Although Universal Credit was introduced to simplify the benefits system, it may affect your debt plan payment. Find out how in this blog.
Introduced in October 2013, Universal Credit the biggest change to the UK welfare system since its beginning was designed to support people out of work or those who have a low income.
Instead of numerous different monthly payments, Universal Credit combined the following six different benefits into one single payment:
- Income Support
- Income-based Jobseeker’s Allowance
- Income-related Employment Support Allowance
- Housing Benefit
- Working Tax Credit
- Child Tax Credit
It is estimated that by 2022, over 7 million families will receive Universal Credit.
Although the government introduced Universal Credit to “make the benefit system fairer and more affordable”, “reduce poverty, worklessness and welfare dependency” and “reduce levels of fraud and error”*, evidence suggests that in some cases, people in receipt of Universal Credit are more likely to have issues with debt than those on the previous benefits system, with Citizens Advice claiming that 26% of people they helped with Universal Credit needed help with debt, as opposed to 19% on the previous benefits system.
The following were found to be the main issues that were either causing or worsening debt problems faced by people on Universal Credit:
The 6 week waiting period
With most people facing a six week waiting period for their first Universal Credit payment, it is of no surprise to learn that this initial lack of funds can cause or increase existing debt problems, with rent arrears in particular being an issue. It is thought that a lot of claimants are struggling to manage the initial 6 week period as they are used to receiving various smaller payments throughout the month, and therefore aren’t used to budgeting from one payment per month as opposed to frequent payments.
During the initial 6 week waiting period, if any administrative errors occur, your payment could be delayed further. Citizens Advice state that 1 in 3 of their Universal Credit clients waited more than 6 weeks for their first payment, with up to 11% waiting over 10 weeks. To avoid delays in your payment, ensure that your claim is filed correctly to the best of your knowledge when you submit it.
To survive the initial 6 week wait, it is important to try and budget accordingly and realistically. List out your upcoming expenses, and hold back on unnecessary spending if possible.
For further advice on coping with the 6 week waiting period, contact MoneyPlus today.
It can be difficult to adjust to single monthly payments, rather than more frequent payments throughout the month. Due to this, it can be easy to find yourself in arrears on your bills or to be left without money at the end of the month, which can only worsen debt problems if you are having to source income from alternative sources.
If you are struggling with budgeting on a single monthly payment, try out the below tips:
- Create a full list of your monthly outgoings. This can help you see how much you are spending and when.
- Try to have some “emergency” money saved aside, in case anything happens financially during the month that you weren’t expecting.
- Cut back on unnecessary spending.
- Track the cost of your essentials for a month and work out how much you have left over at the end of the month.
- Shop around. Use a price comparison website to compare the prices of your weekly shop, bills, and more.
- Take our debt test to find out how we can help you.
Deductions from Universal Credit
The Department of Work and Pensions can deduct money straight from your Universal Credit payment to repay previous debts such as Council Tax arrears or if you have received previous benefit overpayments.
If you know you have outstanding debts from previous benefit overpayments, rent arrears, or Council Tax arrears, try to make a clear list of these so you can prepare to budget for a lower Universal Credit payment.
If you are receiving or about to start your claim for Universal Credit and you are concerned about managing your debts, take our debt test to find out how we can help you with your finances.