Should I spend my redundancy pay before claiming?

No — and you should be careful. DWP can treat money you spend down quickly as if you still have it (this is called deprivation of capital). Use it for normal living costs and bills.

Does an enhanced redundancy package count differently?

Enhanced or contractual redundancy pay on top of the statutory minimum is also usually treated as capital, not income.

What about pension lump sums?

Lump sums from a pension are usually treated as capital. Regular pension payments are treated as income. The rules differ by pension type, so get advice if you're unsure.

Can I claim Universal Credit and New Style JSA together?

Yes, you can claim both. New Style JSA isn't means-tested but the amount you get is taken off your Universal Credit, pound for pound.

Redundancy

Does redundancy pay affect Universal Credit?

5 min read · Updated 26 May 2026

Redundancy pay can be a big lump sum, and it's natural to worry it will stop you claiming Universal Credit. The rules are clearer than they first look: most of it is treated as savings, not income. This guide explains how the assessment usually works.

Capital vs income

Universal Credit assesses two things separately: capital (savings and assets) and income (earnings and certain other money coming in).

Statutory redundancy pay is usually treated as capital from the day you receive it. So is any contractual or enhanced redundancy pay your employer chose to add on top.

The £6,000 and £16,000 thresholds

Under £6,000: capital is ignored. Your UC isn't reduced for savings.
£6,000 to £16,000: every £250 (or part) above £6,000 reduces your UC by £4.35 a month.
Over £16,000: you generally can't claim Universal Credit at all.

These thresholds apply to your whole household — so if you have a partner, their savings count too.

Notice pay, holiday pay and final wages

Payment in lieu of notice (PILON), final salary and accrued holiday pay are usually treated as earnings in the UC assessment period they're paid in. That can reduce or wipe out UC for one or two months, but you can usually claim again once those payments stop.

If you're unsure how a particular payment is classified on your payslip, Citizens Advice or a welfare rights adviser can check it for you.

What this means in practice

Don't assume redundancy pay rules you out of UC — check the numbers.
Keep written records of what was paid as redundancy, notice, holiday and bonus.
If you're close to £16,000, get advice before spending savings — deliberate deprivation rules can apply.

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Frequently asked questions

Sources and further reading

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Common situations

People reading this guide often find one of these situations close to theirs.

When your savings are close to the limit
How Universal Credit and other means-tested support treat savings around the £6,000 and £16,000 thresholds.

Related guides

Universal Credit
Savings and Universal Credit explained
How savings, capital and assets affect Universal Credit in the UK, including the £6,000 and £16,000 thresholds and what counts as capital.
Redundancy
What benefits can I claim after redundancy?
A plain English overview of the UK benefits you may be able to claim if you've been made redundant, including Universal Credit, New Style JSA and help with rent or council tax.
Universal Credit
Universal Credit after redundancy
A step-by-step plain English guide to claiming Universal Credit after redundancy in the UK — eligibility, what to expect, and how payments are worked out.