Hundreds of thousands of families saving for the future will lose out under plans for Universal Credit

16 February 2011

Hundreds of thousands of families trying to save for the future will be left with little or no financial support under the Government's proposed overhaul of welfare benefits, leading think tank the Social Market Foundation (SMF) said today as it released new figures analysing the Government's proposals.

The SMF's new figures, released ahead of the publication of a Welfare Reform Bill, show that around 400,000 families with children – currently receiving tax credits - will lose their entire eligibility for financial support under the Universal Credit. New rules for the Universal Credit mean that families with £16,000 or more in savings are disqualified. At least a further 200,000 families with savings of between £6,000 and £16,000 will lose some of their entitlement under the new regime.

"The Universal Credit will punish working families trying to save for the future, such as those trying get a foot on the property ladder," said Ian Mulheirn, Director of the SMF.

The SMF's analysis of the savings penalty shows that a family with two children and a combined income of £25,000 per year could lose out to the tune of around £50 per week depending on the ultimate design of the Universal Credit. In addition, many thousands more working families receiving support for childcare could be disqualified from eligibility.

Ian Mulheirn continued: "These reforms will save the Government a lot of money, but they send all the wrong signals to working families. The Government should reassess these punitive proposals and support  working families on low incomes seeking to save for the future."

Ends

Notes for Editors:

  • The SMF's new figures were obtained by analysing the Wealth and Assets Survey, a nationally representative household survey conducted by the Office for National Statistics, which asks people about their assets and liabilities in order to estimate household and personal wealth.
  • Under proposals for the Universal Credit, families with savings in excess of £16,000 will no longer be entitled to financial support through the benefits or credits system. The new rules on the treatment of savings were given in answer to a Parliamentary Question, available here: http://www.publications.parliament.uk/pa/ld201011/ldhansrd/text/101215w0001.htm#10121535000298
  • Under the existing tax credits system only the income from financial assets is taken into account when calculating a family's tax credit award.
  • The Social Market Foundation (SMF) is a leading UK think tank, developing innovative ideas across a broad range of economic and social policy. It champions policy ideas which marry markets with social justice and takes a pro-market rather than free-market approach. www.smf.co.uk

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