Welfare Reform - Universal Credit & The role of Credit Unions

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1 Welfare Reform - Universal Credit & The role of Credit Unions

2 Credit Unions - What are they? Co-operative organisations that provide financial services to a common set of individuals and groups Developed and controlled by local people Provide affordable products irrespective of income Overseen by the Financial Service Authority and protected under the Financial Service Compensation Scheme

3 Universal Credit - What is it? Universal Credit is at the heart of the Government s Welfare Reforms, aims to help people move into and progress in work, while providing support for those who need it. A benefit with a single taper and set of rules A service managing access to employment support work programme, job search A platform enabling the modernised delivery of future benefits An ambition reforming welfare to support social justice A policy intended to produce behavioural change

4 What does Universal Credit deliver? Clear incentives Increased financial incentive to work Simplified processes Interruptions and uncertainties in having to switch between benefits go away Increased incentive to take short term work and try jobs out Reduced differences Make financial management as similar as possible in and out of work Increased readiness for managing money independently

5 What benefits are affected? Income related JSA Income related ESA Income Support (including SMI) Working Tax Credits Child Tax Credits Housing Benefit UNIVERSAL CREDIT Disability Living allowance Personal Independence Payment Child Benefit, Carer s Allowance (will remain) Council Tax Benefit (still considering how this will work) Contributory JSA and ESA (still considering how these will work)

6 Universal Credit One of the biggest behavioural changes required will be around the way that PEOPLE receiving universal credit will be responsible for paying their rent. Universal credit will be paid: As a single household payment On a calendar monthly basis Direct payment of housing costs to the claimant DWP To help claimants prepare we need to understand how low income households currently manage their money, and what types of support they will need to successfully budget under universal credit.

7 DWP Most radical change to the benefit system since Beveridge (introduced from 1945) 57 years ago A major transformation that will hopefully lead to Increasing employment opportunities and help in reducing poverty A major behaviour change over time with key changes in particular to the payment method and approach and financial budgeting capability Credit Unions / ABCUL are seen as important partners in helping us develop the UC service offering in particular developing services and products to support claimants through the change.

8 Under Occupation Example Under occupation of 1+ bedrooms 15% of IHA tenants will be affected (326 households) Potential loss of 220K+ in Housing Benefit per year On average, affected households will need to pay additional per week More than half of our tenants are only unoccupation by 1 bedroom

9 Housing Projects Wider R funding for Current Account Match funded Current Account running costs for 3 years Training of Housing Officers for knowledge and understanding of Credit Union Easy referral process for Tenant appointments re arrears Service level agreement to clarify expectations and responsibilities, reviewed 6 monthly. Loans for recycling project owned by Housing Association Trusted partners to enrol, interview and submit loan application at Recycling project shop Training of volunteers for collection points

10 The Potential Impact of Universal Credit Increase in housing arrears Increase in evictions/homelessness Increase in stress impacting on health & well being Increased unemployment Increase in easy access borrowing uptake Increase in personal debt at high interest rates

11 The Potential Relationship of Credit Unions & Universal Credit Direct bill/ rent payments Budget accounts Financial Capability referral Benefit/Debt referral Bank accounts, Pre paid cards Softening of the retrospective nature of payment Block rent payment to landlord per month

12 What Now! Develop a collaborative action plan Collaborative meetings to identify model of payment Customer profile from landlords to ascertain resource requirement for CU Jointly Inform members/tenants of the services available QUESTIONS?