From Monday 9 May DWP resumes the managed migration of people who claim benefits from legacy benefits to Universal Credit. The first two areas to go live will be Bolton and Medway. In this blog post we explore how managed migration to Universal Credit will affect people differently, how a benefits calculator can help, and other steps that organisations can take to support people to complete the move.
The managed migration to Universal Credit programme had been rightly put on hold during the pandemic as many people found themselves in need of support from the welfare system. DWP recently published its analysis and goals for managed migration in its paper Completing the move to Universal Credit.
Policy in Practice is one of many partners invited to share its thoughts on how best to support people with the move to Universal Credit with DWP. While the department hasn’t adopted all of our suggestions we are pleased to see their guidance advises that claimants should use a benefits calculator when considering whether to make a voluntary move to Universal Credit.
We believe that using a benefits calculator is an essential step, but on its own won’t be sufficient to ensure people are making the right decision about when to migrate to Universal Credit. This blog highlights some of the other steps that people on legacy benefits, and the organisations that support them, can take.
Why people on legacy benefits are being migrated to Universal Credit
Since its launch in 2013, complete migration to Universal Credit (UC) has been one of three tracks that made up part of DWP’s strategy to simplify the benefits system. The first track, known as natural migration, required all new benefit claims to be for UC. New claims for legacy benefits (Jobseekers Allowance, Income Support, Employment Support, Housing Benefit and Tax Credits) were no longer available.
More recently, track two, known as voluntary migration, saw people on legacy benefits able to migrate to UC voluntarily if they believed they would be better off. During the pandemic people on Universal Credit benefited from the £20 uplift to Universal Credit, while people on legacy benefits (unless they claimed tax credits) did not, for example. However, many people did not have the trust in Universal Credit, financial resilience to manage any delay or wait, or knowledge of the benefit system to make this voluntary switch with confidence.
Managed migration is the third and final track in DWP’s strategy, an irreversible transition to UC. Its aim is to ensure the complete transition to UC for working-age people in order to achieve the simplicity offered by the unification of benefits under UC, and to remove the cost and complications of running two parallel benefit systems.
Who’s better off or worse off from the managed migration to Universal Credit
UC is now more generous for people than when it was first introduced, largely thanks to a lower withdrawal rate. The withdrawal rate is designed to allow people on Universal Credit to keep more of their earnings as their income rises.
DWP estimates that nearly two million working households are £1,000 a year better off under UC. Alongside cash incentives, claimants who are considered fit for work are assigned a work coach who helps them to look, prepare and apply for jobs.
The DWP report on managed migration states that ‘out of work claimants are more likely to move into work on UC compared to JSA’ which is a finding that is supported by data-led analysis from Policy in Practice. In our analysis for the LGA about the impact of Universal Credit on employment outcomes we found a small positive impact on employment rates for people on Universal Credit.
DWP’s approach to analysing the impact of managed migration to Universal Credit uses FRS data combined with Housing Benefit and Tax Credit administrative data. Using a sample of 20,000 or so households it uses DWP’s Policy Simulation model to carry out the better off calculation.
In comparison, Policy in Practice carried out similar analysis using legacy benefits data held across 142,000 people in 25 local authorities. We found that we could confidently identify the 41% of people who would be better off moving to Universal Credit, see the table below.
The main reason for the difference in the findings of who will be better or worse off is that we use recent data on individual households’ Housing Benefit and Council Tax Support claims. Councils can use this information to tackle the cost of living crisis by effectively using their data to identify households who will have a higher benefit entitlement under UC. They can then proactively encourage them to make the migration immediately.
Using benefits data, councils can also identify eligibility for other support, including social tariffs, free school meals, healthy start and council tax support among others, to boost financial resilience.
There are some limitations to this analysis. For example, local authorities have limited information on passported claims and don’t capture people only in receipt of Tax Credits. However, given the scale and impact of the rollout, we believe these analytics could be piloted in a local area, to support a national rollout.
