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The Government has embarked on a series of welfare reforms – the biggest changes to the system in over 60 years. Most of the changes have already been introduced but some of these are subject to change from April 2016. We want to make sure that you understand what the changes are and how they will affect you and those that live in your home.
If you receive benefits then it's important to find out now whether you are affected by the changes and what your options are.
More detailed information is available on the Welfare Reform pages of the Department for Works and Pensions website.
The main rates of working age benefits and tax credits will be frozen in cash terms for 4 years from April 2016. Pensioner benefits are excluded from the benefit freeze and will be protected by the ‘triple lock’.
Disability benefits, the disability-related elements of tax credits and statutory payments including Personal Independence Payment, Attendance Allowance, Disability Living Allowance, Employment and Support Allowance (Support Group only), Maternity Allowance, Statutory Maternity/Paternity Pay and Statutory Sick Pay, will be uprated in line with the Consumer Prices Index (CPI). The CPI was announced to have fallen in the year to September 2015 so this means that the benefits mentioned above will not be increased from April 2016.
There is currently a benefit cap in place in England restricting the amount in certain benefits that a working age household can receive. Any household receiving more than the cap has their Housing Benefit reduced to bring them back within the limit.
From Autumn (dates for roll-out to be confirmed) the cap which is currently up to £26,000 per year is to be reduced to £20,000 for claimants living within the Derbyshire Dales. Individual households will be contacted by Jobcentre Plus in advance of the reduction being applied.
Unlike other reforms the Chancellor announced directly affecting child related payments, withdrawal of the family premium in Housing Benefit (£17.45 when a claimant has one or more dependant children) will take effect from 1 May 2016, a year earlier than the reductions for children within Child Tax Credit. Removal of the family premium will affect both new claims and new births from 1 May 2016.
Housing Benefit backdating will be reduced so that new claims from working age claimants will be backdated for a maximum of one month. Currently, if you are working age, your Housing Benefit claim can be backdated for up to six months if you can show good cause for making a late claim and you would have qualified for the benefit sooner.
At the moment, if your household income increases by up to £5,000 during the tax year this increase is ignored when calculating your entitlement for that year. From April 2016 this will be reduced so that any increase in income of more than £2,500 will be taken into account. According to the Treasury, it is estimated that 800,000 people will see their entitlement to tax credits reduced by an average of £200-£300 per year due to this cut which brings the 'income rise disregard' back to the same level it was when tax credits were first introduced.
For those reaching pension age from 6 April 2016 a new State Pension is being introduced to replace the basic State Pension and State Second Pension. This affects all women born on or after 6 April 1953 and all men born on or after 6 April 1951. The new pension is designed to be much simpler than the current system and will consist of a single amount to be awarded in full if you have 35 qualifying years of National Insurance contributions. If you don't have the contributions required for the full pension, as long as you have a minimum number of qualifying years (between 7 and 10) you will receive a pro rata amount. If you don't have the minimum number of qualifying years you will not qualify for the single tier pension. Any contributions made under the current pension system can be used toward the new State Pension.
If you qualify for the full amount you will receive £155.65 a week. For those who do gain in state pension income, for some this will be offset by reductions in means-tested benefit entitlements and if you fall under the new single tier pension system you will not be able to claim the Pension Credit savings credit.
The work allowance in Universal Credit, the amount you can earn without your benefit being affected, will be reduced from April 2016. For disabled people and people with children it will be reduced to £192 per month if you have housing costs and £397 per month if you don’t have housing costs. The work allowance will be abolished altogether from April 2016 for non-disabled, childless claimants meaning your benefit is reduced as soon as you start earning.
The Childcare Costs element of Universal Credit currently pays for 70% of your registered childcare costs up to a monthly limit of £532 for one child or £912 for two or more children. From 11 April 2016, this will increase so that you will be able to claim back up to 85% of your paid out childcare costs up to a monthly limit of £646 for one child or £1108 for two or more children.
Claims for DIsability Living Allowance can still be made by people aged 16-64 in Northern Ireland, however, from 20 June 2016 all new claims will be for Personal Independence Payment rather than DLA. Existing claimants of DLA reporting a change of cicumstance will also be assessed for PIP rather than DLA.
National Minimum Wage increased
The National Minimum Wage will be 'rebranded' as the National Living Wage and will be increased to £7.20 per hour for those 25 or over from April 2016. It will reach £9.00 per hour by 2020.
Personal tax allowance increased
The Personal Tax Allowance, the amount you can earn before paying income tax, will be increased from £10,600 to £11,000 from April 2016. It will be further increased to £12,500 by 2020 and thereafter it will automatically be set at the same level as 30 times the National Living Wage (National Minimum Wage).
From April 2016 social housing rents will be reduced by 1%, or in some exceptions frozen, for four years.
Universal Credit is scheduled to be rolled out nationally as a new single benefit for working age claimants, replacing traditional benefits like Housing Benefit, Income Support, Income-related Job Seekers Allowance, Income-Based Employment and Support Allowance and Tax Credits. Most claims will be made digitally online and payment will normally be a single household payment, including the housing costs, paid monthly in arrears directly to the claimant. All new claims from October 2013 will be a claim for Universal Credit with all other claims being moved over to Universal Credit over a 4-year period.
From 23rd November 2015, any single person living in the Derbyshire Dales area making a new claim for one of the benefits listed above will be expected to claim Universal Credit. Please contact the Council's Benefit Section for any advice concerning this change. Alternatively, for more information about Universal Credit, visit the Department for Works & Pensions website.