Incapacity to ESA
Simon Osborne describes the rules providing for the transfer of incapacity benefits claimants onto employment and support allowance (ESA).
Two parallel benefit systems for people unable to work because of sickness or disability have been in place since 27 October 2008:
- ESA for new claimants, who must establish they have ‘limited capability for work’ by satisfying the ‘work capability assessment’ (WCA);
- incapacity benefit (IB), severe disablement allowance (SDA) and income support on the grounds of disability1 (referred to generically as ‘incapacity benefits’) for existing claimants, who must establish they are ‘incapable of work’ by satisfying the personal capability assessment (PCA).
The Government always intended this two-system approach to be temporary and has now introduced rules which provide for the transfer (sometimes called ‘migration’) of existing awards of incapacity benefits to awards of ESA.
The rules are set out in the Employment and Support Allowance (Transitional Provisions, Housing Benefit and Council Tax Benefit) (Existing Awards) Regulations 2010.2Most claimants are currently expected to be subject to the transfer process between 2011 and 2014 (see ‘the timetable’ below), triggered by the date of their next scheduled PCA. Their incapacity benefits awards will be converted to ESA, provided they satisfy the normal ESA rules, including the WCA. They will not, however, be required to make a fresh claim for ESA. Claimants transferred onto ESA will be subject (with a few exceptions) to the usual ESA rules thereafter.
Claimants who do not satisfy the conditions of entitlement to ESA at the point of transfer will not be awarded ESA and their award of incapacity benefit will also terminate. Some will be able to claim jobseeker’s allowance (JSA), if they satisfy the labour market conditions, but there is concern that others may be left without entitlement to benefits. The current rules allowing repeat ‘linked’ claims of incapacity benefits (eg, for ‘welfare-to-work beneficiaries’) will also be revoked on 31 January 2011, so that any new claim for an incapacity benefit will be treated as a claim for ESA.
The official intention is that there will be no financial loss at the point of transfer.3
Claimants whose ESA award would be lower than their IB award will receive a ‘transitional amount’ to cover the loss, but no transitional amounts will be paid after 2020.
The transfer process overall is expected to start in 2011 and be complete by April 2014. Most of the regulations actually come into force on 1 October 2010. CPAG understands, however, that this is mainly to provide for an initial trialling of some ‘sample’ cases to test the system, and that in the vast majority of cases, the transfer process will not begin until February 2011 at the earliest (in practice, it is understood the process may not get fully underway until April 2011), although note that the new government may wish to alter the timetable.
Revocation of the rules allowing repeat linked claims of incapacity benefits will not take effect until 31 January 2011.4Such claims will no longer be possible from that date.
The rules themselves do not specify when individual incapacity benefits claimants will enter the transfer process, beyond saying that they may be issued with a notice starting the process ‘at any time’.5In practice, the process will be triggered by the date of their next scheduled PCA. There are no plans for transfer on the basis of age or postcode. It is understood that IB and IS claimants will be transferred first, followed by SDA claimants, and then claimants of national insurance (NI) contribution credits (on the basis of incapacity) only. At the time of writing, it was not clear how claimants exempt from the PCA (eg, by virtue of having a severe condition) would be included in the transfer timetable.
Who will be transferred
Claimants with an ‘existing award’ of an incapacity benefit may be issued with a notice after 1 October 2010 (in most cases this is expected to be from February 2011 – see above) which must include prescribed information, including notification that their award will be converted to an ESA award if the relevant conditions are satisfied, and that their incapacity benefit will be terminated if those conditions are not satisfied. The main category of existing claimant who may not be transferred is anyone who reaches pension age before 6 April 2014.6
Once initiated by the notice, the transfer process is then carried out by the making of a
‘conversion decision’. In order to qualify for conversion to an ESA award, the ‘notified’ person must be entitled to an existing incapacity benefits award and satisfy the basic ESA rules, including that s/he:7
- has limited capability for work – ie, satisfies the WCA;
- is aged 16 or over but under pension age;
- is in Great Britain;
- is not entitled to statutory sick pay;
- is not entitled to JSA (or is not a member of a couple entitled to joint-claim JSA).
The claimant is subject to the usual ESA rules relating to claims, decisions and appeals, including the requirement to provide information and attend a medical examination in connection with the WCA, and ‘conditionality’, including taking part in work-focused interviews.8
For contributory ESA, NI contribution tests will not need to be resatisfied.9For income-related ESA, the normal rules including the means test and the right-to-reside test will apply, but students transferring from IS will be eligible even if they are not in receipt of DLA.10
Awards of IB and SDA will be converted to awards of contributory ESA, and awards of IS will be converted to awards of income-related ESA (although, arguably, the rules are a little imprecise about this).
