A Reddit user felt Premium Bonds were ‘dead money’ as they couldn’t be spent and didn’t accrue interest

A concerned friend felt it was unfair that a pal’s benefits could be reduced as a result of inheriting £4,000 in Premium Bonds.

The Reddit user felt it was ‘dead money’ as her companion – who was in receipt of Personal Independence Payment (PIP) after having a brain tumour removed – couldn’t spend them, they didn’t accrue interest and he ‘never wins anything with them’.

They explained: “His benefits have just been moved to Universal Credit and it has just been suggested to him that some Premium Bonds he has to the value of £4,000 may cause him problems, he has £6,000 savings you see.”

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The forum user continued: “The Premium Bonds were left to him when his mum died and they are pretty much dead money, he can’t spend them, they don’t accrue interest and he never wins anything with them.

“But now this dead money is going to lead to him getting less benefits, is there anything legal he can do to with the bonds to avoid a sanction?”

The replies quickly came in, including one which said: “No. And they were always capital.

“He’s going to need to declare them. Whilst he can explain, I’d expect an overpayment and an ongoing deduction (£4.35 per £250 of part thereof each month of capital over £6k).”

Another said: “There are no sanctions, all that happens is UC gets reduced once your savings are over £6,000 which is what is happening now.

“You are allowed to spend them on things you need. What he can’t do is suddenly spend £4,000 on something just to get more benefits.

“There are all kinds of rules and people who would decided if that’s the case.

“But normal everyday or disability stuff is of course allowed.”

Someone else sympathised: “I’m saving for big house repairs so no choice but to take the deductions to UC on the chin until I have enough money for the repairs – it is getting harder each month to manage to make the amount in savings I want though.

“I really think disabled people who own their own houses should get a higher savings limit though – I don’t know how we are expected to manage this stuff without living without adequate heating etc.”

According to the gov.uk website, when assessing entitlement to UC, the Department of Work and Pensions will take into account the value of all money, savings and investments someone owns, or jointly owns with someone else, as ‘capital’.

The amount of money, savings and investments someone – or their partner – has can affect their eligibility for UC, or how much they receive.

Premium Bonds are taken into account, along with money someone has in their bank account, savings for children in their name, cryptoassets and inheritance payments.