Work and Pensions Committee - Universal Credit implementation: meeting the needs of vulnerable claimantsWritten evidence submitted by Consumer Focus

About Consumer Focus

Consumer Focus is the statutory consumer watchdog for the postal and energy markets for England, Wales, Scotland and (for postal consumers) Northern Ireland. We work to secure a fair deal for consumers across the economy.

Our remit encompasses a statutory responsibility to monitor the Post Office network across the United Kingdom, ensuring it continues to meet the needs of consumers and delivers quality goods and services, of social and economic interest, to local communities throughout the UK.

1. Executive Summary

1.1 In October 2013, the national roll out of Universal Credit will begin. While the Department for Work and Pensions (DWP) prepares for implementation of Universal Credit, Consumer Focus has sought to identify the scope and scale of the challenges consumers will face with the proposed changes to the administration and payment of benefits, as well as solutions which may help mitigate any adverse impacts.

1.2 Research we have conducted highlights that the proposed changes present two main challenges: digital delivery and the risk of budgetary disruption. It also identifies consumer preferences and attitudes towards a range of tools and products, providers and method of delivery, which could help benefit recipients mitigate the risks and manage the challenges associated with Universal Credit.

1.3 Face to face support will be needed to satisfy demand from benefit recipients unable or unwilling to complete an online application or manage an online account for Universal Credit, or demand from those whose identity cannot easily be verified without providing supporting, paper-based documentation. Our research demonstrates why the Post Office network is ideally placed to provide the face to face services that will be required.

1.4 Proposed changes to benefit payment frequency and composition pose a range of potential risks. Our findings suggest that “jam jar” budgeting accounts should be made more widely available, in order to support benefit recipients who will be affected by the introduction of Universal Credit, and reinforce findings from previous research that the provider of such accounts will be key to their success. Building on previous work exploring transactional banking solutions for low-income consumers,1 a report detailing our complete findings and recommendations will be published later this year.

2. Consumer Focus Research

2.1 Consumer Focus has conducted two waves of research in an attempt to identify the consumer interest and perspective in relation to the delivery of Universal Credit:

A survey of 647 recipients of benefits that will be incorporated into Universal Credit;2 and

20 in-depth, face-to-face interviews and four focus groups conducted with recipients of relevant benefits.3

2.2 Findings from our research4 suggest that there are two main challenges for affected benefit recipients arising from the move to Universal Credit:

Digital delivery—how able and willing consumers will be to apply for and manage Universal Credit claims and accounts online, given the assumption that it will be delivered “digital by default”; and

Budgetary disruption—how the individual and cumulative changes to the way in which Universal Credit is to be paid may disrupt consumers’ ability to budget effectively.

2.3 Our research5 also sought to identify banking and budgeting solutions that may help recipients in managing the challenges associated with the changes to the benefit system. In particular, we looked at the potential for the Post Office to assist in the delivery of Universal Credit.

3. Universal Credit AdministrationDigital by Default

3.1 Government policy is for the Universal Credit application process and account management to be undertaken on a “digital by default” basis; with the expectation that 80% of claims will be managed online by the end of the four year migration window.6 Government has also identified that some recipients are likely to encounter difficulties in carrying out these activities online and will therefore need face to face assistance during the initial set-up and on an ongoing basis.7

3.2 Our research8 highlights that many benefit recipients feel able and are willing to set up and manage their Universal Credit claims and accounts online, with 36% of those we surveyed happy to do so at home, and 7% at work or in another public place. Among those who were comfortable using the internet, there was a sense that moving to online forms and account management was a positive development, with claimants able to complete these forms at a convenient time and location.

The challenges

3.3 However, our findings also demonstrate that a sizeable minority of benefit recipients will need some degree of face-to-face assistance. Nine per cent of those surveyed were unable to use the internet at all, and 7% neither had access to the internet at home, nor would be comfortable using the internet at work. Additionally, one in five (21%) of those surveyed who had internet access would not feel comfortable applying for or managing their benefits online with 29% expressing a preference to be able to apply for and manage their benefits face to face. A further 12% would be happy with online application and account management but only if they had face to face assistance available while doing so.

