Universal Credit made 'more generous' by Chancellor says expert
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Universal Credit provides monthly payments for those in need of financial support. On top of this, emergency funding can be provided to those who face unexpected costs or can no longer afford their bills, which may prove especially important as an energy crisis looms.
Advance and hardship payments
Universal Credit can be claimed by those who are on a particularly low income or who are out of work entirely. The payments awarded are designed to cover essential costs but it can take up to five weeks for a claim to be processed.
This may be a tight timeframe for those who may experience financial difficulties in the run up to Christmas but, payments can come through early under certain circumstances.
Where claimants do not have enough to live on while they wait for your first payment, they can ask for an advance payment after they’ve made a claim.
To apply for an advance, claimants will need to speak with their Jobcentre Plus work coach or utilise their online account. The most they can get as an advance is the amount of their first estimated payment.
When applying for an advance, claimants will need to explain why they need it, verify their identity and provide bank account details for the advance. Claimants will usually find out the same day if they can get an advance but it should be remembered advances will need to be paid back to the Government through future payments.
Hardship payments can also be claimed if a person receives a sanction but cannot pay for rent, heating, food or hygiene. These payments will also need to be paid back through future Universal Credit payments which will be lower until it’s all paid back.
Alternative Payment Arrangements
Where claimants are having financial difficulties or are behind on their rent, they or their landlord may be able to apply for an Alternative Payment Arrangement (APA). Guidance from the Department for Work and Pensions (DWP) explains: “Universal Credit (UC) prepares claimants for the world of work in which 75 percent of employees are paid monthly. It also encourages claimants to take responsibility for their own financial affairs. To that end, Universal Credit is paid in a single monthly sum to households who are expected to manage their own budgets.”
However, for those who cannot manage single monthly payments (many legacy benefits are paid more frequently) an APA can be provided.
An APA is generally considered where there is a risk of financial harm to the claimant and/or their family. Depending on the claimant’s circumstances, they could get an APA to get their rent paid directly to their landlord.
Their payments may come through more frequently than once a month or be split between couples. Claimants will need to speak with their work coach to apply for an APA.
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Budgeting Advances can also be issued to those who need help with certain emergency or unexpected costs. This includes the cost of replacing a broken cooker, getting or staying in work or funeral costs.
These advances will need to be repaid through future Universal Credit payments. This is important to note as even if a person comes off Universal Credit, they’ll still need to repay the money in another way.
What a claimant gets will depend on how much they’ll need which will be agreed with a work coach. The smallest amount a person could get is £100 but up to £348 can be received by single claimants.
Up to £464 can be received by couples with up to £812 available to those with children. To be eligible for a Budgeting Advance, a claimant must have been getting Universal Credit, Employment and Support Allowance, Income Support, Jobseeker’s Allowance or Pension Credit for six months or more, unless they need the money to help you start a new job or stay in work.
Additionally, they must also have earned less than £2,600 (£3,600 together for couples) in the past six months and have paid off any previous Budgeting Advance loans.
A difficult winter
Taking advantage of these kinds of support measures may be needed over the coming months as a continuing energy crisis hits consumers. In October, the UK’s wholesale natural gas prices reached record-highs, with similar spikes seen across Europe.
The shortage of gas was driven by a resurgence in demand post-Covid lockdowns and Myron Jobson, a personal finance campaigner at interactive investor, warned consumers need to get ready for a difficult winter.
“The energy crisis is heating up as UK wholesale gas prices surge to record highs,” he said. “Energy providers are dropping like flies as the sector continues to battle an unprecedented rise in the cost of wholesale gas, with prices rising well above levels many suppliers could pass on to customers.
“The harsh reality is scores of customers of failed energy firms will be moved automatically onto new, and invariably more expensive, tariffs.
“More broadly, the prospect of higher energy bills is a huge worry for people on the financial cliff edge, and with the £20 uplift to Universal Credit and Working Tax credits coming to an end, the nation’s most vulnerable face the dilemma of choosing between heating or eating this winter.”
Inflation difficulties also continue to loom over the economy. In recent weeks, the Bank of England warned inflation is expected to rise to 4.5 percent in November, before peaking at five percent in April 2022.
Many expected the Bank of England to raise rates in light of these inflationary fears but it kept the base rate at 0.1 percent last week. Despite this, many experts predict interest rates will be increased sooner rather than later, possibly before the end of the year.
An increase in rates will hit consumers across a range of financial products. While savings rates would be expected to rise, some have warned banks would be delayed in acting on this, while mortgage and debt costs would likely be increased.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, warned “neither borrowers or savers can afford to hang around waiting for a rate rise: they should act now”.
She continued: “The Bank [of England] is still likely to raise rates in the near future. Inflation is still on the up, and is expected to peak at five percent in April, putting the bank under pressure. It’s balancing this against some signs of weakness in the economy.
“Unemployment is likely to rise slightly at the end of the year, partly because 1.14 million people were on furlough when the scheme ended. Growth is also expected to be hampered by rising prices and supply bottlenecks.
“It means the bank is cautious about rises, and while the market expects the first hike to be around the corner, and for rates to hit one percent by the end of 2022, there are no guarantees. It means savers and borrowers shouldn’t hang about.”
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