Millions NEED to switch to Universal Credit – you can beat the five-week wait for cash
MILLIONS of households on various legacy benefits are being asked to switch to Universal Credit as part of a massive wealth change.
All two million legacy benefit claimants must move to Universal Credit (UC) or pension credit by the end of March 2025, through a process known as managed migration.
Universal Credit was created to replace old benefits.
Eligible households will be contacted with letters in the post explaining how they can make the switch from tax credits to Universal Credit.
Once you receive a letter, you have three months to switch. Otherwise, you may lose your current benefits.
However, the latest statistics show that more than 31,000 people with tax benefits who were invited to move to UC have not made a claim and have had their benefits stopped.
There could be a number of reasons for this, including the issue of the five-week wait for cash.
When you first sign up to the Universal Credit scheme, there can be quite a long wait for your first payment.
In some cases it can take up to five weeks before you are in the system and this can cause problems for many people.
Many households struggle to afford basic necessities during this period as other pre-existing benefits are usually canceled.
For example, if you claim tax credits under the managed migration process, your entitlement will stop as soon as you apply for Universal Credit.
However, those receiving income support, housing benefit, means-tested Jobseeker’s Allowance (JSA), means-tested Employment and Support Allowance (ESA) will continue to receive their old payments for a further two weeks after making a Universal Credit application.
This means there are still three weeks without benefits.
However, households waiting for their first Universal Credit payment can apply for an advance loan.
The advance loan is designed to help you bridge the gap while you wait for your first Universal Credit payment.
However, keep in mind that it is not free cash, it is just a loan and the money does have to be paid back.
This means that the amount of Universal Credit you receive will be reduced until the cost of the loan is repaid.
However, it can still be a lifeline for some. Here’s exactly how it works.
How much can I get?
Claimants can borrow up to 100% of their estimated payment, but you can also ask for less.
The advantage of this loan is that it is interest-free, so if you do need to borrow, it is wise to do so rather than incurring debt elsewhere.
However, remember that you will have to pay it back, so think carefully before signing up.
The money will be transferred to you within three working days and must remain for the full five weeks before your first payment.
How do I request an advance?
You can apply for a Universal Credit advance before you receive your first payment from UC.
There are several ways in which you can apply for the loan.
You can sign up with the help of your Jobcente work coach, or by calling the Universal Credit helpline.
You can apply for the loan from the time you first apply for Universal Credit until the date you receive your first payment.
You will need to explain why you think you need the advance, provide information to verify your identity (during your first Jobcentre Plus interview) and provide banking details for the advance.
If you are unable to open a bank account, please contact your work coach.
You will usually be told the same day whether you will receive your advance loan.
If you need help, you can call the Universal Credit helpline on 0800 328 5644.
The lines are open Monday to Friday from 8am to 6pm.
When do I have to repay an advance?
You are expected to repay the loan within the first 24 months of obtaining it.
To pay it back, the DWP will deduct an amount from your Universal Credit payment every month.
You can calculate how much will be deducted from your payment each month by dividing the full cost of the loan by 24.
For example, if you borrowed £1,500, £62.50 will be deducted from your Universal Credit payment each month.
You can request to defer your repayments for up to three months if you are unable to pay them, but this is only allowed in exceptional circumstances.
If you call the helpline and are successful in your application, they will tell you over the phone:
- How much you can take
- The monthly repayment amounts
- When the first payment is due
However, you still have to pay it back within 12 months if you applied for the advance before April 12 this year.
You only have six months if you have submitted the application due to changed circumstances. You can then request a postponement of repayment by one month.
Am I better off with Universal Credit?
According to the government, around 1.4 million people on old benefits will be better off after switching to Universal Credit.
Another 300,000 would see no change in payments, while around 900,000 will be worse off under Universal Credit.
About 600,000 are expected to receive additional payments if they move under managed migration, so they don’t immediately lose out on money.
The majority of these – around 400,000 – are claiming Employment Support Allowance (ESA).
About 100,000 people benefit from tax credits, while fewer than 50,000 of them are expected to experience other inheritance benefits.
Examples of those who the government believes may be entitled to less on Universal Credit include:
- Households receive ESA-who and the premium for serious disability and an increased disability premium
- Households with a child with a lower disability receive a supplement on top of the old benefits
- Self-employed households that fall below the minimum income limit after the 12-month grace period expires
- Working households who have worked a certain number of hours (for example a single parent who works 16 hours and is entitled to employment tax credits
- Households receiving tax benefits with savings over £6,000 (and up to £16,000)
But if they don’t switch in the future, they risk missing out on a future benefit increase and having their payments frozen.
Those who voluntarily move and are worse off will not receive these additional payments and could lose money.
Those who miss the deadline and file a claim later may also not receive this transitional protection.
The clock starts ticking on the three-month countdown from the date of the first letter, and reminders are sent via mail and text message.
After this, there will be a one-month grace period during which any Universal Credit claim will retroactively expire and transitional protection can still be granted.