Universal Credits Christmas Scrooge Nightmare for Weekly Pay Recipients

By: N_Walayat

The Universal Credits nightmare is set to continue for the working poor this Christmas as over 100,000 people look set to receive no payment over the festive season. The reason being that Universal Credit can not cope with something as simple as that there being 5 fridays (pay days) during December, where such months can tip recipients over the monthly limits for claiming Universal Credit as UC is not able to do the simple calculation of averaging earnings throughout a year that is the case for the likes of tax credits.

Work and pensions website states:

8. If you’re paid weekly

If you’re paid weekly by your employer, you will get either 4 or 5 payments of earnings within a Universal Credit assessment period. Depending on the amount you get paid this may affect your Universal Credit.

When you have 5 weekly earnings payments within an assessment period, your income may be too high to qualify for Universal Credit in that month.

If this happens you will be notified that your income is too high and you will no longer get Universal Credit.

You can re-apply the following month as you should only get 4 wage payments in your assessment period then.

You will need to be prepared for a month when you get 5 wage payments in one assessment period and budget for a potential change in your monthly Universal Credit payments.

For instance take someone earning £150 per week, then that is treated as £600 earned during November, and £750 earned during December, where depending on individual circumstances could mean that the person is no longer eligible for any universal credit for December and thus has to reapply in January and potentially have to wait as long as a further 6 weeks to get any money. Therefore no Universal Credits for 2 months. Of course December is not the only month with 5 pay weeks as the same is likely to repeat in March 2018 thus creating a nightmare for claimants.

This is just the latest example of the nightmare that Universal Credits is turning out to be with even worse to come for families on tax credits who have built up sizeable cash ISA savings pots under the tax credits regime which could mean that they will no longer be entitled to ANY benefits as the tax credit system takes taxable earnings into account and not capital whilst Universal Credit in line with out of work benefits such as Income Support are subject to income withdrawal of £1 per week for every £250 of capital above £6000, with zero entitlement to benefits if capital exceeds £16,000.

So the tax credit system has been a significant encouragement for families to save in Cash ISA's as capital holdings for example of £50,000 currently have zero impact on tax credit awards.

So today's Tax Credit recipients face a doomsday under Universal Credits as they are switched over to the new benefit over the next 2 years as many families will lose ALL entitlement to the benefit. So a family of 6 will go from currently receiving £12,400 in tax credits per year to receiving ZERO under Universal Credits! If they have capital (ISA savings) of over £16,000.

So those £40k to £50k nest eggs built up under tax credits translate into ZERO entitlement to Universal Credit, for which the maximum limit is £16k and £6k being the optimum maximum. Which means hard working families who have built up sizeable ISA holdings need to start considering their options right now else they face their Universal Credits Doomsday of ZERO entitlement.

Options such as paying off ones mortgage, to going on a spending spree, buy a new car ? 2 new cars? family holiday of a lifetime? Though I would not advocate buying a bigger mattress to stuff ones cash under!

Perhaps its time to start planning to upgrading the greatest tax free vehicle of all, ones home, either by extending or moving and thus utilising ones Cash ISA holdings before the UC doomsday hits!

The bottom line is that Universal Credits does not work for working more just does not pay, and saving for ones future definitely does not pay! Furthermore, UC is designed to penalise families that rent over those who own their homes who have the get out of jail card of dumping their £40-£50k cash ISA holdings into their mortgages and thus increasing the equity in their homes, whilst those who rent are stuck and either have to spend most of their savings or lose all of their benefits even if their savings are only a fraction of the equity that home owners enjoy.

So no, Universal Credits just does not work as it's inability to cope with months with 5 pay days instead of 4 illustrates.

By Nadeem Walayat

http://www.marketoracle.co.uk

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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

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