Universal Credit Local Support Services: Personal Budgeting Support Chartered Institute of Housing

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1 Universal Credit Local Support Services: Personal Budgeting Support Chartered Institute of Housing Felicity Ridgway 11 th October

2 Context - Claimant Preparation REQUIREMENT FOR A PERSONAL BUDGETING STRATEGY IS DRIVEN BY THESE CHANGES We want to help people to be able to manage their own finances successfully, whether they are in or out of work Housing costs direct to tenant Single payment to household Monthly Payment 2

3 Personal Budgeting Support overview Alternative Payment Arrangements Money advice Claimants managing their money Financial products 3

4 Alternative Payment Arrangements For a minority of claimants, alternative payment arrangements may be required; these might include paying the rent directly to the landlord making more frequent than monthly payments splitting the payment within the household We will also have the option to make rent payments direct to the landlord if a claimant reaches a certain level of rent arrears. These alternative payment arrangements will be considered on a case by case basis and assessed on their individual merits. When considering alternative payment arrangements, a series of Tier 1 and Tier 2 factors indicating potential support needs will be used to help to decide if these arrangements are appropriate to an individual. The decision about whether an alternative payment arrangement is suitable will be made by a UC adviser through the PBS process. Information from a third party i.e. the claimants representative, and / or their landlord can be used to inform a decision. Subject to a review, the goal being that claimants move to the standard payment over time supported by money advice. 4

5 Alternative Payment Arrangements Consideration Factors Tier One factors Highly likely / probable need for alternative payment arrangements Drug / alcohol and / or other addiction problems e.g. gambling Learning difficulties including problems with literacy and/or numeracy Severe / multiple debt problems In Temporary and / or Supported accommodation Homeless Domestic violence / abuse Mental Health Condition Currently in rent arrears / threat of eviction / repossession Claimant is young either a 16/17 year old and / or a Care leaver Families with multiple and complex needs Tier Two factors - Less likely / possible need for alternative payment arrangements No bank account Third party deductions in place (e.g. for fines, utility arrears etc) Claimant is a Refugees / asylum seeker History of rent arrears Previously homeless and / or in supported accommodation Other disability (e.g. physical disability, sensory impairment etc) Claimant has just left prison Claimant has just left hospital Recently bereaved Language skills (e.g. English not spoken as the first language ). Ex Service personnel NEETs - Not in Education, Employment or Training 5

6 More Frequent Payments: bi-monthly (14 days) (14 days) (15 days) (16 days) 31/01 28/02 +7 days 31/03 01/01 Date of Claim Regular UC Assessment Period 1 st UC Payment Calc/notification to claimant: 01/02 ½1 st Payment (a) 07/ st Payment (b) 21/10 ½2 nd Payment (a) 07/ nd Payment (b) 22/03 ½3 rd Payment (a) 07/04 6

7 Money advice Money advice will include: Online budgeting tools for claimants who can help themselves e.g. by Money Advice Service Advice services by external organisations for those who need more support with, for example, getting a bank account or doing a monthly budget plan. Local advice services will be delivered by phone and face-to-face by expert providers through the Local Support Services framework. The Local Support Services Framework is available on gov.uk: A UC personal planner is available on gov.uk to help claimants understand and prepare for financial changes arising from the introduction of Universal Credit: The Planner asks claimants a set of questions about their readiness for claiming Universal Credit and, depending on the answers given, sets out an individual action plan. 7

8 Financial Products 75% of people are paid earnings monthly in arrears. Monthly payment of benefit will prepare households for the reality of budgeting on a monthly income, will ease the transition into work, and will make it easier for households to take advantage of cheaper tariffs for essential costs such as utility bills. The majority of Universal Credit claimants will continue to be paid through mainstream current or basic bank accounts. Having access to a transactional account will enable claimants to make electronic payments out of the account. Most claimants will be paid into a bank account but up to 1.3 million potential UC claimants currently do not use a suitable financial product e.g. POCA which doesn t have transactional facilities. We are working with banks and other financial institutions to support claimants to open suitable accounts before they migrate to UC. We are investing 38 million into the modernisation and expansion of credit union services. A growing number of credit unions offer current account services as an alternative to mainstream bank accounts. 8

9 UC Payments Universal credit payments will be issued through the BACS system, with the payment narration: DWP UC AA000000A (national insurance number) Each claimant will be given a UC payday based on their date of claim. Once they have this payday, UC will be made on the same date each month thereafter. If the payday falls on a weekend or bank holiday, the payment will be made on the first closest working day prior to the normal payment date. The first payment will be made after the initial UC calculation period (one calendar month from the date of claim) + 7 days. This is to allow us to guarantee the same payment day every month, allowing for 3 BACS days and up to up to 4 non-working days on weekends and bank holidays (eg. at Easter or Christmas). New claimants and those transitioning from legacy benefits will be offered an advances of up to 50% of their indicative award to help them manage during the first assessment period These UC advances will provide an interest-free lending facility for claimants who find it difficult to access mainstream credit, and could offer an alternative to high cost borrowing. 9

10 A standard claim +7 days 31/01 28/02 Regular UC Assessment Period 01/01 Date of Claim 1 st UC Payment Calc/notification to claimant: 01/02 2nd UC Payment Calculation: 01/03 1 st UC Payment 07/02 2 nd UC Payment 07/03 10

11 UC Advance: new claims Based on an indicative claim of 1000 pcm (3 days) (35 days) +7 days 31/01 28/02 Regular UC Assessment Period Standard Monthly Payment Payment minus repayment of UC advance (new claim) UC Advance (up to 50%) st payment: nd payment: A claimant can request an advance of up to 50% of their indicative UC award. The advance can be claimed at any point during the first month and will be issued via BACS after 3 days. The advance will be recovered from UC payments in equal deductions over the following 6 months. 11

12 UC Advance: benefit transfers Based on an indicative claim of 1000 pcm (19 days) (19 days) +7 days 31/01 28/02 Regular UC Assessment Period Standard Monthly Payment Payment minus repayment of UC advance (benefit transfer) UC Advance (up to 50%) st payment: nd payment: A claimant can will be offered an advance of up to 50% of their indicative UC award. Our current assumption is that the advance will be issued half way through the initial claim period. The advance will be recovered from UC payments in equal deductions over the following 12 months. 12

13 Thank you and any questions? 13