Ask CPAG Online - What are UC Alternative Payment Arrangements?

This section explains how universal credit (UC) is normally paid, and what alternative payment arrangements are made by the DWP.

How is UC normally paid?

The default method for paying UC is:

  • monthly in arrears;

  • by direct credit transfer into a claimant's (or appointee's) bank account.

The payment of all elements of UC, including allowances for children and housing costs for rent, in a single monthly sum into a claimant's bank account represents a significant change. The legacy benefits UC is replacing (income support, income-based jobseeker's allowance, income-related employment and support allowance, housing benefit and tax credits) are all paid separately, usually every fortnight (tax credits can be paid weekly or four weekly). Housing benefit is frequently paid directly to the claimant's landlord, and this is sometimes a mandatory arrangement where there are rent arrears. As with legacy benefits, UC housing costs for owner occupier loan interest payments are normally paid directly to the lender.

The Government's view is that monthly lump sum payments to UC claimants encourages self-reliance and budgeting skills, smoothing the transition into work, for which most employees are paid monthly in arrears.

Critics are concerned that:

  • many claimants may struggle to budget on a monthly basis for weekly or daily essential expenditure;

  • some claimants could run out of money before their UC payday because of pressing debts or misspending;

  • tenants could find themselves unable to pay their rent when it is due;

  • claimants who run out of money or whose UC payments are delayed may turn to expensive 'pay day loans', or discretionary 'local welfare assistance' (including foodbanks);

  • the first payment of UC is not made for 5 or 6 weeks creating debt and rent arrears, notwithstanding the availability of short-term advances (loans) of UC.

What alternative payment arrangements are made by the DWP?

The Government accepts that some claimants need additional support to adjust to and manage the normal UC payment arrangements. In addition to offering money advice to all new claimants (via referals by DWP 'work coaches' to online services, or to local authorities and specialist advice services), the DWP has developed guidance on how to exercise its discretion to make alternative payment arrangements.

The guidance sets out the following three types of alternative payment arrangements, with details of when and how they should be made, administered and reviewed:

  • payment of the UC housing costs element for rent directly to the claimant's landlord (referred to as 'managed payments');

  • twice monthly payments (or exceptionally four payments per month);

  • split payments to different partners in a couple.

For more details, see When can you get an Alternative Payment Arrangement?