Universal Credit DWP benefits change hitting Brits with £4,000 loss revealed

A comprehensive report has shed light on the groups most affected by the transition from traditional benefits to Universal Credit. The Institute for Fiscal Studies (IFS) examined the ongoing changes implemented by the Department for Work and Pensions.

Recipients of certain benefits have been receiving notifications instructing them to switch to Universal Credit (UC), with warnings that failure to do so could result in a complete cessation of their payments. The 'legacy' benefits in question include Income Support, Tax Credits, Housing Benefit, ESA (Income Based) with Child Tax Credit, and JSA.

Once the transition is complete, eight million individuals will have migrated to UC. The IFS report analysed the financial impact on those who have already made the switch.

Alarmingly, one demographic was found to be losing out to the tune of £4,000, Birmingham Live reports.

This group comprises households with one adult above and one adult below the state pension age, described as being 'significantly worse off under the UC system than under legacy benefits'. The IFS stated: "Because the reform means they are entitled to UC rather than the much more generous pension credit 70% of these households (180,000) lose out by more than £4,000 per year under the UC system. Households with over £16,000 of assets and the self-employed can also lose out significantly under the UC system."

The study revealed that families with children are the most likely to benefit from Universal Credit (UC) compared to the previous system, with 72 percent gaining at least £200 annually, while only 22 percent lose out by the same amount. Working households and those renting also tend to benefit as benefits are typically withdrawn more slowly as earnings increase under UC.

However, the IFS warned: "The UC reform makes large numbers of households worse off, even though the average household gains from it. Families receiving disability benefits, mixed-age couples, the self-employed and those failing a harsher assets test are much worse off under the UC system than under legacy benefits."

"There are transitional protections in place to ensure families do not lose out when moving from the legacy system to UC in the short run. But under current plans, they will still be left worse off in the long run. One policy option for a future government would be to permanently compensate these and other families who are left worse off under UC. But doing so would be expensive, making the UC reform a larger net giveaway than it already is."

The transition to UC is scheduled for this year, with households receiving letters asking them to take action. So far in 2024, those targeted are Income Support and Tax Credits recipients, with Housing Benefit recipients being included from April and June.

In July, individuals on ESA (Income Based) with Child Tax Credit will receive letters, followed by those on Tax Credits (Pension Aged including mixed aged couples) in August and JSA (Income Based) recipients in September.

The transition began last year, primarily focusing on tax credits. The DWP has reported that 130,000 people have made the switch.

However, concerns have been raised about the lack of support for vulnerable individuals, as the change relies on them initiating the application process.

Last month, during Work and Pensions Topical Questions in the House of Commons, it was revealed that individuals are missing out on £3,200 annually by failing to transition their benefits. It is estimated that about a quarter of eligible individuals have not applied for the change.

Over the next few months, Migration Notices will be issued to all legacy benefit types, excluding ESA claimants.