Should I stay or should I go? Moving to UC

Introduction

Transfer from legacy benefits and tax credits to UC may take place in one of two main ways: (1) ‘natural’ migration to UC, whereby the claimant decides (for whatever reason) to make a claim for UC, and (2) ‘managed’ migration, a DWP-led process in which the claimant is ‘invited’ to claim UC, but will find that her/his legacy benefits and tax credits will terminate even if s/he does not claim UC. The DWP now refers to natural migration after a claimant decides s/he would be financially better off on a UC claim on as ‘voluntary’ migration.

Both natural (including ‘voluntary’) and managed migration involve the ending of legacy benefit and tax credit entitlement on the submission of the claim for UC, with return to the former benefits/tax credits an impossibility. UC may be worth more than or less than entitlement under the legacy system (no change is also a possible result). Only managed migration includes a transitional protection mechanism, in effect guaranteeing that at point of transfer the UC will not be worth less than the legacy entitlement.

Therefore, a dilemma faces legacy claimants and their advisers. Would the claimant be better off on UC, so that s/he should make such a claim now? Conversely, would the claimant be worse off, and advised instead to await the managed migration process so as to qualify for transitional protection? The answers are not as straightforward as they should be.

‘Voluntary’ natural migration

DWP attempts to encourage ‘voluntary’ migration to UC were explained to the UK parliament’s Work and Pensions Committee in the summer of 2021:

What we want to do in the first phase is encourage those who would be better off if they moved to universal credit to move over. In order to do that we are working closely with third parties, stakeholders and organisations that have relationships with our claimant community and working through with them what is the best way to do that to help them understand the nature of the calculation and help them understand whether they would indeed be better off. That is something we want to do very much in partnership.1

The DWP does not intend identifying those who would be better off, or worse off. Rather, it is left for claimants to decide – and also, therefore, to take on the risk of that decision turning out to be wrong. The Secretary of State said in December:

They may be better off on UC, but if not, they should wait for the managed migration programme, where they will have transitional protection. It is also important to note that benefits calculators are readily available online, and the Department funds Citizens Advice and Citizens Advice Scotland for the help to claim programme. I am sure such organisations can give individual support.2

The ‘Could universal credit be for you’ page of the ‘Understanding universal credit’ gov.uk site includes the advice: ‘Have a look at all the different ways in which universal credit could help you, and use a benefits calculator to get an understanding of what support may be available and how much you might get.’ It also gives a health warning about not being able to go back to legacy benefits even if UC is refused, and cross-refers to further information from Citizens Advice.3 It does not say, ‘ask us, we will tell you’!

The official approach is, therefore: decide for yourself if you should claim UC, by carrying out your own ‘better-off’ calculation using online calculators, and getting advice from the voluntary sector. There is no DWP calculator, and no undertaking to allow claimants who turn out to be worse off to return to the legacy system. It is a daunting responsibility for claimants, especially given that no online calculator or adviser is in a position to provide a formal guarantee of their position.

Better or worse off?

Some current legacy benefit claimants would indeed be financially better off on UC. The DWP estimates that, of the 3 million households on legacy benefits, as many as 1.7 million of them (around 56 per cent) would be better off on UC; but 1 million would be worse off. Is it safe to generalise about who would be better or worse off? Are there any guarantees? No. Individual circumstances are crucial. Crudely speaking, it would seem that where a claimant is working, then (due to the relatively favourable UC earnings taper) s/he in particular may be better off on UC; conversely, where there is disability, especially severe disability, then (due to the loss of disability premiums including the severe disability premium) s/he in particular may be worse off. It should be remembered that in any case a claimant with over £16,000 in capital (ie, in some tax credit cases) will have no UC entitlement. But there is no adequate substitute for comparing legacy and likely UC entitlement and good advice.

The absence of transitional protection in natural (including voluntary) migration, combined with the fact that there is no official better-off calculation or avenue allowing claimants to return to legacy benefits, means that there will be a greater or lesser degree of risk in a claim for UC in such a case. That risk is borne by claimants, informed by their advisers. Many will think that an unfair position for claimants and advisers to be put in.

Stay or go?

In each case, a decision by a legacy benefit claimant whether to claim UC should ideally be informed by a better-off calculation and advice. Relevant factors to bear in mind will include the following.

• Natural (including voluntary) migration does not include transitional protection. Being worse off is possible, and return to the legacy system is impossible.
• Some claimants will be better off on UC. Delaying a claim in such cases will mean losing out on increased benefit support.
• Paid work is a particular indicator of possibly being better off; disability a particular indicator of possibly being worse off. But the individual facts and circumstances will always be critical. Complex rules like the minimum income floor for the self-employed may be difficult to plan for.
• Online calculators cannot guarantee 100 per cent accuracy, particularly in cases of inaccurate or incomplete information, and changes of circumstance.
• There is no official pre-claim calculation available. Neither has the government undertaken to protect the position of claimants who naturally migrate to UC (including after a ‘voluntary’ claim) and find that they are worse off.
• Strictly, given the absence of official protection, there is at least some risk in any claim.
• Financial considerations may not be the only relevant ones. Online claims and claim maintenance will suit some but will not appeal to some others. The same applies regarding UC features such as monthly payment in arrears and (where applied) work-search/preparation requirements and assistance.

Managed migration

This is the DWP-led process of moving claimants to UC, and is now a live issue. It was initially tested in the ‘Move to UC’ pilot that began in Harrogate. That pilot was suspended early in 2020 due to the coronavirus pandemic. The pilot is not to be resumed.

But in December 2021, the Secretary of State told the Work and Pensions Committee: ‘We will be resuming our plan to move to UC in 2022.’2 At time of writing, it was understood that the DWP has begun a small-scale introduction of the process. The official plan is to complete migration by the end of 2024.

A different process

Managed migration is different from natural migration. It is a process detailed in regulation and is initiated by the DWP notifying a claimant that s/he is subject to it and ‘inviting her/him’ to claim UC. The rules provide for the termination of legacy benefits and tax credits even if no claim for UC is made – effectively negating the technical retention of a choice to claim UC.4

Also unlike in natural migration, transitional protection to the level of legacy/tax credit entitlement at the point of transfer is provided, via a transitional element which is included in the UC. In that sense, financial worse-off concerns are resolved, although the rules provide for the erosion of the transitional element for subsequent increases in UC allowances and elements (excepting the childcare element).

But, again, financial considerations are not the only ones. In particular, consideration will need to be given to those claimants with complex needs who may be more vulnerable during the process – eg, as a result of having their legacy benefits stopped. It is understood that the DWP had this consideration in mind in the Harrogate pilot.5 However, given that it was decided in practice not to stop legacy benefits for failure to claim UC there, and (by late January 2020) that only ‘around’ 13 claimants were actually managed migrated to UC under it,6 it remains to be seen what was learned.