How do savings and lump sum pay-outs affect benefits?

Some benefits are affected by the amount of money you have in savings, such as cash in a savings account, or investments in shares. These benefits are called means-tested benefits. Find out more about which benefits are affected by savings or a lump sum pay-out, such as redundancy pay or compensation.

Which benefits are affected by savings?

The main means-tested benefits that are affected by both income and savings include:

  • Income-based Jobseekers Allowance
  • Income-related Employment and Support Allowance
  • Housing Benefit
  • Income Support
  • Universal Credit

What are the savings limits?

If you or your partner have £6,000 (£10,000 if you are over state pension age) or less in savings this will not affect your claim for these benefits.

If you or your partner have £16,000 or more in savings, you will not be entitled to any of these benefits.

If you have savings between £6,000 and £16,000

If you or your partner have any savings or capital of between £6,000 and £16,000, the first £6,000 is ignored.

The rest is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250.


  • You have £7,000 in a savings account.
  • The first £6,000 of it is ignored.
  • The remaining £1,000 is counted as giving you a monthly income of £17.40.
  • £1,000 ÷ £250 = 4
  • 4 × £4.35 = £17.40
  • £17.40 will be taken off your monthly Universal Credit payment.
For more information on how savings affect your benefits, contact Turn2Us.

How savings affect Council Tax Support

Council Tax Support (CTS) is run by local councils and if you are of working age the amount of savings you are allowed to have depends on the rules of the CTS scheme in your area.

Your local council can tell you more about how the scheme works where you live.

If you are getting Pension Credit and qualify for Council Tax Support, your savings could affect how much you get.

How savings affect Tax Credits

If you are getting tax credits, only taxable income is taken into account, so you might be able to claim tax credits, regardless of the amount of money you have in savings.

However, the interest you earn from savings is classed as income. Any income from savings over £300 will be taken into account and will affect how much you get.

How your savings are affected if you move from Tax Credits to Universal Credit

If you move onto Universal Credit from Tax Credits and you have savings or capital of over £6,000, the government has said that you’ll still be entitled to a top-up payment – known as transitional protection – to make sure that you’re not worse off.

How savings affect Pension Credit

There is no upper capital limit for Pension Credit but you may receive a reduced amount if you have more than £10,000 of capital.

For every £500 or part of £500 of capital over £10,000, you’ll be treated as having an income of £1 a week. This is added to any other income you have, such as a pension.

What counts as savings?

Savings are counted as any money you can get hold of relatively easily, or financial products that can be sold on. These include:

  • Cash and money in bank or building society accounts, including current accounts that don’t pay interest
  • National Savings and Investments savings account and Premium Bonds
  • Stocks and shares
  • Property, which is not your main home

Under certain circumstances, other properties you own, which you don’t live in, might be disregarded. You can find out more at

Other savings and capital are disregarded including:

  • Personal possessions, such as jewellery, furniture or a car
  • Value of any pre-paid funeral plans
  • Life insurance policies which have not been cashed in
  • Insurance claims will be ignored for six months if used to replace or repair

If you deliberately deprive yourself of capital to increase the amount you receive in benefits, for example, giving money away to family members, it will be treated as if you still had the money.

Will my redundancy pay or other lump-sum payment affect my benefits?

Yes, any cash payments you receive will be treated as savings for any means-tested benefits you claim.

If you’re claiming benefits and are claiming, or thinking about claiming, compensation for an accident, injury or disease which was not your fault, your pay-out might be affected.

Find out more about how benefits are affected by compensation hereopens in new window.

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