Are banks turning their backs on state-sponsored Universal Credit accounts?
Published by 24publishing for 24dash.com in Featured and also in Central Government, Communities, Housing, Universal Credit
Are banks turning their back on state-sponsored Universal Credit accounts?
Are the DWP's subsidised budgeting accounts a good idea for Universal Credit?
It appears not all is going to plan with the Department for Work and Pension’s (DWP) attempts to get a national payment supplier to offer ‘budgeting accounts’ for Universal Credit claimants.
The DWP recently held a procurement day for financial providers to discuss the tender which would see one or more providers go on to offer the state-sponsored jam jar-style accounts to claimants when they sign on to Universal Credit next October.
The accounts – which would allow people to split their benefits into separate pots for spending, saving and automated bill payment – would be offered to those exposed to debt and who feel unable to manage monthly payments.
The DWP will hand the supplier/s up to £145m over five years and they will offer the accounts to claimants free of charge for their first year under Universal Credit.
However, the industry’s response has so far been cold with some of the major banks understood to have written to the DWP to inform them they will not be participating in the tender.
The main issue appears to be the high running costs associated with the accounts, with the subsidy not covering the investment. There is also the added issue of sustainability and who picks up the cost of the accounts once the subsidy ends.
Barclays was one of those rumoured to have pulled out, however a spokesperson said this was not the case.
“We have been involved in initial conversations with the DWP but we haven't written any such letter ruling ourselves out of the tender,” the spokesperson said.
The DWP estimates that around 3 million people will need some form of additional help to budget on a monthly basis when Universal Credit is launched. This, it added, may range from light support with setting up automated payments to more intensive support and targeting banking products.
The DWP couldn't confirm or deny whether it had received any such letters from banks ruling themslves out of the tender but said discussions with financial providers were "on-going".
Landlords have given a cautious welcome to the news that the Government will be providing a state-sponsored banking product and that they still see a big role for their local credit unions in supporting tenants under Universal Credit.
Circle chief executive Mark Rogers said he hoped banks would be providing budgeting products for free. He said: "I hope banks would be providing this as a free service, expecially the government-backed banks."
Despite recent growth in credit unions offering jam jar accounts there were only four “accessible brands” in the market as of last year: Royal Bank of Scotland, the Secure Trust Bank, Spectrum Payment Services and Think Banking Ltd. It's understood both Barclays and Lloyds Banking Group are both exploring the concept of offering budget accounts.