Hundreds of thousands to be hit by freeze on benefit payments in big Universal Credit change

HUNDREDS of thousands of people on legacy benefits could see payments FROZEN after they move over to Universal Credit.

Millions of claimants will start switching from the old to new welfare system from May 9, initially with a small number of people.

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The government’s goal is to get all 2.6million people still on legacy benefits moved over to Universal Credit by the end of 2024.

So-called managed migration is starting up again after a pause during Covid.

Universal Credit is replacing six benefits under the old welfare system, commonly called legacy benefits. They are:

• Working Tax Credit
• Child Tax Credit
• income-based Jobseeker’s Allowance
• Income Support
• income-related Employment and Support Allowance
• Housing Benefit.

Anyone who has a change of circumstances may already be moved over to Universal Credit. And you can chose to switch if you think you’ll be better off.

Those who don’t move over under these circumstances between now and December 2024 will eventually switch under managed migration.

But as many as 900,000 people on legacy benefits are expected to see their payments frozen.

They will be protected from an immediate drop in income if their Universal Credit entitlement is less than on legacy benefits.

Transitional protection will top up their income to the same amount if they move under managed migration.

But these amounts will be eroded over time with rises to Universal Credit

Each year benefits are increased to keep up with rising prices.

This month the annual benefits uprating saw many benefits, including Universal Credit, go up by 3.1%.

And next year that rise could be 7%, as inflation is rocketing.

But anyone who is moved from legacy benefits to Universal Credit under managed migration and is given transitional protection could miss out on extra cash.

When Universal Credit rises it will reduce the transitional protection, effectively freezing benefit amounts overall in future years.

Transitional payments could also be lost if a claimant has a change in circumstances.

Announcing the major shake up to benefits, Therese Coffey, the work and pensions secretary, said:

“Over five million people are already supported by Universal Credit. It is a dynamic system which adjusts as people earn more or indeed less, and simplifies our safety net for those who cannot work.

“Parliament voted to end the complex web of six legacy benefits in 2012, and as this work approaches its conclusion we are fully transitioning to a modern benefit, suited to the 21st century.”

Who is affected?

The government’s own calculations show that of the 2.6million people currently on legacy benefits, it estimates that 1.4million will be better off on Universal Credit.

A further 300,000 would see no change, while around 900,000 will be worse off under Universal Credit.

Of those worse off an estimated 600,000 will get transitional payments to top up their income – but face potentially having their payments frozen in future.

The majority of those – around 400,000 – are claiming Employment Support Allowance (ESA).

Around 100,000 are on tax credits while fewer than 50,000 each on other legacy benefits are expected to be affected.

Examples of those who may be entitled to less on Universal Credit according to the government include:

• Households getting ESA who and the Severe Disability Premium and Enhanced Disability Premium
• Households with the lower disabled child addition on legacy benefits
• Self-employed households who are subject to the Minimum Income Floor after the 12 month grace period has ended
• In-work households that worked a specific number of hours (eg lone
  parent working 16 hours claiming Working Tax Credits)
• Households receiving tax credits with savings of more than £6,000 (and up to £16,000)

Anyone who moves over to Universal Credit because of a change in circumstances, or because they choose to, and not via managed migration, is not entitled to transitional protection.

That means you should check carefully before switching as you could be worse off.

A benefits checker can help you understand if you’ll be better off or not.

Using an online benefits calculator can help you compare and are free and easy to use from charities such as Turn2Us and EntitledTo, and it’s also worth asking them for advice.

Once you move over, you won’t be able to go back to legacy benefits.

Eventually anyone who hasn’t moved over to Universal Credit will be notified that they will be switched.

If you’re worse off under Universal Credit, you’ll get transitional payments to top up your income so you won’t be worse off.

This post first appeared on thesun.co.uk