Universal credit advances
Robbie Spence considers rules and practices that apply to payments in advance of universal credit (UC).
The need for an advance of UC could arise for various reasons: the seven ‘waiting days,’1 the time lag of one month plus one week before payment on a new claim is made (above all on transfer from a benefit that is paid weekly or fortnightly), running out of cash after leaving a previous job with a week’s wage rather than a month’s wage2 and the DWP’s general, chronic, administrative delay in processing claims. So now is a good time to look at UC advances alongside other short-term benefit advances.
CPAG has published a new resource page to supplement our existing guide to short-term benefit advances. Some of the key points are highlighted and summarised here.
When can a claimant get a UC advance?
A claimant may be able to get an advance of UC in three situations: on a new claim, after a change of circumstances or after a ‘benefit transfer’ from so-called ‘legacy’ benefits. However, confusion may arise about certain conditions that may or may not apply.
Firstly, does the claimant have to be in ‘financial need’? This is defined in the Payments on Account Regulations 2013 as ‘serious risk of damage to the health or safety of [the claimant] or any member of their family’.3 The answer is yes, but note that, in the case of ‘benefit transfers’, the DWP’s webpage on UC meanings of terms seems to assume that claimants will be in financial need by deﬁnition:4
A Universal Credit Advance (benefit transfer) is an interest-free advance of benefit for claimants who are moving over to Universal Credit from relevant legacy benefits and during the first month are assumed to be in ﬁnancial need – all they need to do is request an advance for it to be paid. It will be recovered over a set period of time. [Emphasis added]
On the face of it, a UC advance should be available on application in this situation.
Secondly, in 2015 there was an improvement to the time limit (specified in guidance, not law) within which claimants can apply for a UC advance for a new claim or a change of circumstance: it is within three working days of the end of their assessment month.5 By contrast, for a benefit transfer advance (the type of advance with the most relaxed rules), claimants can apply at any time during their first assessment month.6
How much is the maximum advance?
Guidance, not law, sets maximum amounts. The most a claimant can get depends on two variables and the maximum is whichever is lower. The ‘repayment cap’ is 40 per cent of the claimant’s monthly standard allowance for six months (longer if exceptional circumstances apply7). The ‘maximum advance’ is 50 per cent of the claimant’s estimated award (or, on change of circumstance, 50 per cent of the expected increase).
CPAG’s new resource page gives a couple of examples: one where the repayment cap is very much lower than maximum advance; the other where the maximum advance is lower than the repayment cap – but only just.
How much is the recovery rate?
Here, there is a possible conflict between regulations and guidance. The power to recover UC advances is contained in regulation 10 of the Social Security (Payments on Account) Regulations 2013. But this does not specify the rate of recovery. It merely allows recovery by deductions from ongoing UC ‘where it is practicable to do so’. Rather, it is regulation 11 of the Social Security (Overpayments and Recovery) Regulations 2013 that lays down the maximum rates of recovery for all types of overpayment of UC, including UC advances. Regulation 11 provides for rates of:
- 15 per cent of the UC standard allowance if there is no earned income; or
- 25 per cent of he standard allowance if there is earned income; or
- 40 per cent of the standard allowance in cases of fraud or deception or where there is repayment of a hardship payment.
CPAG believes that the deduction rate should be one of these rates. However, DWP guidance, in stating that the repayment cap is 40 per cent of the monthly standard allowance,8 is effectively saying that the default rate of recovery is 40 per cent. The DWP takes the view that regulation 10 gives a broader power and it is only if it has to ‘forcibly recover’ (eg, where the claimant will not agree to a 40 per cent rate) that it must apply the 15 or 25 per cent rate.
CPAG believes, however, that it is the regulations rather than the guidance that should apply. So, if the DWP insists on a rate of recovery of more than 15 per cent of the standard allowance (or 25 per cent where a claimant has earnings), what can advisers do?
There is a right of appeal against a decision about the rate of recovery.9 Arguably, therefore, once a claimant has been awarded an advance with a repayment rate of 40 per cent, s/he can appeal on the ground that the DWP has contravened regulation 11.
But resisting DWP insistence on a 40 per cent deduction rate before a decision on the advance is made poses difficulties, as it may lead to a refusal of an advance, and there is no right of appeal against such a DWP refusal. Judicial review may be possible in individual cases, but advice should be sought.
Asking for repayment to be deferred
Repayment normally starts from the next UC pay day after the claimant gets his/her advance. In exceptional circumstances, the start date can be deferred (postponed) for up to three months. Unhelpfully, DWP guidance states that the time to request to defer the repayment start date does not include the day of application itself.10 But quite how soon after the date of application the DWP will entertain a request to defer is, for the time being, unknown.
CPAG’s view is that everyone who is transferring from legacy benefits should get a UC advance on application as they are assumedto be in financial need by deﬁnition (according to the three working days of the end of the assessment month.
Repayments can be deferred (postponed) for up to three months in exceptional circumstances.
Rates of recovery should be 15 per cent of the standard allowance where there is no earned income, or 25 per cent where there is earned income. The 40 per cent rate should not be the default rate, but this is the DWP practice. However, disputing that before an award is made is difficult, and may risk outright refusal of an award. While there is the right of appeal about the 40 per cent repayment rate once an advance has been made, in practical terms it would be far better if the DWP could re-examine its approach and, in particular, ask itself why in insisting on a 40 per cent default recovery rate it should treat all recipients of UC advances as if they had committed fraud.
Please be aware that welfare rights law and guidance change frequently. Older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.
- 1. The Universal Credit and Miscellaneous Amendments (No.2) Regulations 2014No. 2888, regulation 5(1)(a) amended the Social Security (Payments on Account of Benefit) Regulations 2013 (SI 2013/383) to ensure that where the claimant has to serve waiting days before certain benefits are due to be paid, a short-term benefit advance may be paid during (but not for) those days.
- 2. Among those who earn less than £10,000 a year, only about half receive wages monthly. The rest are paid weekly. They are the ones most likely to be UC claimants.
- 3. Regulation 7 of the Social Security (Payments on Account of Benefit) Regulations 2013 No.383
- 4. https://about.universalcredit.service.gov.uk/kms/SitePages/home.htm
- 5. DWP guidance on Universal Credit Advances, section II.2: go to www.cpag.org.uk/stba/uc-advances and click on the link at the top of the right hand margin
- 6. DWP guidance on Universal Credit Advances, section II.2
- 7. DWP guidance on Universal Credit Advances, section II.11
- 8. DWP guidance on Universal Credit Advances, section II.10
- 9. Regulation 20 the Social Security (Payments on Account of Benefit) Regulations 2013
- 10. DWP guidance on Universal Credit Advances, section II.3