Warning as 220,000 benefits stand to lose £1,000 due to upheaval
THOUSANDS of households on legacy benefits have been given an urgent warning after thousands of households had their payments reduced to zero.
It comes as the government continues to move all two million legacy benefit claimants to Universal Credit (UC) or pension credits by the end of March 2025, under a process known as managed migration.
Universal Credit was created to replace old benefits.
The managed migration process started in May last year after a successful pilot in July 2019.
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.
But more than one in five people with tax benefits who were invited to move to UC failed to make a claim and had their benefits stopped, according to a new report from the National Audit Office (NAO).
By the end of December 2023, the Department for Work and Pensions (DWP) had sent out almost 350,000 migration notices advising older benefit claimants that they should apply for UC if they wanted to continue receiving financial support.
However, the DWP has already closed almost 150,000 of these migration cases, and 31,000 closed cases resulted in the claimant’s inheritance benefits being stopped because he had not made a claim for UC.
Gareth Davies, head of the NAO, said: “DWP is on track to move claimants from legacy benefits to Universal Credit.
“But it needs to ensure that people who have not switched to Universal Credit get the benefits they are entitled to.”
A DWP spokesperson said: “The vast majority of tax credit claimants have successfully moved to Universal Credit, allowing them to access the vital safety net provided to millions as they build towards financial independence.”
“As the NAO has recognised, evidence shows that Universal Credit has a sustained positive impact on the labor market, and people on Universal Credit are likely to be back in work six months after making a claim.
“There is also a range of support available to help people move, including extensions for those who need extra support.”
Last month, the government announced how many migration messages it wants to send in the coming financial year.
This will start from April with income support workers and those claiming tax credits with housing allowance.
Applicants for housing allowance will then be contacted in June.
Those claiming income support and tax credits with housing allowance will receive letters from April.
Applicants for housing allowance will then be contacted in June.
Anyone receiving Employment and Support Allowance (ESA) and child tax credits will be asked to switch from July.
Meanwhile, Jobseeker’s Allowance (JSA) applicants will be contacted from September.
The Sun previously reported that those claiming tax benefits who have reached state pension age will be asked to apply for Universal Credit or pension credit from August.
Those claiming only income-related ESA will not be moved until 2028.
In 2024/2025, the DWP estimates that approximately 440,000 people will be contacted, with the following breakdown:
- Tax credits and housing allowance – 120,000
- Income support – 110,000
- Rent allowance only – 100,000
- Income-based ESA with child tax credits – 90,000
- Income-based JSA – 20,000
- Tax credits only – 10,000
What is managed migration?
UNIVERSAL Credit replaces six benefits under the old social security system, commonly referred to as legacy benefits. They are:
- Working tax credit
- Child tax credit
- Income-related jobseeker’s allowance
- Income support
- income-related employment and support benefit
- Housing benefit.
Now, if you have any of these benefits, you can choose to switch, but you may not be better off.
You’ll need to carefully consider what switching will mean for your money, as you won’t be able to go back once you have Universal Credit.
Using an online benefits calculator can help you compare. It’s free and easy to use with charities like Turn2Us and EntitledTo, and it’s worth asking them for advice too.
You can switch to Universal Credit if there is a change in your circumstances, such as a move, a change in working hours or if you have a baby.
But eventually everyone will switch to Universal Credit.
This is known as “managed migration”.
Experts have previously warned that managed migration puts vulnerable people at risk of losing money.
Top bosses at charities including Mind, The Trussell Trust, Turn2Us and the Money and Mental Health Policy Institute said in 2022 that around 700,000 people with mental health problems, learning disabilities and dementia could struggle to take part in the trial.
More than 20 organizations have called on the government to halt managed migration to fix flaws in the system that could allow those at risk to fall through.
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.
Help with claiming Universal Credit
In addition to benefit calculators, anyone switching from tax benefits to UC can find help in a number of places.
You can visit your local employment center, but search for find-your-nearest-jobcentre.dwp.gov.uk/.
There is also a free service called Help to Claim from Citizen’s Advice:
You can also get help from advisors online at www.citizensadvice.org.uk/about-us/contact-us/contact-us/help-to-claim/.