Deal struck to allow tenants without bank accounts to receive Universal Credit

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government, Universal Credit

The Government has struck a deal to allow tenants without bank accounts to receive the new Universal Credit directly from next year.

Universal Credit comes into force next October and replaces six of the main means-tested benefits and tax credits with a single monthly payment paid directly to the claimant.

To ensure tenants pay their rent under the new system, housing associations have been busy signing up tenants to direct debits but have been concerned about those without bank accounts.

They've also been discussing jam-jar accounts, provided by credit unions and payment specialists like allpay, which could "ringfence" the housing benefit element of the Universal Credit ensuring it can only be paid to the landlord.

Recent estimates suggest there are around 1.4m people without a transactional bank account.

Earlier this week in the House of Commons, Labour MP Stephen Timms asked the Government what it is considering to ensure that Universal Credit is payable to people without a bank account.

In a written answer, employment minister Chris Grayling revealed the Department for Work and Pensions (DWP) had signed a seven-year contract with Citibank, working in partnership with PayPoint, to allow those without bank accounts to receive the new benefit.

Mr Grayling said: "Wherever possible, universal credit will be paid directly into a claimant's bank or building society account. Facilities such as direct debits and standing orders are important tools for helping claimants to managing their benefit payments and for gaining access to discounts for household bills which are especially important for those on low incomes. We are working with a range of banking and financial product providers to encourage more claimants to use a bank account for managing their earnings and benefit income.

"For those claimants who cannot access any form of bank account the Department has signed a seven year contract with Citibank, working in partnership with PayPoint to provide a new Simple Payment service as an alternative to cheque payments.

"The Simple Payment service is based on the electronic transfer of funds in the same way that the Bacs system works for direct payment into a bank/building society account and has been designed specifically for those people who are unable to make use of mainstream bank accounts."

The Simple Payment service has already been put in place to allow the elderly to receive their state pension where they used to receive it by cheque.

Instead of queuing for cheques, pensioners will be given a plastic card which must be presented at a local PayPoint - typically found in shops such as Spar and Costcutter and garages. They will then be given their money.

The service has been designed specifically for those people who are unable to make use of mainstream accounts or the Post Office card account.

The move was also outlined in an explanatory memorandum published with the draft Universal Regulations earlier this month.

Nick Atkin, chief executive of Halton Housing Trust, said he welcomed any move that supported customers without bank accounts, but said he had concerns around the potential charges that would be levied towards landlords, tenants or both.

He said: "We would want much more detail about the charges. Our preference would be to develop the credit unions as there is huge untapped potential there. We believe that the credit union sector offers the most cost-effective answers for our customers and also keeps money in the local community."

The Government has also shown its commitment to improving the consistency of the credit union sector pledging £38m up to 2015 to help it expand and innovate.

It also sees them playing a role in serving the 1.4m people who have no transactional bank account in addition to those hit by mainstream bank charges or forced to turn to loan sharks.

It wants credit unions to be a "mainstream option for savers and borrowers" and to offer bank accounts with direct debit and savings account functionalities and other facilities such as jam jar accounts - which help people to budget and prioritise bills, such as rent.