Following the introduction of the 2012 Welfare Reform Act, all overpayments of Universal Credit and new style benefits paid in excess of entitlement are recoverable.
Where recovery is made by deduction from Universal Credit, there is a limit placed on the overall amount that can be deducted in circumstances where, for example, a claimant may have multiple deductions to be considered. In recent years we have seen two successive reductions in the maximum that may normally be deducted – from 40% of the UC Standard Allowance to 30% and now 25% from April 2021.
Where requested deductions exceed the 25% maximum, or there is insufficient Universal Credit in payment for all deductions to be made, a priority order is applied, which determines the order in which items should be deducted. ‘Last resort’ deductions, such as rent or fuel costs, are at the top of the priority order, ensuring that claimant welfare is prioritised, followed by social obligation deductions, such as fines and child maintenance, and finally benefit debt, such as Social Fund loans and benefit overpayments.
This ensures that benefit claimants repaying debt are left with more of their benefit, striking a balance between the Department’s responsibility to recover overpayments whilst not creating undue financial hardship.
Anyone with overpayment deductions who does experience financial hardship is encouraged to contact the Department’s Debt Management unit. Where a person cannot afford the proposed rate of these deductions repayment a lower amount can be negotiated.
In exceptional circumstances, discretion not to pursue recovery of overpayments can also be applied under guidelines set out by HM Treasury. Typically, this would be where the continuing recovery would cause severe hardship or risk to the customer and/or their family. Further details of which are publicly available in HM Treasury’s Managing Public Money.