A major report has revealed which people have missed out most in the reform of the benefits system moving people across into Universal Credit. The Institute for Fiscal Studies (IFS) looked into the changes from the Department for Work and Pensions which are currently taking place.
People on some benefits have been receiving letters telling them they have to change and apply for Universal Credit (UC) - failure to take action could mean their payments are totally stopped. The ‘legacy’ benefits concerned are Income Support and Tax Credits with Housing Benefit, Housing Benefit, ESA (Income Based) with Child Tax Credit, Tax Credits and JSA.
When the process is completed eight million people will have switched over and the IFS report looked into the impact on the finances of those who have already switched. Worryingly one group of people were missing out under the change to the tune of £4,000.
These were households with one adult above and one adult below state pension age which were described as ‘significantly worse off under the UC system than under legacy benefits’. The IFS said: “Because the reform means they are entitled to UC – rather than the much more generous pension credit – 70% of these households (180,000) lose out by more than £4,000 per year under the UC system. Households with over £16,000 of assets and the self-employed can also lose out significantly under the UC system.”
The report found couples with children are the most likely to gain under UC compared with the legacy system. 72% gain by at least £200 a year, compared with just 22% who lose out by at least that much. Households in work and renter households also tend to gain as benefits are typically withdrawn more slowly as earnings rise under UC.
The IFS said: “The UC reform makes large numbers of households worse off, even though the average household gains from it. Families receiving disability benefits, mixed-age couples, the self-employed and those failing a harsher assets test are much worse off under the UC system than under legacy benefits.
“There are transitional protections in place to ensure families do not lose out when moving from the legacy system to UC in the short run. But under current plans, they will still be left worse off in the long run. One policy option for a future government would be to permanently compensate these and other families who are left worse off under UC. But doing so would be expensive, making the UC reform a larger net giveaway than it already is.”
The transition to UC has a timetable this year with households getting letters through asking them to take action. So far in 2024 those targeted are Income Support and Tax Credits with Housing Benefit from April, Housing Benefit in June.
In July people on ESA (Income Based) with Child Tax Credit will get letters, in August Tax Credits (Pension Aged including mixed aged couples) and in September: JSA (Income Based).
The switchover started last year focusing on tax credits and the DWP said that 130,000 people have made the change. However concerns have been raised that people, especially those who are vulnerable, are not being given enough help to make the change as it is reliant on them making the application.
Last month Work and Pensions Topical Questions in the House of Commons was told that people are losing out on £3,200 a year by failing to switch their benefits over. It was thought that about a quarter of people were not actually applying for the change.
Migration Notices will be issued to all legacy benefit types, apart from ESA claimants, over the next few months.
