Universal Credit advances can be claimed for by those who are in financial hardship while they’re waiting for their first payment. These advances need to be paid back and claimants will see their future payments reduced until the debt is covered, something the Work and Pensions Committee recently addressed.
In October 2020, the committee produced a report on the wait for initial payments and within this they focused on advance payments.
They made the following request of DWP: “We recommend that Advances should be renamed ‘new claim loans’, so that it is clear to claimants that they will need to be repaid.
“Before a new claim loan is granted in full, the Department should provide personalised budgeting support—when possible, with a face-to-face option—with a full assessment of the claimant’s financial situation and the impact that future repayments of the loan will have on their household finances.
“We recognise that, for people in acute financial crisis, it may be necessary for the Department to pay part of the loan before this support can be offered.”
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On January 12, the DWP officially responded to this with the following: “A new claim Advance is not a loan. It allows for UC entitlement to be spread over thirteen payments rather than twelve in a year. Use of incorrect terminology in this respect will only serve to dissuade claimants in genuine need from making a claim to UC.
To avoid claimants receiving more of an Advance than they require, New Claim Advances are limited to the claimant’s estimated monthly award.
“In addition, all claimants are encouraged to consider the amount of Advance they request and the impact of this on UC payments they will receive over the following year.
More generally, Work Coaches gauge claimants’ financial needs from their first interview and can refer them to more specialist support for personal budgeting, money guidance and debt advice if required, and we have invested a further £38m in the Money and Pensions Advisory Service this year to support those claimants affected by COVID-19.
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“For claimants who find themselves in unexpected hardship, the impact of taking an advance on the spreading of UC payments can be deferred for up to three months.
“The Department is considering the policy of automatic referral for budgeting support to the Money and Pensions Advisory Service.”
To apply for a Universal Credit advance initially, a claimant will need to:
- Speak to their Jobcentre Plus work coach
- Apply through their online account or
- Call the Universal Credit headline
If an advance is awarded, it could be as much as 100 percent of an estimated Universal Credit payment.
Deductions will be made over the course of a year or so and the debt must be repaid even if a claimant stops receiving Universal Credit.
Should a person move from Universal Credit to another benefit while still owing money, deductions will usually be taken from the new benefit payments.
Additionally, the DWP can also recover the amounts directly through a person’s employer or by utilising an independent collection agency.
The DWP warn advance requests can be refused if the claimant:
- Has not had their identity checked and verified
- Has enough money to last until their payment of Universal Credit
- Lives with parents, relatives or friends
- Has any final earnings or redundancy payments
- Has any accessible savings