The Department for Work and Pensions (DWP) is under fire for allegedly underpaying Universal Credit claimants by an average of £110 per month. The issue centres on the department's reported refusal to adjust benefit awards to account for regular pension contributions made by those in work.
Claimant details systemic error
A specific case, highlighted in a letter to former Pensions Minister Sir Steve Webb, reveals the depth of the problem. The claimant explained they pay £200 monthly via direct debit into a personal pension, on top of workplace contributions, bringing their total to 15% of gross salary.
Despite reporting this change through their online journal, the DWP has repeatedly stated the payments cannot be used to adjust their net income calculation for Universal Credit purposes. This directly reduces their entitled benefit amount.
Formal appeals ignored
The situation has escalated, with the claimant stating the DWP has now ignored a request for a mandatory reconsideration of the decision. This forces the next step: raising a formal tribunal claim. The core of the dispute is a rule, originally from the Tax Credits system, which treats pension contributions as disposable income rather than a legitimate deduction.
This means that while the claimant receives tax relief on their pension savings, the DWP does not deduct the contribution amount when assessing their need for state support.
Public outcry over eligibility
The case has sparked significant debate among readers questioning the fairness of the rules. Many argue that if an individual can afford to save £200 a month for retirement, their eligibility for in-work benefits should be reassessed.
Critics point out a perceived inconsistency: the system incentivises pension saving through tax relief but simultaneously penalises it within the benefits calculation. This has led to accusations that the policy is a 'con' and that claimants are receiving a 'handout each and every way'.
The DWP's stance, and its failure to engage with the mandatory reconsideration process in this instance, suggests a systemic issue affecting others in similar positions. The upcoming tribunal claim will be a critical test of whether these pension contributions must be recognised, potentially forcing a change in how Universal Credit net income is assessed for thousands of working claimants.
