Universal Credit Advance Payments
Recent announcements by the government in the Autumn Budget will lead to a shake up of Universal Credit’s Advance Payments system from January 2018.
The changes are welcome news – increasing the maximum a claimant can receive and giving then 12 months to repay BUT many claimants before this change should have been given 12 months to repay but have not been, and many have borrowed more than they should have due to having the ‘waiting days’ applied when they should not have been (click here for more information of who should not be affected by the waiting days).
David Gauke advised parliament on 23rd November 2017 that, “from 1st January 2018, DWP will make two changes to advances. First, the period over which an advance is recovered will increase from six to 12 months, making it easier for claimants to manage their finances. That will apply regardless of the level of advance claimed. Secondly, we are increasing the amount of support a claimant can receive from up to 50% of their estimated entitlement to up to 100%, interest free.”
And in the near future, claimants will be able to apply for an advance online.
Full guidance has not been published yet, we expect this very soon - but from what we know these changes cover New Claim Advances. Benefit Transfer Advances can already be paid back within 12 months as can Budgeting Advances. New Claim Advances have, however, always previously been repayable over a shorter 6 month period.
Many claimants have been mistakenly awarded New Claims Advances instead of Benefit Transfer Advances meaning that repayments took place over 6 months, causing budgeting problems. These claimants, if they are still paying back the Advance, can request that the DWP re-schedule to repayments to allow the full 12 months – click here for more info and standard letter new rules.
A key difference from January will be that, for both Benefit Transfer Advances and New Claim Advances, a claimant will be entitled to up to 100% of their likely UC award.
From (we assume) 1st January 2018, these new rules will apply to all UC claimants regardless of when they made their claim for UC. So where a claimant has received an Advance worth up to 50% of their UC award on a claim made in December, they will be able to request a further Advance on or after 1st January 2018 if they are within the normal time limits for doing do ie before the end of their first Monthly Assessment Period.
When applying for a New Claim Advance, claimants will need to:
- Explain why they need the Advance
- Provide bank details so that the Universal Credit helpline adviser can arrange payment if the Advance is agreed
- Have had their identity checked and agreed their claimant commitment.
We assume Benefit Transfer Advances will still be available – where the claimant doesn’t need to explain why they need the Advance – to anyone who had been a claimant of one of the benefits UC is replacing (ie HB, IB-JSA, IR-ESA, IS or Tax Credits) at some point in the calendar month before the date of their claim for UC.
It’s worth knowing that Universal Credit Advance Payments repayments can be deferred for up to 3 months in exceptional circumstances. But, unhelpfully, the application for deferment cannot be made on the same date as an application for an Advance - it needs to be at a later date.
The risk – for landlords – is that the claimant gets 100% Advance Payment without their landlord knowing, (there is no mechanism to inform landlords or third parties) - doesn’t use any of it to pay their rent, and then struggles to make their rental liabilities for the next 12 months as their UC award is reduced to repay the advance!
Michiko claims Universal Credit on the 20th of December as she was laid off work before Christmas. As she was not on any of the benefits UC replaces whilst in work, she has to serve the 7 day waiting period and is advised that she won’t receive her UC for 6 weeks. She was paid weekly and has spent her last wage and doesn’t have any accessible savings. Michiko needs some money now to pay for food and essentials and, as the new rules on Advance payments are not yet in place, is granted an Advance at 50% of her current award. On 10th January she has spent all her Advance and still has a couple of weeks to go before she will receive her UC payment, she contacts the UC helpline and successfully claims a further 50% of her likely award as an Advance payment. In total Michiko has borrowed a total of £795.00 and so will have her first 12 UC payments reduced by £66.25.