Over one million Universal Credit claimants are set to get a £420 boost this month after a major Department for Work and Pensions (DWP) change.
The DWP will lower the cap on the maximum level of deductions that can be taken from a claimant’s benefit payments from April 30. Confirmed by Labour Chancellor Rachel Reeves in the Autumn Budget last year, the maximum deductions from the standard allowance will drop from 25% to 15%.
Currently, the DWP and other third parties can deduct 25% of someone’s Universal Credit standard allowance payment to recover any debts someone may have. The amounts are subtracted from a claimant’s standard allowance each month until the debt is repaid.
These deductions can cover a range of debts, including benefit advances, historical overpayments of child tax credits, rent and council tax arrears, as well as outstanding water and utility bills. Money can be deducted from your Universal Credit payments to pay off up to three debts at once with at least 5% being deducted for each debt you owe.
The types of deduction that can be taken are ordered by priority. Deductions for a fraud penalty, sanction or advance are taken first. If the total of these is not above 25% of the claimant’s Standard Alowance then other deductions can be taken However, once the 25% limit is reached, any remaining – lower priority – deductions cannot be taken unless it is a “last resort deduction”.
Last resort deductions help prevent eviction or the cutting off of gas or electricity. They are primarily used to cover rent, home service changes, or energy arrears. This money is paid directly to the third party to whom you owe money.
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The new Fairer Repayment Rate will not cover deductions related to fraud penalties or sanctions. This means Universal Credit claimants can have more taken off their Standard Allowance.
Alongside this, deductions for child support will move up the priority list – to above repaying Universal Credit advances and third-party deductions for rent arrears. The move – called the Fair Repayment Rate – is intended primarily to help the worst-off families.
At the time, Reeves said the change would benefit 1.2million households, including 700,000 families with children, boosting their incomes by up to £420 a year – or £35 a month.
Save the Children estimates that the measure could see single parents receive up to £39 more of their Universal Credit entitlement each month. For two-parent households, this could be up to £62.
The move has been welcomed by charities, including Save the Children, who described the current level of benefit deductions as “unfair and unsustainable”. Ruth Talbot, Save the Children UK’s policy and advocacy adviser, said: “It is bold thinking from ministers and we know it will have a significant impact for families and put more money in their pockets for food, toys, clothes and books.”
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At the time, Sebrian McCullough, director of external relations at the debt free advice firm Money Wellness commented: “We’ve been lobbying for changes to benefit deductions for some time. The reduction from 25% to 15% is a positive step for some of the most vulnerable in society. This is because people trying to survive on inadequate income inevitably increase their reliance on credit.
“64% of the people we support with benefit deductions also need access to a food bank. That is why, longer term, we would like to see the government move towards making decisions based on individual affordability in order to ensure no one is left without enough money for essentials.”
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