3.4 Results from the focus groups and in-depth interviews9 illustrate a worrying lack of confidence by consumers in their own ability to fill in complex forms online without making mistakes—the perceived consequences of these mistakes identify this as a significant barrier to applying for benefits online.

3.5 Some participants also reported a lack of confidence in the security of the internet and were worried about identity theft, hacking and fraud—particularly where their children’s information was being provided. These concerns were further exacerbated where the respondent did not have internet access at home and would have to go online in a public place, such as a library or internet café. Using a computer at work was seen as more secure but there were some privacy concerns expressed with financial issues and benefits claims considered personal matters, and consumers anxious about employers or work colleagues gaining access to this information.

3.6 In addition to benefit recipients’ ability and willingness to apply for and manage their benefits online, our research also suggests that almost two-thirds (64%) of benefit recipients exhibit characteristics which may lead to difficulty in having their identity verified eg lack of bank account with a high street bank; lack of credit card or other credit arrangements such as a mobile phone contract; no entry in the electoral register. These claimants may need to present supporting, paper-based, documentation in person in order to have their identity verified. Our research10 shows that 86% of those who have said that they would not be comfortable applying for or managing their benefits online may need to go through this additional process to have their identity verified.

3.7 While many Universal Credit accounts will be managed online, our research suggests that Government’s assumption, that 80% will be managed online, is perhaps more ambitious than the evidence warrants. Adequate face to face provision must be available to support benefit recipients who are unable or unwilling to go online; require assistance to go online; and those who will need to verify their identity in person.

Potential solutions

3.8 Our research also asked a cross section of benefit recipients how important and convenient it would be for them to be able to access face to face services in a number of outlets including the Post Office; local benefits office; and Jobcentre Plus. The Post Office was identified as both the most important and most convenient place to access face to face services when making a Universal Credit claim by 69 and 77% of respondents, respectively. The Post Office scored slightly ahead of the local benefits office in importance (66%) and convenience (60%), and even further ahead of the local Jobcentre Plus which was identified by 58% of respondents as an important place to be able to access face to face services when making a claim and 56% of respondents who identified it as a convenient place.

3.9 Benefit recipients displayed similar preferences when asked about updating personal details linked to their Universal Credit claim,11 and presenting supporting documents, where necessary.12 In all cases, the Post Office was considered the most important and convenient location for face to face services. These results show a healthy appetite among benefit recipients to access face to face services, associated with their Universal Credit application and account management, at the Post Office.

Why the Post Office?

3.10 The Post Office offers a convenient point of access for consumers to a variety of essential social and economic services. With 90% of the population living within one mile of the nearest Post Office outlet,13 consumers are more likely to be nearer to a Post Office branch than to a local benefits office or Jobcentre Plus. Only 20% of research14 respondents lived less than one mile from the nearest Jobcentre Plus and only 16% less than one mile from the nearest local benefits office. In addition to geographical coverage and convenience, our research15 also indicates that consumers trust the Post Office (85%) and would prefer to provide supporting documents face-to-face at the Post Office, rather than send them in the post (79%).

4. Universal Credit PaymentThe Risk of Budgetary Disruption

4.1 The introduction of Universal Credit heralds a fundamental change in the way in which benefit payments are administered. The three key changes proposed, the move to monthly payment; the move to a single household payment; and the removal of direct rent payments to landlords, pose new risks for benefit recipients and considerable challenges for the successful implementation of Universal Credit.

4.2 Our research16 suggests that, in all likelihood, the majority of benefit recipients will be able to adjust to the changes over time with greater concern expressed about adapting and coping in the short term during the transition period.

The risks consumers face

4.3 When asked how they thought the change to monthly payment would affect them, 36% of benefit recipients reported that that they would be affected for the worse by the change with only 5% reporting that monthly payment would have a positive impact for them.17 Those who budget weekly were more likely to feel they would be acutely affected by the move to a monthly payment as, in the short-term, these recipients will need to alter the established budgeting routines that give them a sense of comfort and security. Many of the benefit recipients we spoke to in the depth interviews reported that the changes were also likely to disrupt their established budgeting practices, such as ring-fencing where each benefit is allocated for payment of a different expenditure or bill.

