DWP explains Universal Credit rules for what savings count towards capital

The DWP was asked if a particular savings account would count

The Department for Work and Pensions (DWP) has outlined the eligibility criteria for Universal Credit, detailing what counts towards an individual's capital in terms of savings. After an MP inquired whether Lifetime ISAs (LISA) could be exempt from capital rules, Government ministers have clarified how the rules work.

Lifetime ISAs offer a way to save for a first home or retirement, with a 25% bonus from the Government on contributions. Savers can put in up to £4,000 annually, potentially receiving a maximum bonus of £1,000.

Responding to the query, DWP minister Sir Stephen Timms stated: "There are no plans to change the way savings held in a Lifetime ISA are treated in the assessment of Universal Credit. It is appropriate that means-tested benefits, including Universal Credit, take all forms of savings into account. This includes investments where the Government provides a contribution to encourage saving such as the Lifetime ISA."

Mr Timms further spoke about the implications for savers applying for Universal Credit, explaining: "People will not be required to cash in these ISAs in order to claim Universal Credit, but they will be taken into account as part of their capital.

"If a person has capital over £16,000, they will be expected to rely on their savings until their capital reduces to £16,000 before they can claim Universal Credit."

The future of the Lifetime ISA was a topic of discussion in Parliament this week, with Treasury minister Emma Reynolds appearing before the Treasury committee to talk about about the savings scheme.

She confirmed that the Government is "looking at ISA reform" but did not provide specific details about their plans when questioned if they were considering getting rid of the scheme. Ms Reynolds was also queried about the dual purpose of the ISA, which allows the funds to be used for purchasing your first property as well as for your retirement.

In response, she said: "You could argue that one of the benefits of the dual purpose is it's very flexible. You may have a situation where somebody is using it to purchase a home, that doesn't work out, they could actually use it for a pension later in life."

A LISA can be opened by anyone between the ages of 18 and 40, and contributions can be made until the age of 50. This means if you plan to use the cash in your later years, you have to wait a decade without making any deposits, before you can access the funds at age 60.