Universal credit: alternative payment arrangements

Issue 255 (December 2016)

David Simmons examines the normal and alternative universal credit payment arrangements.

Normal payment arrangements

The default method of payment for universal credit (UC) is monthly in arrears, by credit transfer into a claimant’s nominated bank (or similar institution) account.

This is a significant change from the payment arrangements for the ‘legacy benefits’ UC is replacing,1 which are paid separately, normally fortnightly in arrears (tax credits can be paid weekly or four weekly). Housing benefit is also frequently paid directly to a landlord, and this is sometimes mandatory where there are rent arrears.

There is concern that many UC claimants may struggle to budget for ongoing and unexpected expenditure from monthly lump-sum payments which include allowances for themselves, their children and their rent. The problem is exacerbated by the fact that the first payment of UC is not made for five or six weeks. Combining all means-tested support into a single pot also means that delays and administrative failures could leave claimants without any money.

The government takes the view that monthly payments encourage self-reliance and budgeting skills, and smooth the transition into work, for which most employees are paid monthly in arrears. It accepts, however, that some claimants need additional support toadjust to and manage monthly payments. In addition to the availability of ‘money advice’ and ‘short-term advances’ for UC claimants, the DWP has developed a system of ‘alternative payment arrangements’ (APAs).

Alternative payment arrangements

The DWP has developed guidance2 which sets out the following three types of APAs, with details of when and how they should be made, administered and reviewed:

  • payment of the UC housing costs element for rent directly to the claimant's landlord (referred to as 'managed payments');
  • twice-monthly payments (or, exceptionally, four payments per month);
  • split payments to different partners in a couple.

This reflects the DWP’s legal powers3 to pay UC other than monthly in arrears, and partly or wholly to a third party or to one or both partners in a couple where this is in the interests of a claimantora childforwhoms/he is responsible.

The guidance states that:

  • an APA can be considered at any point in a UC claim;
  • the DWP shouldmake decisionsonthe basis of the claimant’s individual circumstances, in particular her/his ability to manage and budget with monthly payments;
  • ‘tier one factors’ set out in Annexe A indicate a ‘highly likely/probable’ need for an APA (these include drug/alcohol problems, learning difficulties, mental health conditions, multiple debt, homelessness, domestic abuse and rent arrears), whereas ‘tier two factors’ indicate a ‘less likely/ possible’ need – there is supplementary guidance under each head defining and restricting its scope;
  • direct payments to landlords are the top priority APA and these should be automatically made where either of the other types of APA are made;
  • APAs are designed to be temporary until the claimant is capable of managing single monthly payments and should be reviewed after an appropriate period (normally between three and 24 months).

Direct payments to landlords

The guidance says these can be made where a claimant:

  • has at least two months’ rent arrears (it appears an APA is automatically made in these circumstances); or
  • has continually underpaid rent over a period and has at least one month’s arrears; or
  • has been evicted for rent arrears in the past year or is threatened with eviction.

The DWP can decide how much to pay to landlords. This will normally be the amount of the claimant’s UC housing costs element, unless his or her UC is less than this because of, for example, earnings or reductions for sanctions or the benefit cap. Note that local authority ‘discretionary housing payments’ should not preclude an APA (and vice versa).

More frequent payments

The guidance says that payments can be made twice monthly (half of the monthly award) or, exceptionally, four times per month, after the end of the first assessment period where it is identified that the claimant is finding it difficult to budget monthly.

Split payments

The guidance says that UC payments can be divided between partners in a couple in exceptional circumstances, including where there is domestic violence, financial abuse, or where a claimant is mismanaging UC payments and not using them to meet the day-to-day needs of the family. Although it refers to 'split payments' (stating that the larger percentage could be allocated to the person with primary caring responsibilities for children), the law allows payment to be made solely to one partner, where this in the interests of the claimants and their children.

Applying for an APA

There is no legal requirement to apply for an APA, and the DWP can make an APA withoutan application where it has information that this is appropriate.

Claimants (or anyone with authority to act for them) can request an APA in person at a jobcentre or by ringing the UC helpline (0345 600 0723). Alternatively they can apply on form UC129. Landlords can apply for direct payments on form UC47, available from the gov.uk website. Proof of rent arrears must be provided when requesting direct payments to a landlord.

It is clearly important to set out the case for an APA when making an application, with any supporting evidence. Referring to the guidance, where this supports an application, can be helpful, but the fact that a claimant’s circumstances are not covered by the guidance does not necessarily mean that an APA is not in the claimant’s best interest.

Decisions

There are no rules about when and how decisions are made and notified, but refusals to consider an application and unreasonable delays in making a decision can be challenged by a making a complaint, and ultimately by judicial review.

Making an APA is a discretionary power, which means there is no legal right to a APA within the regulations. Common law principles, however, require the DWP to exercise its discretion reasonably and rationally, taking into account all the relevant circumstances of each individual case. Decision making must also comply with human rights and equality legisla- tion. Both a failure by the DWP to take account of its own guidance, anda refusal toconsider an APA solely on the ground that a claimant’s circumstances are not covered in the guidance, could potentially make a decision unlawful.

There is no right of appeal against a refusal of an APA within the UC adjudication rules, but the guidance says a decision can be reviewed in the light of further information. The ultimate legal remedy for disputing a decision is judicial review. Where the need for an APA relates to disability (eg, a learning disability or mental health condition which impairs a claimant’s ability to cope with the normal UC payment arrangements), a refusal could constitute unlawful discrimination under the Equality Act 2010 (in particular a failure to make 'reasonable adjustments'), giving rise to a possible claim in the county court.

 


Please be aware that welfare rights law and guidance change frequently. Older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.

  • 1. Income support, income-based jobseeker’s allowance, income-related employment and support allowance, housing benefit and tax credits
  • 2. Personal Budgeting Support and Alternative Payment Arrangements guidance, April 2016, available at www.gov.uk/government/uploads/system/uploads/attachment_data/file/541512...
  • 3. Regs 47 and 58 The Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013, SI No.380