Starting this week, many Universal Credit claimants across the UK will receive a welcome financial boost, amounting to an extra £420 per year. This increase comes as part of a change to the Fair Repayment Rate, which will significantly reduce the amount of money deducted from benefit payments for individuals who are in debt while receiving benefits. This change aims to ease financial pressure for low-income households and help them manage their debts more effectively.
What is the Fair Repayment Rate?
The Fair Repayment Rate is the percentage of Universal Credit payments that are deducted from claimants’ benefits to repay debts, such as rent arrears or loans. Previously, this rate was set at 25%, meaning a quarter of a claimant’s Universal Credit was taken to cover their debts. Under the new system, this deduction has been reduced to 15%, helping claimants retain more of their benefits to cover daily living costs.
Impact on 1.2 Million Households
The Department for Work and Pensions (DWP) estimates that around 1.2 million of the UK’s most financially vulnerable households will benefit from this change. In particular, 700,000 families with children are expected to see the largest improvements in their yearly income. With the adjustment, these households will be, on average, £420 better off annually.
Chancellor of the Exchequer Rachel Reeves stated, “As announced at the budget, from today, 1.2 million households will keep more of their Universal Credit and will be on average £420 better off a year. This is our plan for change delivering, easing the cost of living and putting more money into the pockets of working people.”
Why Is This Change Happening?
The reduction in the Fair Repayment Rate is part of the government’s Plan for Change, which aims to improve the financial security of households across the country. The change is designed to ease the burden on those who are facing debt repayments while trying to support their families on low incomes.
Work and Pensions Secretary Liz Kendall commented, “As part of our Plan for Change, we are taking decisive action to ensure working people keep more of the benefits they’re entitled to – which will boost financial security and improve living standards up and down the country.”
The government’s overarching goal is to boost living standards and provide better financial stability to families. This measure aims to give people a fairer chance and help them manage their financial responsibilities without the extra strain of unaffordable deductions from their Universal Credit payments.
The Wider Picture: Supporting Vulnerable Households
Along with the change to the Fair Repayment Rate, the government has also announced an extension and £742 million boost for the Household Support Fund (HSF) for an additional year. This fund helps local councils provide financial assistance to low-income households for necessities like food, utilities, and other essential items, helping to prevent households from falling into poverty.
How to Access Help with Debt Repayments
For Universal Credit claimants who are struggling with debt repayments, there are options available to reduce the amount of their benefits being used to clear debts. If you are finding it difficult to manage repayments, you can request a financial hardship decision. This could potentially lower the portion of your Universal Credit directed toward repaying debt obligations.
To be eligible for this decision, you must have used your Universal Credit to cover debts such as Budgeting Loan repayments, benefit debt, advances, or rent arrears, and if these deductions amount to more than 10% of your standard allowance.
What Does This Mean for Universal Credit Recipients?
This adjustment to the Fair Repayment Rate offers critical relief for those on Universal Credit, especially for those already struggling with debt. Reducing the amount deducted from benefits will allow recipients to retain more money for living costs, making it easier to manage daily expenses.
The £420 extra annually can help cover a variety of essential costs, including food, utilities, and even outstanding debt repayments. The government’s focus on supporting the lowest-income households is a vital step toward improving financial security and ensuring more people have the support they need during tough times.
What’s Next?
The change to the Fair Repayment Rate and the additional funds for the Household Support Fund are both important steps in supporting 1.2 million households in the UK who rely on Universal Credit. With this change, claimants will see an extra £420 each year, making it easier for them to manage their finances and reduce the strain of debt.
As part of the government’s wider effort to address the cost of living crisis, these measures offer much-needed relief to vulnerable households. If you’re struggling with debt or financial hardship, now is the time to check whether you qualify for a financial hardship decision or other support available through Universal Credit.
FAQs
What is the Fair Repayment Rate for Universal Credit?
The Fair Repayment Rate is the percentage of your Universal Credit that is deducted to repay debts. It has been reduced from 25% to 15%, allowing claimants to keep more of their benefits for living costs.
Who will benefit from the Universal Credit repayment rate change?
Around 1.2 million vulnerable households will benefit from the repayment rate change, with 700,000 families with children expected to be the largest beneficiaries, receiving an average annual increase of £420.
Why is the Fair Repayment Rate being reduced?
The Fair Repayment Rate is being reduced as part of the government’s Plan for Change, aimed at easing financial pressure on low-income households by allowing them to retain more of their Universal Credit to cover daily expenses.
How can I request a financial hardship decision with Universal Credit?
If you are struggling with debt repayments, you can request a financial hardship decision to reduce the portion of your Universal Credit used to pay debts. This is available if debt deductions amount to more than 10% of your standard allowance.
What other support is available for Universal Credit claimants?
In addition to the reduction in the Fair Repayment Rate, the government has extended the Household Support Fund with an additional £742 million to help low-income households with essential needs like food and utilities.
