As the deadline of December 2024 fast approaches to move legacy benefit claimants onto Universal Credit, Society Matters trainer Chris Errington discusses what claimants need to know to avoid being financially worse off.
The current rollout to move legacy benefit claimants onto Universal Credit is picking up pace. Through a process called ‘Managed Migration’, the government are sending letters to everyone still claiming legacy benefits, such as tax credits, income-based Job-Seekers Allowance or income-related Employment Support Allowance (among others).
For those receiving one of these letters, they must apply for Universal Credit by the deadline shown on the letter (usually 3 months from the notice) or risk losing their current benefits.
According to the DWP 1.7 million households were claiming legacy benefits as of November 2023.
Migration notices are being sent to over 500,000 claimants in 2023/24 for those in receipt of tax credits only. By September 2024, the DWP will be contacting 440,000 households that claim tax credits and receive income support, income-based jobseekers Allowance and Housing benefit.
For those claiming income related Employment and Support Allowance (ESA) by itself or with housing benefit, the deadline has been delayed until 2028-29. This is impacting around 600,000 claimants.
When moving over to Universal Credit some claimants will be worse off than others. This is due to certain premium additions that can be added to legacy benefits but are not available on Universal Credit. A common example would be the Severe Disability Premium. When claimants on legacy benefits are moving to Universal Credit, the Severe Disability Premium will be part of the calculation.
If you have a lower entitlement, you will be eligible for ‘transitional protection’ payments. This is a top up to make up the shortfall in your benefits so that you are not in financial detriment. This is only available to those who have received a ‘Managed Migration’ notice.
If the claimant misses the deadline stated on the letter they would not miss out on the transitional protection as they also have a ‘Final Deadline’ date which would give them an additional month to make the application. This would be the last day of the first assessment period. For example, if the deadline on the migration notice is set at 7th March, the final deadline would be 6th April. Due to Universal Credit being backdated, the claimant shouldn’t see an interruption to their benefit.
Claimants will be at risk of losing the transitional protection if they do not make a claim before the final deadline. This could make a claimant significantly worse off financially. In addition, Their legacy benefits will have ended from the day before the deadline day. There would be no Universal Credit award until they submitted a claim (subject to the usual rules on backdating a Universal Credit claim by up to one month), so there could be a gap between their legacy benefit award and their Universal Credit award.
If a claim for Universal Credit is not successful, and the claimant makes another claim then they could be at risk of losing the transitional protection.
Two types of transitional protection exist under Universal Credit; a capital disregard and a Student Exemption.
The capital disregard is for claimants claiming benefits that allow savings and capital to be over £16,000. Universal Credit has an upper capital limit of £16,000, meaning that you would not qualify for a claim if your capital were above this. Those subject to managed migration will have any capital above £16,000 disregarded when assessing the eligibility. Any capital up to £16,000 is treated in the normal way in the Means Test. This could result in the Universal Credit award being lower than the amount the client was receiving on Working Tax Credits, for example. The client would be entitled to the transitional protection to make up the shortfall when they first move over, however this is something that would be taken away when circumstances change. In addition, the capital disregard is only available for a maximum of 12 assessment periods. A claimant may be at risk of losing their Universal Credit entitlement if their savings dip below £16,000 and later rise above it.
The student exemption is relevant where a client does not meet the basic conditions for UC because of being a full-time student on the day their legacy benefits stop. That basic condition will not apply whilst the client is undertaking a full-time course. The exemption will only last until the course ends. If they decide to undertake another course, then the student exemption will no longer apply.
In some circumstances all types of transitional protection will end. This will happen if:
- The client has a consistent drop in earnings.
- If the clients’ earnings drop below the administrative earnings threshold for 3 consecutive assessment periods. The administrative earnings threshold is currently £743 for a single claimant or £1,189 for a couple.
- If a couple separates or a new couple is formed.
The Transitional element could be subject to ‘erosion’. This means that the award could be reduced by increases in the Universal Credit standard allowance or other elements (excluding the childcare element). It is important to note that this will not be impacted by increases in income, an increase in income however will reduce the award in the usual way.
It is important that claimants are making a claim during the 3-month period to avoid missing out on the transitional protection they may be entitled to. A report published by the National Audit office found that 31,000 of the cases closed by the DWP resulted in claimants having their legacy benefits stopped because they did not make a Universal Credit claim on time. We at Citizens Advice Gateshead know all too well just how difficult the move from legacy benefits to Universal Credit can be. Ensuring people get that transitional protection wherever possible is key if we are to best support people in ‘weathering the storm’ of moving to a whole new system.