With the cost of living increasing and wages / benefits not keeping up, many social housing providers are considering setting up Welfare Funds to help families in particular need.
The payments could help with furniture, bedding, food, fuel bills, clothing, nappies, travel or other essential costs, in exceptional circumstances.
But how will these payments be treated for welfare benefit purposes – could they reduce a claimant’s benefit entitlement?
The answer is ‘probably not, but it all depends…’.
Such payments need to be reported by the claimant to the benefit authorities, who would then classify them and decide if they affect any award.
IMPORTANT: payments made directly into a claimant’s rent account or paid directly to them by their landlord for the purpose of helping them pay their rent could be seen as reducing the claimant’s rent liability and therefore could reduce any Housing Benefit or Universal Credit they are entitled to.
Lump Sums / Irregular payments
All the benefit authorities would normally treat a one-off lump sum payment that is not attributable to a specific period as capital, as they would payments that are made irregularly and are intended to be paid irregularly.
These payments, therefore, would only affect a claimant’s benefit award if it took their total capital over the savings thresholds that applied to that benefit.
Presumably if the claimant did have savings close to one of these thresholds, then they would not be in exceptional hardship and would not receiving a payment from a Welfare Fund (but we have included the limits below for information purposes).
NOTE: A lump sum attributable to a specific period could be seen as some form of income (see below).
Regular payments that a claimant receives from their landlord’s Welfare Fund could be classed as:
- A ‘charitable payment’ i.e. one made by a registered charity,
- A ‘voluntary payment’, i.e. that has a benevolent purpose and is given without anything being given/expected in return, or
- ‘Unearned income’.
Once it has been established what type of payment it is then different rules apply to the different benefits.
More on Voluntary Payments
Caselaw confirmed that a ‘voluntary payment’ is one that has a benevolent purpose and is given without anything being given or expected in return i.e. it doesn’t benefit the payer.
We believe that if the payment made by the landlord to their tenant from a Welfare Fund is:
- not seen as benefiting the landlord, and
- not being given under some kind of agreement i.e. the landlord is expecting the tenant to do anything in return, and
- not being credited to the rent account on a regular basis i.e. every 4 weeks,
then these payments should be seen as ‘voluntary payments’.
However, if the payment is conditional on the tenant doing something in return (eg staying out of rent arrears, keeping their garden tidy, refraining from anti- social behaviour) then there is a risk that it would not be seen as a ‘voluntary payment’.
There is also a small risk that the benefit authority could say that the landlord benefits by being seen in a good light or that the payments reduce rent arrears.
The more specific the purpose of the payment – e.g. to reduce exceptional hardship experienced by the tenant/family, for example by preventing ill health due to cold or damp, or by ensuring the children have warm clothes or shoes that fit, the less likely this would be seen as simply a direct benefit to the landlord.
For Universal Credit, however payments from a Welfare Fund will be disregarded and so will not affect a UC award.
Regulation 66 of the UC Regulations 2013 lists income other than earnings that is taken into account and so reduces a UC award. If an income is not on the list, it isn’t taken into account. Charitable and voluntary payments are not listed, and neither are payments from the kind of Welfare Funds we are talking about.
BUT be aware that if an amount is paid regularly to a claimant whose award includes a Housing Costs Element by their landlord without any reference as to what that payment is for, then there is a risk that the DWP could regard these payments as a reduction in rental liability and thereby reduce the amount of the Housing Costs Element.
‘Charitable payments’ and ‘voluntary payments’ are disregarded as income under paragraph 14 of Schedule 5 of the HB Regulations 2006 and the Housing Benefit (PC age) Regulations 2006.
However, if the payment is considered to be benefiting the landlord in some way, then it may fall to be counted as unearned income instead and would reduce the HB award by 65p per £1.
ALSO be aware that if an amount is paid regularly to a claimant receiving HB by their landlord without any reference as to what that payment is for, then there is a risk that the HB Office could regard the payments as a reduction in rental liability and thereby reduce the amount of the HB award.
Income-Related ESA, Income Support, Income-Based JSA
The rules apply in the same way as for Housing Benefit, so payments not considered to be ‘charitable payments’ or ‘voluntary payments’ would reduce the award – in the case of IR-ESA, IS and IB-JSA - £1 for £1.
Pension Credit ignores all these payments. It works in the same way as Universal Credit – in that if it is not listed as an income that should be considered then it isn’t.
Regular payments from a Welfare Fund would not be taxable income and would not be classed as income for Tax Credit purposes
Council Tax Support
Each scheme is different so it would be advisable to check the local authority’s policies.
For working age claimants on Income-Related ESA, Income Support, Income-Based JSA, Housing Benefit or Universal Credit, these thresholds are £6,000 (where savings over £6,000 generate a tariff income), and £16,000 (where having savings above this would end entitlement).
For pension age claimants on Pension Credit there is no upper savings limit but savings over £10,000 generate a tariff income.
For pension age claimants not on Guarantee Pension Credit but getting Housing Benefit these thresholds are £10,000 (where savings over £10,000 generate a tariff income), and £16,000 (where having savings above this would end entitlement).