Universal Credit: Rates are increasing and they could reach this amount in 2020 | Personal Finances | Finance


The government clarified that for fiscal year 2020/21, benefits will continue to be indexed to the consumer price index (CPI) after being frozen since 2015/16. As it stands, this means that benefits will generally increase by 1.7%. In addition to these increases in benefit levels, the government has also increased pension rates. Basic pensions and new state pensions will be revalued in accordance with the “triple locking system”. This system means that pensions will increase by the largest increase in income, price inflation (as measured by the CPI) or by 2.5%. For 2020/21, earnings growth was the highest at 3.9%.

It means that:

  • The new state pension (for those reaching retirement age from 6 April 2016) will be £ 175.20 per week in 2020/21 (up from £ 168.60 in 2019/20)
  • The basic state pension (the base amount in the old state pension system) will be £ 134.25 per week in 2020/21 (up from £ 129.20 in 2019/20).

These increases after four years of freezing are a step in the right direction. However, some organizations are not impressed.

Citizens Advice, the network of 316 independent charities, recently produced a report on the impact of ending the benefit freeze and how the 1.7% increase will affect claimants.

According to their research, the revaluation of income-related benefits by the CPI will still leave 38% of households with a negative budget by 2024.

READ MORE: How does Universal Credit work? How much does the Universal Credit cost?

They say the way to remedy this is to increase CPI benefits plus two percent, as well as recalculate the local housing allowance to the thirtieth percentile of local rents.

If this is done, they calculate that the proportion of households with a negative budget would drop to 28% by 2024.

Citizens Advice has officially called on the government to make these changes. They also call on the government to ensure that universal credit provides enough means for people to live.

To do this, they want areas such as the amount of money kept by job seekers and deductions for those in debt to be looked at. These findings were shared by the All-Party Parliamentary Group (APPG) on Universal Credit.

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The APPG is a multi-stakeholder group that was established for Members of Parliament to discuss and take action on various issues relating to universal credit.

This group believes that universal credit is not working as well as it should and is pushing for it to be simplified.

Although it is an informal group, it currently has Labor, Conservative and SNP MPs, which suggests that Universal Credit is under the microscope of all political parties.

Using official decisions and suggested improvements, it is possible to assess what Universal Credit applicants might receive as income.

Even if we must never forget that the official increase is still 1.7%, the government has not changed its position on this subject.

Universal credit payments also vary based on applicants’ individual circumstances, meaning that overall income will be difficult to measure.

However, the government provides details of the “standard allowances” that can be used as a basis. Currently, the standard allowance is as follows:

Single and under 25 – £ 251.77 per month
Single and 25+ – £ 317.82 per month
As a couple and both are under 25 £ 395.20 each per month
As a couple and either 25 or more at £ 498.89 each per month

Taking into account the upcoming 1.7% increase, applicants could receive the following:

Single and under 25 – £ 255.97 per month
Single and 25+ – £ 323.22 per month
In couple and both are under 25 £ 401.91 each per month
As a couple and either 25 or more for £ 507.37 each per month

As Citizens Advice suggested, the rise should be 2% above the CPI for the best result. The CPI is currently at 1.7%, so the total increase could be 3.7%. This is still only a suggestion, but if the government introduced this rate, applicants could receive the following:

Single and under 25 – £ 261.08 per month
Single and 25+ – £ 329.57 per month
In couple and both are under 25 £ 409.82 each per month
As a couple and either 25 years or over £ 517.34 each per month

Only time will tell if the 1.7% hike will be enough or if additional hikes will be needed to truly support claimants. The government will need to keep an eye on Universal Credit to move forward, as the rollout has been fraught with problems. There have been reports of claimants struggling to pay for essentials like heat due to low payments and a recent report details that a quarter of beneficiaries face problematic debt levels.

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