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Benefit Cap and transitional protection
Apologies if this has already been full resolved. Lets say Universal Credit would end up paying £20.00 per week less than the pre-UC award, but after application of the Benefit Cap, the disparity is £30.00pw. What then is the value of the transitional protection, £20 or £30pw? This issue is sort of addressed in UCPBN No 6, which says…
“The amounts of legacy benefit and Universal Credit for comparison will be those calculated after application of the Benefit Cap. This will ensure that Transitional Protection is not offered against the limits of the Benefit Cap. However, Benefit Cap rules will still apply, and so those households who are exempt from the Benefit Cap will be unaffected.”
The firsts sentence suggests to me the answer is £30pw. Is that what the second sentence is also saying?
Are there any draft regs that sort this out?
Steve
It’s very hard to tell.
I can see how the method proposed (comparing post-cap values) will achieve the result suggested (ie “ensure that Transitional Protection is not offered against the limits of the Benefit Cap.”) in cases where the legacy (HB) cap applied prior to moving onto UC - perhaps that’s what they’re getting at.
e.g.
Legacy Benefit=550 (capped to 500)
Universal Credit=470
TA=500-470=30 (and not 550-470=80)
The transitional provisions are conspicuous by their absence from the draft regs published so far.
Thanks Jon,
Your response is based on the cap applying to the legacy alone.
I think you get the same result if the UC alone was capped at £500 (recognising the legacy was over £500). Correct? Maybe thats the same thing!
I assume that if in the same case the UC (and other relevant income) was £520, then they would be forced to cap the UC (making the legacy amount somewhat irrelevant).
I phoned the benefit cap help line, but they have not yet been trained on UC capping.
I have sent off an email to the DWP policy section to try to shed some light on the whole business, and will report back. I realise its all bit theoretical right now, but it certainly won’t be our clients in about 12 months time!
Steve
Just heard back from the DWP Strategy unit. Based on what they say, it goes something like this in a couple/lone parent case:
Example 1. Legacy benefit is £550. In April 2013 the HB Cap cuts the award to £500. There is no transitional protection at the adjustment in April. When UC eventually takes over, the UC award turns out to be £480, so transitional protection of £20 is awarded to bring it up to Cap level (‘transitional protection will only offer protection up to the Cap level’, says the DWP).
Example 2. Legacy benefit is £550. In April 2013 the HB Cap cuts the award to £530, because there is insufficient HB to cut more. There is no transitional protection at the adjustment in April. When UC eventually takes over, the UC award turns out to be £480, so transitional protection of £20 is awarded to bring it up to underlying Cap level of £500.
Example 3. Legacy benefit is £550, but the claimant is an owner occupier so is unaffected by the April 2013 Cap. When UC eventually takes over, the UC award turns out to be £510, so the Cap applies, and £500 is awarded.
Example 4. Legacy benefit is £550, but the claimant is an owner occupier so is unaffected by the April 2013 Cap. When UC eventually takes over, the UC award turns out to be £480, so transitional protection of £20 is awarded to bring it up to underlying Cap level of £500.
Steve
On the owners examples, do they say what will happen where the current benefit includes SMI but the UC won’t?
I am afraid I did not raise that. If you list all the precise points you are interested in, I will see what I can find out.
Steve
One simple point. Someone in part-time work under the current scheme will be able to get SMI for two years. They won’t get any SMI under UC if they have earnings. Will the transitional protection be based on the SMI inclusive amount of their previous benefit?
I’ve got over two pages of a list of potential loopholes and flaws in UC and PC in future and additions will be welcome.
e.g. What happens if a mixed-age couple separate, the elder claims PC and they then reconcile?
Gareth,
I will see what I can find out about the mortgage interest, and will advise.
On the question of the couple, it seems to me that on the one hand you will be penalised by UC if you get together with someone under 18 or 25 if you are above these ages, but on the other hand you cannot escape UC unless you and your partner are of PC age! Some people choose a partner by star sign, others by virtue of their football team allegiance. DOB seems a better bet!
Steve
Colleagues,
Here is the response I have just received regarding mortgage interest…
“...Further details concerning Transitional Protection will be set out later in the autumn. In the meantime, I can confirm that, when a claimant is moved to Universal Credit in the circumstances ....described, the claimant’s total legacy benefit award payable at that time will be taken into account for the Transitional Protection calculation, which will ensure that there are no cash losers as a result of the migration to Universal Credit.
With regards the Benefit Cap, you are right in saying Transitional Protection will be paid up to the level of the benefit cap…however….Benefit Cap rules will still apply and so those households who are exempt from the Benefit Cap will be unaffected by this limit.”
Therefore, it looks so far as though those people who are working part-time and getting mortgage help within their legacy benefit will retain that help as part of their TP within UC, despite the UC background ‘zero earnings rule’. This prompts me to wonder what is the status of the TP? Is it UC, but not as we know it?
Steve
Thanks Steve
The answer seems to be to get your job hunting in pre UC. It’s interesting as one of the first migration groups is low hour earners on WTC (whoever they might be).
Hi Gareth,
On that note, has the Government moved away from this idea of “flow…stock…tax credits” in terms of who comes first for UC? I seem to recall IDS recently saying in the house that they were now going to approach the migration “benefit by benefit”, with JSA first. Any light you can shed on who will be where in the queue would be very useful.
Thanks,
Steve
Hi
might you be thinking of this from Iain Duncan Smith on 12 September? -
‘This will be a progression over four years, so that, as we bring in different groups, such as jobseeker’s allowance recipients, and first address the flow, then the stock, and then look at tax credits and how they fit in, we can make sure that we get this absolutely right at every stage. We know that there are important things to consider so that people do not suffer as a result of universal credit. We want to get this right, even as we do it.’
here’s a link to rightsnet news story on universal credit debate in House of Commons -