4.4 Benefit recipients were also concerned about the potential consequences of the change in payment frequency. Twenty-seven per cent of those who said they would be worse off reported that they would be likely to run out of money before the end of the month and 11% reported that they would be more likely to need to borrow money. Some depth interview participants, who budget weekly, reported that they often spend a day a week without money at the end of the budgeting cycle. These recipients anticipated having to manage the last four or five days each month without money for essential items and utilities, even if they budgeted well, as a result of the move to monthly payment. Some also indicated that the false sense of wealth likely to be created at the start of the monthly budgeting cycle would lead to irresistible temptation to spend money on non-essential items.

4.5 Thirty per cent of benefit recipients reported that they would be worse off as a result of the proposed changes to Housing Benefit payments—with only 3% reporting a positive impact from the changes.18 Our qualitative research found that having Housing Benefit paid to them, rather than their landlord, was expected to exacerbate the false sense of wealth felt by recipients at the start of the monthly budgeting cycle. Some also questioned whether they would have the discipline and restraint to ring-fence the money for rent, given regular pressures on their budget, and voiced concerns that rent money may be used as a way to boost finances if there was an unexpected cost to deal with—which could, in turn, lead to a repetitive cycle of rent money being spent on more immediate essentials.

4.6 Some 17% of benefit recipients stated that they would be worse off as a result of the move to a single household payment.19 While this change may adversely affect a smaller number of recipients than other proposed changes, the move to a household payment may have a greater adverse impact on those who are affected. Specific concerns were expressed about cases where households had adult children also receiving benefits, with a great deal of anxiety reported about how to divide the payment and the impact this may have on the family if disputes arose. Some recipients also expressed concern about the move to a single household payment further disrupting their current budgeting practices, especially in situations where each individual recipient in a household took responsibility for the payment of specific expenditures.

5. Budgeting Accounts

5.1 Our research20 tested a range of tools that could potentially help benefit recipients mitigate any adverse impacts from the changes proposed in Universal Credit payment. We specifically sought to ascertain views on whether particular attributes and features of a transactional banking account would aid budgeting and money management. The results from this research, combined with findings from previous detailed research,21 suggest that many low income consumers place a particular premium on those attributes and features which aid control.

5.2 Of the account features tested, ring-fencing facilities that could be used to shelter money needed to pay bills was considered the most useful. This “jam jar” type facility could aid self-discipline, with sums clearly allocated for essential bills, and assist with management of the longer budgeting cycle.

Account provider is a significant factor

5.3 It is essential that accounts aimed at low-income consumers, and designed to encourage transactional banking, are offered by a trusted provider. While many currently receive benefits in to an account with a high street bank, our research22 suggests that low-income groups often lack trust in these banks—usually as a result of a previous bad experience. The same research highlights that the Post Office is considered as trusted by 83% of low-income consumers.

5.4 Credit Unions and the Post Office Ltd could work highly effectively together, within the framework of the DWP strategy for supporting expansion of Credit Unions, to offer budgeting accounts to Universal Credit recipients. Our recent report, Credit where credit’s due,23 highlights the benefits that offering credit union services through the Post Office could bring, especially for the reported 1.7 million people who do not have a transactional banking account, the four million who incur bank charges and the up to seven million who use sources of high cost credit.24

18 September 2012

1 Opportunity Knocks, Consumer Focus, January 2010; available at

2 Research carried out for Consumer Focus, February 2012, by GfK Group, due to be published in a forthcoming report

3 Research carried out for Consumer Focus, February–March 2012 by TNS BMRB, due to be published in a forthcoming report

4 GfK Group, 2012 and TNS BMRB, 2012

5 Ibid

6 Ministerial response to Parliamentary Question, 26 June 2012. Available at

7 Welfare Reform Bill Universal CreditEquality Impact Assessment, Department for Work and Pensions, Nov 2011. