Universal credit - a ridiculous system

[financebro]

I earn roughly 100k but sacrifice 50k into my work pension. This avoids 42% tax and retains child benefit.

Wife earns around 15k but is going to give up work whilst kids are pre-school age. Our mortgage is reasonable (200k at 4.4%, roughly £1200 per month) on 4k combined take home which will reduce to 3k. Pre school savings etc balance out, albeit we're a little worse off.

Here's the bit I don't understand.

We're very fortunate to be able to pay off our mortgage. If we were to use the majority of our savings to pay off our mortgage, leaving £10k in the bank account as a buffer, AND I chose to increase my salary sacrifice to 75% - the Government then apparently decide that as we are earning £25k between us (bear in mind, no mortgage but £75k is still going into my pension), they will give us another £6k per year in universal credit.

Or, and how ridiculous is this, we buy a larger house and borrow a further £200k, do the above, and then 'ask for help' on the additional £200k borrowed - and they'll give a 'mortgage interest loan' at 2.65%.

Isn't this system entirely broken?

[scot_aln]

But then with earnings sacrificed down to £25k surely that'd fail any affordability checks to borrow another £200k. The whole system is of course like one great game of snakes and ladders. Or is it snakes as leaders hmmmmm

[Michael_B]

financebro said:

Here's the bit I don't understand.

We're very fortunate to be able to pay off our mortgage. If we were to use the majority of our savings to pay off our mortgage, leaving £10k in the bank account as a buffer, AND I chose to increase my salary sacrifice to 75% - the Government then apparently decide that as we are earning £25k between us (bear in mind, no mortgage but £75k is still going into my pension), they will give us another £6k per year in universal credit.

…

Isn't this system entirely broken?

Other countries show a little more imagination when assessing the real need for help. Here in Geneva, 20% of one’s net taxable wealth is added to your real income, and this is the figure used. Moreover, salary sacrifice is added back into the calculation.

So here for means-tested benefits (housing, health insurance, etc) your income be £100k plus 20% of the net equity in all properties, non-pension savings/investments, boats, jewelry, shares, etc. So no UC for you.

There will soon come a time where, for a 5-6 year period, Mrs B and I will have an official income of £25k, a portion of my occupation pension pot taken early as an annuity. We will then supplement that from savings until state pensions kick in.

At first glance this would give us quite a few benefits towards the obligatory health insurance (currently £430 each). But as soon as 20% of property, savings, etc are added in, we fly back the table and will (quite rightly) get nothing at all.

ETA: comments below would indicate that the UK is also a little more attentive when it comes to assessing real needs as well !

Edited by Michael_B on Friday 15th December 09:21

[anonymous-user]

financebro said:

I earn roughly 100k but sacrifice 50k into my work pension. This avoids 42% tax and retains child benefit.

Wife earns around 15k but is going to give up work whilst kids are pre-school age. Our mortgage is reasonable (200k at 4.4%, roughly £1200 per month) on 4k combined take home which will reduce to 3k. Pre school savings etc balance out, albeit we're a little worse off.

Here's the bit I don't understand.

We're very fortunate to be able to pay off our mortgage. If we were to use the majority of our savings to pay off our mortgage, leaving £10k in the bank account as a buffer, AND I chose to increase my salary sacrifice to 75% - the Government then apparently decide that as we are earning £25k between us (bear in mind, no mortgage but £75k is still going into my pension), they will give us another £6k per year in universal credit.

Or, and how ridiculous is this, we buy a larger house and borrow a further £200k, do the above, and then 'ask for help' on the additional £200k borrowed - and they'll give a 'mortgage interest loan' at 2.65%.

Isn't this system entirely broken?

Doesn’t quite work like that, read this https://revenuebenefits.org.uk/universal-credit/gu...

Also, how are you going to buy a bigger house with only 25k income? Cannot have it both ways.

Edited by anonymous-user on Thursday 14th December 19:43

[CoolHands]

Welcome to the motoring site that is PH

[Countdown]

You're not a "Finance Director" by any chance.......?

There used to be a PH regular who was supposedly a Finance Director and would regularly "drop a lump" into his pension....he was also obsessed with earning £100k

[CoolHands]

Undoubtedly is