The DWP is encouraging those receiving “legacy benefits” who would be “better off” on Universal Credit (UC) to claim it voluntarily.
There are six means tested legacy benefits: income-related employment and support allowance; income-based jobseeker's allowance; income support; housing benefit; child tax credit; and working tax credit.
As part of its initiative, the DWP has launched a campaign aimed at ”encouraging” tax credit claimants to check if they might be financially better off on Universal Credit.
The DWP says: "Many tax credit claimants could be financially better off on Universal Credit. You could take advantage of this by choosing to apply for Universal Credit sooner if you think it’s right for you."
However, the DWP is not going to identify, advise or inform legacy benefit claimants as to who would be "better off", or “worse off” under UC, or provide any safeguards for those who make a wrong decision.
The Minister for Welfare Delivery David Rutley has admitted that even the UC Help to Claim service is "not intended to help someone decide if Universal Credit is right for them".
Instead, the gov.uk Could universal credit be for you webpage gives the following advice: “Have a look at all the different ways in which Universal Credit could help you, and use a benefits calculator to get an understanding of what support may be available and how much you might get.”
Alongside a warning that those choosing to apply sooner should get independent advice before they do so, the DWP specifically advises that individuals should:
- check whether they are eligible
- check their savings in relation to the capital thresholds (have £16,000 or less in savings)
- check how outstanding debts are recovered under UC
- use one of the independent benefit calculators to see if their entitlement to UC could be higher than the amount the government pays them.
In practice, the DWP has placed all the responsibility and risk on individual claimants rather than take any itself.
This, when claiming UC is a "one-way street".
Once someone makes a claim for UC, even if they try to withdraw it, they will be not being able to go back to legacy benefits even if UC is refused.
"Better off" under UC?
Some current legacy benefit claimants may be financially better off on UC. The DWP estimates that, of the households on legacy benefits, 1.4 million would be better off on UC - but 1.2 million would be worse off.
Where a claimant is working, then (due to favourable UC work allowances) they may be better off on UC.
However, where someone has a disability, especially a severe disability, then (due to the loss of disability premiums including the severe disability premium) they may be worse off on UC.
The support component equivalent of UC is paid at a higher weekly equivalent rate of around £41.00 more than Employment and Support Allowance.
However, there is no enhanced disability premium or severe disability premium within UC. While there is some transitional protection for those who have this awarded these in their legacy benefit,this is not fixed indefinitely and can be reduced by increases in other UC elements.
Crucially, it is not possible to generalise about who would be better or worse off under UC, and each individual’s circumstances will differ.
Other wider considerations around claiming UC include:
- "transitional protection" on moving to UC, so that someone is not financially worse off, is not available if claiming UC voluntarily
- work related requirements (and sanctions) are tougher under UC
- UC is an IT-based benefit, and some people will not be able to cope with the online claim and management of UC;
- the five weeks delay in its first payment followed by the possible need to request and repay an advance payment (in effect a loan)
- UC is paid monthly payment compared rather than two weekly
- UC hardship payments are loans
- UC has no permitted work rule
- when moving to UC, the DWP are recovering old tax credit overpayments
- the capital savings limit for UC is £16,000 and if you have savings above £6,000 your UC will be lower, whereas tax credits has no capital limit
- UC overpayment recovery rules are much ‘stricter’ than legacy benefits.
Ken Butler DR UK’s Welfare Rights and Policy Adviser said: "UC is not a simplified benefit and not everyone will be better off by claiming it.
"Other factors such as monthly payments and that it is IT based are factors that can be important considerations.
"Given that it’s impossible to return to legacy benefits after claiming UC it is essential to get independent advice to check if it’s the right thing for you."
For more information see:
Moving to Universal Credit from other benefits available from citizensadvice.org.uk.
For help in locating independent advice see:
Benefit calculators:
Note: As it is no longer possible to make a new claim for any legacy benefit certain changes in circumstances require someone to make a UC claim.
From June 2022, the DWP will begin an initially slow roll-out of the compulsory managed migration of legacy benefit claimants to UC, completing the transfer process by the end of 2024.