Planning & Budgeting

Universal Credit is Failing Older Generations

· 3 min read

A Lords' Economic Affairs Committee peer report has lambasted the controversial Universal Credit scheme. The report highlights how universal credit exploits the poorest in society while not protecting the vulnerable.


A Lords' Economic Affairs Committee peer report has lambasted the controversial Universal Credit scheme. The report highlights how universal credit exploits the poorest in society while not protecting the vulnerable.

The scheme, introduced in 2010 by the coalition government, merges the following six benefits into a single payment, to “make claiming these benefits simpler”:

  • Income support.
  • Income-based jobseeker's allowance.
  • Income-related employment and support allowance.
  • Housing benefit.
  • Child tax credit.
  • Working tax credit.

How Does Universal Credit Work?

You can claim universal credit irrespective of your employment status. There are no limits to how many hours you can work, but the amount of payment gradually decreases as your hours increase. Currently, you get a reduction of 63p in benefits for every extra £1 earned after tax.

If you qualify for other housing or disability payments or have children, you have a “work allowance” you can earn before universal credit payments are affected.

Why is Universal Credit Failing Older Generations?

Since its introduction, universal credit has attracted widespread criticism for not fulfilling its purpose and for pushing people further into debt. The universal credit budget has undergone significant cuts since its announcement, limiting its effectiveness in achieving its aims.

Coverage of universal credit usually addresses the general drawbacks of the system. However, such coverage rarely highlights the harsh realities faced explicitly by older generations, who are among the most vulnerable to these failings.

As an example, the threshold for the work allowance has reduced, meaning benefits are affected sooner. Many over-50s are also ineligible for universal credit since they have accumulated savings over the permitted threshold, or because they have income from a pension.

While the government has granted temporary respite by increasing this allowance during the COVID-19 pandemic, we need permanent change to make a real difference.

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Another widespread criticism of the system is the time it takes to process these payments. Since payments are in arrears, it can take up to 5 weeks to receive the first payment of the benefit. While there is an option to receive an advance on the first instalment of payments, this amount is then deducted from future benefit payments for the subsequent year.

This leaves older workers who are more likely to be in long-term unemployment very little footing to stand on while they wait to see any real benefits from the scheme.

A recent analysis of unemployment data by Rest Less highlighted deeper systemic issues affecting over-50s. The number of over-50s claiming universal credit has increased by 117% since March. Considering the eligibility criteria for universal credit requires less than £16,000 of savings to qualify, this highlights their extremely precarious financial situation, despite decades of working.

Age discrimination and a lack of workplace training have already made this population less competitive in the workforce. The pandemic has forced an increasing number of them onto furlough or into unemployment, leading to them making reduced pension contributions, too.

A Need for Change

In a recent interview, Labour and Co-Operative MP for Stalybridge Jonathan Reynolds MP said, “Sadly, this report confirms what many have known for a long time – universal credit is simply not working. There is a clear consensus that the system is not delivering on its objectives and is instead pushing people further into poverty and debt.”

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COVID-19 has driven vulnerable people into even deeper financial trouble. Millions of people will continue or begin to claim universal credit in the coming months to stay afloat amid economic turmoil. The case has never been stronger for a more flexible and well-balanced system in the UK.

Rhea Tibrewala
Rhea Tibrewala
Rhea has had over 5 years of experience in the finance sector, having worked as a digital marketing manager for leading financial institutions across multiple geographies. She is a tech fanatic, an avid reader, and enjoys travelling and music in her free time.
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