Saturday, 25 October 2014

Banks asked to help tenants with universal credit

The government is calling for banks and other businesses to come forward with financial products that will help benefit recipients cope with the demands of moving to universal credit.

Welfare reform minister Lord Freud issued the call yesterday, and said suppliers could include high street banks, mobile phone operators and pre-pay card providers.

Under universal credit a range of existing benefits will be combined into a single monthly payment, which will go to the claimant. Current rules allow weekly or fortnightly payments, and make some payments direct to the intended recipients, such as housing benefit payments going to a landlord.

Social landlords are concerned the changes will make it harder for tenants on benefits to manage their income. Several have already begun to encourage tenants to set up ‘jam jar’ accounts with credit unions, which allow income to be split into separate pots to cover certain expenses.

The Department for Work and Pensions has not specified the type of product it would like suppliers to introduce. It has set out some ‘essential features’ that the products must include, but said the ‘final design will be open to the market to devise’.

The essential features include supporting claimants to budget and manage their money, and allowing regular payments for housing and other main bills.

Lord Freud said: ‘Accounts that provide people with extra budgeting services could help to ensure people’s essential bills are covered – helping them to build up their credit rating and break the cycle of financial exclusion.

‘We are anticipating the call for new financial products may open up a new market place, where competition is strong. And we are looking for a range of diverse providers to step forward to express an interest, as we work towards the introduction of universal credit in October 2013.’

A spokesperson for the National Housing Federation said: ‘We hope his challenge to financial providers to design the product will create an account that will help people avoid falling into arrears and debt. But the process must move quickly as the changeover is just over a year away.’

Readers' comments (19)

  • Rick Campbell

    Wonga might be interested -- we're only a couple of steps away from a 'government debit card' system -- the pensioners will love that!

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  • Desperation is setting in.................. all these details should have been ironed out in the Committee stage not after the Bill has been passed.

    This desperation is the surest sign that UC is toast.

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  • Rick Campbell

    I am not in disagreement with you Don, it should have been sorted -- however the 2 snake-oil merchants (IDS and former banker Freud) have 'covered this' "ironing out" with all the pilots and such malarkey ... in that, the roadtesting of the system is ongoing and will be rolled out over a few years not 'waterfalled' as of day one.

    The massive fear I have is that when the UC IT system jiggers up that there will be potentially thousands in absolutely greater dire straits than at present.

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  • Melvin Bone

    Basic bank accounts already exist. They were encouraged when LHA came out...for direct pay to the claimant...

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  • Chris

    No doubt the government will be offering banks incentives to develop these means of making extra profits of the poorest in our community - funded from the cuts in benefits perhaps!

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  • Rick Campbell

    Well, what do people expect from Freud? -- after all, he is a former banker.

    I think the basic idea is the 'budgeting help' bit -- so that users cannot go into the red and attract massive costs with using PayPal or something similar.

    I don't think that Smith and Freud are doing this on an altruistic basis but I do think they are just protecting their own backs (fancy, politicians doing that) because of the 'polite' criticism they've had.

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  • Melvin Bone

    You may have snuck an idea in there Rick.

    Give everyone a PayPal account and pay the benefit into that.

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  • Rick Campbell

    On the subject of budgetting and in the interests of fairness (my version not the government's), there's been some 'movement' (and, unusually, not of the bovine type) from DWP --

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  • Colin McCulloch

    Don't we own RBS and the Post Office? Why can't we coerce RBS into giving basic accounts to benefits claimants? At the moment, my tenants are forced to jump through hoops for an account only to be told no if their main income is state benefits.

    Sadly, the Post Office contract is being given to Citibank, so any chance of a public service-led financial response to this is slim to none.

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  • Rick Campbell

    I was trawling twitter earlier and saw this which I thought might interest readers (or probably not) bearing in mind my 10:19 post.

    Tom Lloyd ?@TomLloydIH

    Lord Freud said yesterday there would be £140m to subsidise universal credit bank accounts - not in the release though

    17 September 2012 – Freud: New financial products to help Universal Credit claimants manage money

    Tom Lloyd ?@TomLloydIH

    Helpful clarification from DWP: there is between £80m and £145m earmarked to subsidise universal credit bank accounts.

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