After conversion the normal ESA rules will continue to apply11(subject to the above).
The claimant must be notified of the conversion decision. Where the claimant is entitled to ESA on conversion, the decision must state the amount of the ESA award (see below).12
Amount of ESA
There are three steps in deciding how much ESA a transferred claimant is entitled to.13
Where ESA is awarded on conversion, the first step is that ESA is calculated in the usual way, as if the assessment phase has ended – ie, it will include either the work-related activity component or the support component straightaway.
The second step is a comparison with the amount of the incapacity benefit the claimant has been getting, but not all elements of awards are taken into account. For IB and SDA, the comparison is with contributory ESA, including the additional component. The IB taken into account is the relevant short-term or long-term rate, including age-related additions (in transitional invalidity benefit cases, the full amount is taken into account). In both IB and SDA, according to official intent (but at time of writing apparently not the regulations), dependant additions are also included in the comparison.14For IS, the comparison is between the income-related ESA applicable amount including the appropriate additional component but excluding housing costs, and the claimant’s IS award, excluding housing costs and any amounts for children.
The third step is that if the amount of ESA is lower than the amount of the incapacity benefit award as calculated above, a ‘transitional addition’ is made to the ESA (if the amount is higher, the ESA is not reduced). The amount of the transitional addition is simply the difference between the incapacity benefit and the ESA. The transitional addition is not uprated, and is reduced (not below nil) by annual increases in ESA rates, and by the amount of additions for dependants formerly paid with the claimant’s IB or SDA where the conditions for those are no longer satisfied. Any transitional addition still being paid will cease on 5 April 2020.
Those on IB and SDA who claimed before 6 April 2001 or are entitled to the highest rate care component of disability living allowance will continue to have any occupational pension fully disregarded on transfer to contributory ESA, unlike other ESA claimants who have 50 per cent of any occupational pension over £85 a week deducted from their entitlement.15
Where a claimant’s housing benefit (HB) and/or council tax benefit (CTB) would be subject to reduction because s/he has become entitled to contributory ESA (or ESA in youth), or is appealing a conversion decision but is not entitled to income-related ESA, the reduction is made up by the payment of an HB/CTB ‘transitional addition’. The transitional addition is reduced by the amount of increases in HB/CTB following changes in circumstance. Any remaining additions will cease on 5 April 2020.
Claimants subject to the transfer process (‘notified persons’) must be given a conversion decision which states whether or not their existing incapacity benefit award qualifies for conversion to ESA. The usual revision, supersession and appeal provisions apply to these decisions.16Note that usually conversion decisions do not actually take effect for two weeks,17although the appeal time limit will still start from the date the decision was sent. ESA is payable pending an appeal against a conversion decision that the claimant does not have limited capability for work in accordance with the normal rules.18
Where the award does not qualify for conversion, entitlement to the incapacity benefit is normally terminated as a consequence of the conversion decision. Exceptions apply, including where it is decided (by the DWP or a tribunal) that the claimant had good cause for not providing evidence or attending a medical for the WCA. In such cases, the incapacity benefit is reinstated and a new conversion decision must be made.19
Please be aware that welfare rights law and guidance change frequently. Therefore older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.
- 1. For example, those getting IS on the basis of incapacity for work, or as a disabled or deaf student, blind person or disabled worker
- 2. SI 2010 No.875
- 3. Explanatory Memorandum to the Regulations, para 7.5; Hansard 20 February 2007, column GC8/GC9
- 4. Regulation 1(3) and 24
- 5. Regulation 4
- 6. Regulation 4
- 7. Regulations 5 -7; Schedule 1
- 8. Regulation 6
- 9. Schedule 1 paras 2 and 6 modify section 1 and Schedule 1 paras 1-5 of the Welfare Reform Act 2007 accordingly
- 10. Schedule 1 para 2 of the Regulations. The requirement for a student to be on DLA to be entitled to ESA is omitted in transfer from IS cases, a change lobbied for by CPAG.
- 11. Regulation 16
- 12. Regulation 5
- 13. Regulations 8 -11; 18 -21; Schedule 5
- 14. Regulation 10; Explanatory notes para 33. Regarding dependants, no reference is made to them at regulation 10(5), and even para 33 of the notes is only in terms of adult dependency additions in IB. CPAG has alerted the DWP to this apparent omission, as the transitional award can be reduced when the conditions for dependant increases are lost.
- 15. Schedule 1 para 11
- 16. Regulation 16; Schedule 2 para 5
- 17. Regulation 13
- 18. Schedule 2 para 10
- 19. Regulation 15