More than 2.7 million people who are currently receiving benefits believe they will struggle to make sense of their payment options once Universal Credit is introduced, according to research released by PayYourWay.org.uk, the Payments Council’s consumer education campaign.
The survey of over 6,000 people found one in every two who are eligible for Universal Credit think that the change will make it more difficult to manage their money, with common concerns including running into or increasing debt, and struggling to pay bills or rent on time.
Pay Your Way says one of the key obstacles is that nearly half of people affected by the Universal Credit changes have not thought about how they will budget differently once they have been switched to monthly payments.
Under the new scheme, weekly or fortnightly payments will shift to monthly payments and Housing Benefit will be paid to the claimant’s bank account instead of going directly to a landlord or housing association. Currently Universal Credit is available in four areas, but new claimants in six more areas (Hammersmith, Inverness, Rugby, Harrogate, Bath and Shotton) are being moved on to the credit, starting from October.
The survey shows 48% of people who will receive Universal Credit worry that a monthly payment instead of a weekly or fortnightly payment will make it harder for them to budget and manage their money. Some 45% of people currently receiving a benefit that will change under Universal Credit said they worry that they will run into debt or a greater level of debt because of changes through Universal Credit, and 47% worry that they will struggle to pay bills and/or rent on time. Other notable findings from the research include:
– 65% of UK population don’t know how much interest they pay on their credit or store cards
– 33% of UK population don’t know what their overdraft limit is
– 30% of UK population don’t know the difference between a Direct Debit and standing order
– 23% of UK population don’t know how to cancel or change a Direct Debit.
Adrian Kamellard, Chief Executive of the Payments Council, which is responsible for ensuring that payment services work for all those that use them in the UK, said: “The introduction of Universal Credit means that people will have to be savvier about managing their money and will have to plan for the whole month instead of budgeting on a weekly basis.
“Understanding payments can help manage cash flow. Our guide explains different payment options which in turn can help pay bills on time, stay on top of your money and avoid missing payments or going overdrawn.”
Pay Your Way is working with Working Families and Gingerbread to help ensure people who would benefit from advice on budgeting and managing their money – especially as Universal Credit rolls out across the country – receive the support they need.
Fiona Weir, Chief Executive of single parent family charity Gingerbread said: “We know that families are good at managing small amounts of money coming in at different times, but moving to monthly budgeting under universal credit will be a big change. There will also be a big focus on online claims, so now’s the time to start getting ready by improving your computer skills, and getting a bank account set up.”
Will Hawden, Benefits Advisor from Working Families, said: “It’s also a good time to consider your budget and work out how you would pay housing costs, fuel, childcare and other bills, and when these bills go out. In most cases, you’ll be responsible for paying everything out of your Universal Credit and any earnings you have (Child Benefit will still be paid separately). You’ll also be responsible for making and maintaining your claim online.”