DWP Carer's Allowance warning over major change to reduce overpayments

The Department for Work and Pensions (DWP) has announced plans to trial a new alert system to notify Carer's Allowance claimants of potential overpayments. This comes as thousands are forced to repay the benefit due to exceeding earnings limits, with many unaware they had breached the rules.

Work and Pensions Secretary Mel Stride revealed that the DWP is grappling with £250 million in overpayment of the allowance, with an average debt of £1,800 owed by 134,000 individuals. The current Carer's Allowance, which pays £81.90 per week to those dedicating at least 35 hours a week to caring for someone, requires recipients to have a take-home pay of £151 or less per week after tax, National Insurance and expenses.

Exceeding this amount necessitates the repayment of that week's total Carer's Allowance. The Department acknowledges receiving VEP (Verify Earnings and Pension) Alerts indicating that a benefits claimant's wages may surpass the eligibility level.

It now plans to test a scheme to send text messages to claimants, provided it has their current phone number.

Mr Stride also informed the Work and Pensions Committee that implementing a tapered reduction in the allowance for surpassing the £151 limit - a suggestion put forward by Martin Lewis and some claimants - could prove too complex to introduce, reports Birmingham Live.

He explained: "There are issues with Carer's Allowance that, as a benefit, has been around in one form or another for many decades, in fact back to the 1970s. An element of that problem hinges upon the threshold, which is currently an earnings threshold of £151 per week as a kind of proxy for establishing whether somebody is in gainful employment or not because, of course, the benefit is there for those who are caring for 35 hours per week. It is very important that somewhere within the mechanism of Carer's Allowance there is that particular element."

"Some of the problems of course hinge around thresholds. We always keep these benefits under review. This is one of those things that I am acutely aware of. If you were to look at ways of changing it - and some have suggested some kind of tapering arrangement as you have for example within Universal Credit - there are a host of complications that come with that."

"I am not saying there are not any solutions going forward, but we should just be clear that this is not one of those simple things where you just flick a switch and solve the problem. It is quite complex."

He also highlighted that individuals are made aware of the earnings rules when they first apply for the allowance and each year when the payment increases. Moreover, he emphasised that recipients should take some "personal responsibility" to understand when they might exceed the qualifying criteria, to prevent overpayments from accruing.

He remarked: ''Part of the problem of course has arisen over this issue of notification and whether sufficient notification has been provided to people who may have found themselves in excess of that threshold, for whatever reason. Of course, we do notify people at the point that they sign up for this benefit - and given that these people are doing such extraordinary work up and down the country, often described as unsung heroes, it is important that we provide this benefit.

"What we have also been doing are the alerts called VEP Alerts, which allow us to get a fix on the amount of income that is coming in to the individual. Hitherto we have been using an algorithm to try to establish within that data those who are most likely to be over the threshold, meaning that they do not qualify for the benefit."

"One of the further elements of complexity is there are deductions from earnings that can be perfectly legitimately - and rightly in my view - made to determine how close or otherwise you are to that threshold. That will include income tax, National Insurance, and it could include half the value of transfers made into private pension schemes, for example. It is not possible from the centre to know with certainty, even if someone shows more than £151 a week, that that necessarily means that they do not qualify for the benefit."

"We do proactively approach people in terms of their likelihood of not qualifying for the benefit. Where I am looking to go still further is to see if we can develop this VEP system such that we can alert people as a matter of course as soon as they are at £151 or above, albeit, as I have explained, that might not be an issue."

Sir Stephen Timms, the committee chair, responded: "It is quite difficult to see how such a large number of cases can have been allowed to build up, given the Department does get these monthly alerts when somebody is over the limit. We will follow progress with great interest."

Peter Schofield, DWP Permanent Secretary, explained: "VEP is not the answer in itself. VEP is part of a process. We received 107,000 VEP Alerts in 2022-23, which is the last year that I have the full data for. We looked at 50,000 of them. Only 12,500 of those turned out to lead to an overpayment."

"This is not an automatic one fits through to another. There is quite a lot of work. I was listening in to a VEP Alert call only yesterday and it is incredibly time-consuming, and you need quite a lot of skilled resource to do the work."

"What we are seeking to do is to try to see, when we get a VEP Alert, if we have a mobile phone number that is up to date for the individual and to send a message at that point. We are going to test that on a relatively small number to begin with to see whether we can make it work. Then we will see whether we can roll it out."