The Department for Work and Pensions (DWP) has finally responded to growing calls to update Universal Credit capital limits, which have remained unchanged for 20 years. The issue was brought to light during a joint session of the Work and Pensions Committee and the Education Committee held in the Commons last Friday.
A poignant testimony came from Sam Richards, a single mother of a one-year-old son, Oscar. She highlighted the difficulties faced by many in the current Universal Credit system. “The system as it stands creates a poverty trap,” she said. “The upper and lower capital limits haven’t changed since 2006.”
Currently, to qualify for Universal Credit, claimants must have capital—bank balances, savings, investments—below £16,000. Those with capital under £6,000 are unaffected in their payments. However, those with capital between £6,000 and £16,000 face a reduction in their Universal Credit by £4.35 for every £250 above £6,000, with partial increments also deducted proportionally.
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Ms. Richards emphasized how inflation has eroded the value of these limits. “In 2006, £6,000 was worth much more, and so was £16,000,” she explained. “It feels like you’re trapped. Work more hours, but your Universal Credit decreases—you’re stuck in a cycle that’s hard to break.”
Experts estimate that if these capital limits had been adjusted for inflation, the lower threshold would be approximately £10,600 today, and the upper limit would stand around £28,000—roughly £12,000 more than the current figures.
In response, a DWP spokesperson affirmed the department’s commitment to creating a welfare system that encourages work and helps people exit poverty. “We have deployed 1,000 Pathways to Work advisers to support those left behind and are investing £3.5 billion to help sick and disabled people enter employment by the end of this Parliament,” they stated.
The spokesperson also highlighted ongoing cost-of-living support measures, including increases to the National Minimum Wage, reductions in energy bills, and the launch of the Crisis and Resilience Fund.