The Department for Work and Pensions (DWP) has introduced a major change to the Fair Repayment Rate for those on Universal Credit.
Labour Chancellor Rachel Reeves confirmed in the Autumn Budget last year that the maximum deductions from the standard allowance will drop from 25% to 15% from April, 7 2025.
Currently, the DWP and other third parties can deduct 25% of someone’s Universal Credit standard allowance payment to recover any debts someone may have. The move – called the Fair Repayment Rate – is intended primarily to help the worst-off families.
At the time, Reeves said the change would benefit 1.2million households, including 700,000 families with children, boosting their incomes by up to £420 a year – or £35 a month.
At the time, Sebrian McCullough, director of external relations at the debt free advice firm Money Wellness commented: “We’ve been lobbying for changes to benefit deductions for some time. The reduction from 25% to 15% is a positive step for some of the most vulnerable in society. This is because people trying to survive on inadequate income inevitably increase their reliance on credit.
“64% of the people we support with benefit deductions also need access to a food bank. That is why, longer term, we would like to see the government move towards making decisions based on individual affordability in order to ensure no one is left without enough money for essentials.”
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Alongside this, the government also moved the child maintenance deduction higher up the regulated priority order. This would ensure that when the Fair Repayment Rate is implemented, it would not decrease the current number of child maintenance deductions being made from a Universal Credit award.
In line with this commitment, the DWP felt it necessary to put in place further protection to ensure the child maintenance deduction can be made even if this would result in the overall deductions cap of 15% being exceeded.
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The DWP recognises that child maintenance payments provide vital financial support. This regulatory change, along with the policy decision to exceed the new overall deductions cap of 15% where applicable, will continue to enable child maintenance payment when other payment methods have failed or are not feasible.
This regulatory adjustment will be temporarily in place for a year as the DWP seeks to gather more evidence on the impact of the child maintenance deduction change on Universal Credit households, particularly its ability to address other debts.
The gathered evidence will decide whether this temporary change should become permanent or if a different approach is needed.
Universal Credit and other DWP-related benefits saw a 1.7% increase on April 7. As most benefits are paid in arrears, claimants will not see the full uprating until the next assessment period has been completed.
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