution-Based ESA?
Unlike income-related ESA, contribution-based ESA is not means-tested. This means that your savings have no impact on your eligibility or the amount you receive. This form of ESA is granted based on your National Insurance contributions over the past two tax years.
If you’re receiving contribution-based ESA only, you can have savings well over £16,000 without any reduction in benefit. However, many people receive both contribution-based and income-related ESA, which means part of their ESA could still be affected by savings. Understanding which type you receive is essential to accurately gauge how your capital influences your benefits.
How Is Tariff Income from Savings Calculated by the DWP?
The DWP calculates tariff income to estimate what a claimant could earn from their savings. This assumed income isn’t based on actual interest but on a flat-rate system. For every £250 (or part of) saved above £6,000, the DWP deducts £1 per week from your ESA.
To illustrate, if you have £8,500 in savings, that’s £2,500 over the £6,000 limit. Dividing that by £250 gives ten, so your ESA would be reduced by £10 each week. This continues until you reach the £16,000 ceiling, beyond which you no longer qualify for income-related ESA.
What Happens If Your Savings Increase While on ESA?
Any significant change in your savings such as receiving a lump sum inheritance, compensation, or proceeds from the sale of property must be reported to the DWP. Failing to do so could lead to overpayments, which the DWP will expect you to repay. In some cases, it may result in investigations or allegations of benefit fraud.
It’s important to keep the DWP updated as your financial circumstances evolve. They may reassess your ESA award based on new information, and adjustments can be made to reflect the correct level of entitlement.
Can You Claim ESA and Universal Credit Together If You Have Savings?
Although new claims for income-related ESA are no longer accepted, some people who are already on it continue to receive payments. New claimants must apply for Universal Credit instead, which also includes savings limits similar to those for income-related ESA.
It is possible to receive contribution-based ESA alongside Universal Credit, especially if you require additional financial support. However, the savings rules under Universal Credit mean that capital between £6,000 and £16,000 will reduce your payments, and anything above £16,000 disqualifies you from receiving UC altogether.
So, if you are transitioning from ESA to Universal Credit, it’s essential to consider how your savings will affect your entitlement under the new system.
What Types of Capital Count as ‘Savings’ for ESA?
The DWP defines savings broadly. This includes money in bank or building society accounts, ISAs, Premium Bonds, stocks, shares, and even cash stored at home. If you own any property other than the one you live in, its value may also be considered part of your savings.
Certain types of capital, however, are excluded. Your primary residence does not count towards your savings total, nor do most personal belongings like furniture or clothing. Some compensation payments, such as those held in trust for injury settlements, may also be excluded under specific conditions.
Jointly held accounts are typically assumed to be shared equally unless evidence suggests otherwise.
How Can You Protect Your ESA Entitlement If You Receive an Inheritance or Windfall?
Receiving a financial windfall can push you over the ESA savings threshold, potentially ending your eligibility. If this happens, it’s crucial to handle the money responsibly and in line with DWP expectations. Attempting to reduce your savings quickly or giving away money to remain below the threshold may be considered deliberate deprivation of capital, which can still result in disqualification from ESA.
You may wish to seek professional financial advice to explore legal options such as setting up a discretionary trust, especially if the money is intended for long-term care or related expenses. However, this must be handled carefully to avoid breaching DWP rules.
What Are the Most Common Mistakes Claimants Make About ESA Savings Rules?
Many ESA claimants fall into avoidable traps due to misunderstandings about the system. A common error is assuming that all ESA claims are unaffected by savings, when in fact, only contribution-based ESA offers that flexibility. Another issue is failing to report changes in savings or thinking that jointly held assets don’t count.
Others may unknowingly commit deprivation of capital by spending or transferring funds to stay within the savings limit. These missteps can lead to reduced payments, backdated repayment demands, or even legal consequences. The best way to avoid such mistakes is to stay informed and communicate clearly with the DWP about any changes to your circumstances.
When Should You Speak to a Benefits Advisor About ESA Savings?
Seeking advice from a qualified benefits advisor or an organisation like Citizens Advice is strongly recommended if you’re unsure how your savings affect your ESA. This is particularly important if your financial situation is changing, you’re considering applying for Universal Credit, or you’re receiving an inheritance or lump sum payment.
An advisor can provide personalised guidance, help you understand your rights, and assist you with reporting changes to the DWP accurately. Timely advice can help avoid mistakes and ensure you receive the correct support.
Conclusion
For those receiving ESA within the Support Group, understanding the savings rules is essential. Income-related ESA has strict thresholds any savings over £6,000 begin to reduce your entitlement, and at £16,000, it stops altogether. On the other hand, contribution-based ESA allows for unlimited savings, making it a more flexible option for some.
Keeping track of your capital, reporting changes promptly, and seeking expert guidance when necessary are key steps in protecting your benefits. The system can be complex, but with the right knowledge, you can navigate it confidently and legally.
FAQs About ESA Support Group and Savings
Does the ESA Support Group check your bank account regularly?
While the DWP doesn’t monitor your bank in real-time, they can request statements or conduct reviews to verify your savings.
What is classed as capital for ESA purposes?
Capital includes accessible savings, investments, second homes, and jointly held accounts. Your main home and personal possessions are excluded.
Can you give away money to stay below the ESA savings limit?
No. The DWP may treat you as still having the money if they believe it was deliberately given away to qualify for ESA.
How often are ESA Support Group claims reviewed?
Claims are usually reviewed every one to three years, depending on your condition and circumstances.
Will selling property affect ESA Support Group entitlement?
Yes, if it’s not your main residence. The proceeds from the sale may be counted as savings and affect your entitlement.
Can I keep my ESA if I move in with a partner who has savings?
If your ESA is income-related, your partner’s savings will be considered and could reduce or eliminate your entitlement.
Is ESA support affected by money held in a trust?
Possibly. It depends on the type of trust and whether you can access the funds. Specialist advice is recommended.
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