The Universal Credit Scheme


The UK Government is rolling out a new benefits credit scheme called Universal Credits. This new scheme will merge six existing benefit payments into a single payment and rather than introducing the new scheme simultaneously across the nation, the decision has been made to do it district by district.

Because there is still a lot of confusion over the new scheme, I’ve decided to outline the main points of it in this post. Anyone who is about to go through a divorce, or who has been previously divorced, should take special note of the final section which outlines some special considerations that apply.

The new system is designed to be simpler

A fundamental problem with the existing benefits scheme is that it is far too complex. That complexity causes a lot of difficulties for people, and they can find themselves in all kinds of trouble such as investigations into benefit fraud and other things that may not really be their fault.

The introduction of a universal scheme will make the whole process easier for the recipients to understand and easier for the government to administer.

It can be hoped that this will lead to fewer improper fraud prosecutions, and more people being more easily able to claim their full entitlements under the new system.

How the new system will work

Instead of claiming multiple different credits from multiple sources, you will be able to claim all your eligible credits from a single source. Similarly, when advising of your assets and income, you should only have to declare them to the one source.

An important change will be that the new credit will come with obligations. The exact obligations will vary depending on your health and other circumstances, but you can be sure that it won’t simply be a matter of filling in a form and then sitting around waiting for the money to arrive.

Why are the changes being introduced?

The government believes that under the old system, people don’t have enough incentive to work. They believe that people on benefits are layabouts, or at least that is the image they want to portray to the media. The government believes that the introduction of these changes will give people more incentive to work.

In fact, looking at the scheme in the form it has been presented reveals that there may actually be less incentive for some people to work once the reforms are fully implemented. In June this year, the Resolution Foundation published a report addressing some of the flaws in the new scheme, and suggested ways that the government could further improve the scheme to ensure that it is fair and achieves its objectives. It remains to be seen if the government will act on the recommendations presented by the Resolution Foundation.

Some major disadvantages

Many people on benefits find it hard to make ends meet, in part because they normally receive their income fortnightly rather than weekly. When you have a low income, it can be difficult to make money stretch over an entire fortnight, and any unexpected expenses can really hurt.

Under the new system, recipients will be paid monthly. This will make managing their finances even more difficult and stressful.

Another big problem is that couples will receive a single payment instead of individual payments. This will add an extra layer of complexity to situations where a couple may wish to separate or where one of the partners needs to temporarily move away from home for some reason.

It is an unfair, harsh implementation that limits people’s freedom and could potentially lead to situations where one partner can gain financial control over the other, and you don’t need to be a genius to see how much trouble that could cause.

Hopefully these unfair changes will be repealed before they can do too much harm, but further change and revision to the system is only likely to happen with a change of government.

The means-testing criteria

The new system will take into account income that you earn from all sources except child maintenance payments. Assets will also be part of the assessment criteria. For now, the value of the family home has escaped the noose, but all other assets appear to be fair game. That includes any money you may have in savings. The cut-off point is a low £16,000.

Special considerations for divorce

If you are on benefits and you are receiving spousal maintenance payments, there is something important that you need to know about.

When the government introduced the new Universal Credit scheme, it updated a flaw in the previously existing policy.

Under the old system, people could be receiving quite large amounts in spousal maintenance payments and would still have been eligible to receive benefits because spousal maintenance payments were not considered to be income.

The new system turns that policy completely on its head, and all income is considered as part of the means-testing process, whatever the source of income may be, with the only exception being child support payments. That latter exception makes sense, because even though many people treat child support income as their own, technically it belongs to the child that it is paid on behalf of.

It is important for people who have been divorced, or who are about to become divorced, to understand the implications of these changes.

If you fail to declare your spousal maintenance payments as income, the authorities may regard that omission as attempted fraud.

The special status of child maintenance payments in comparison with spousal maintenance payments is something to consider if you have children and if the divorce is amicable.

But be careful – you may think that converting most of your spousal maintenance payment to a child maintenance payment is clever, but you must bear in mind that the government takes the view that such payments are intended exclusively for the benefit of the child.

If, for some reason, you were to be audited (for example, if somebody has implicated you in a fraud) then you could find yourself in a position of having to prove how you used the money to the benefit of the child.

How we can help

Hylton-Potts is dedicated to helping our clients with legal problems of all kinds. The main way that we can help people who are going to be applying for benefits under the Universal Credit scheme is to assist them by advising on how to deal with any asset problems they may face.

In particular, those who are divorcing or who are already in receipt of spousal maintenance payments should contact us on 020 7381 8111 (or send an email to [email protected]) for confidential advice, because the changes are going to be more significant to you than to the average benefits claimant.

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