Case study: Steph is a lone parent in receipt of tax credits and will be better off moving to UC now
DWP estimates that 1.4 million current claimants (55%) will be better off by moving to the UC, 300,000 (10%) would see no change and 900,000 (35%) may have a lower entitlement. Managed migration guarantees that people with a cash shortfall receive Transitional Protection by adding their Transitional Element to their UC claim, for a limited time, until it is eroded by inflation.
Steph is a 26 year-old lone parent currently claiming Working Tax Credit, Child Tax Credit and Housing Benefit. She works 35 hours a week at the National Living Wage (£9.50). Her childcare costs are £600 a month, and housing costs are £520.
Steph is £228 a month better off under UC because less income is taken into consideration to calculate deductions. UC also has a more generous payment towards childcare costs.
Case study: Jack is in the ESA support group and should wait to be offered transitional protection
Nearly one million people on legacy benefits are expected to be worse off when migrating to UC, 600,000 of whom will be offered transitional protection. Most of these people (400,000) are on ESA. Of those not offered transitional protection, 300,000 may not be eligible for Universal Credit at all. This is the case if, for example, their savings are above £16,000, or a change in their circumstances means they make a natural migration to UC and therefore become ineligible for transitional protection.
Jack is 30 years old, single, with no children and no housing costs. He is currently on ESA Support Group and receiving standard rate Personal Independence Payment (PIP) for both mobility and daily living, Severe Disability Premium (SDP) and Enhanced Disability Premium (EDP) payments.
By agreeing to switch to UC Jack will be £77 worse off if he moves to Universal Credit now via natural or voluntary migration. Moving to UC via managed migration offers higher protection to claimants and this would prevent Jack from having a cash shortfall.
Three things to consider before moving to Universal Credit
1. Use a benefits calculator to compare circumstances before moving
Policy in Practice‘s benefit calculator shows how much money someone will receive under both the legacy system and Universal Credit. This can help people like Steph and Jack to understand how their money will change, and what additional support they can claim as they move to Universal Credit. We can now calculate transitional protection. However people who are uncertain how the move to Universal Credit will impact them should seek help from an advice organisation or their local authority.
2. Tax Credit recipients
DWP advises that Tax Credit recipients consider the following before deciding whether to move to Universal Credit.
- Check that you are eligible to claim Universal Credit; Search ‘Universal Credit eligibility gov.uk’ to find out more
- Use a benefits calculator to see if your entitlement to Universal Credit would be higher than the money the government pays you now. Search ‘benefits calculator gov.uk’ to find out more
- Check how UC recovers any outstanding debts you may have. Search ‘debt and deductions gov.uk’ to find out more
- If you have £16,000 in savings you should wait until you are invited to move to UC
- It is important that you renew your Tax Credits before you apply to Universal Credit to make sure your Tax Credit award for 2021/22 is correct
HMRC should advise customers if they have a Tax Credit overpayment outstanding in their annual statement. People migrating to Universal Credit should be aware that this overpayment will be taken from their monthly Universal Credit award until it is fully repaid.
3. Seek further advice
Moving to Universal Credit is a complex subject and people who are uncertain about how it may affect them should seek advice. If you’d like to understand more about the implications for you please leave a comment below and we’ll respond so others can benefit.
How Policy in Practice is helping people and organisations with managed migration
Managed migration of benefits recipients to Universal Credit is inevitable if we are to realise its full range of benefits. However, the timescales for the current move are ambitious and claimants, even if they are better off, may still need help when they switch. The move from weekly to monthly payments, for example, as well as fluctuating incomes will require a new way of budgeting.
We are helping people through our benefits calculator. We’ve recently built a new feature that allows people to accurately see what their next month’s Universal Credit payment will be, giving them more control over their money.
For local authorities, we’ve enhanced our LIFT platform to give visibility over who may be better or worse off under Universal Credit. For households who have already migrated, we can identify households who are benefit capped and who may have low financial resilience due to deductions from UC awards. This information gives councils the ability to target support to individual households who need it.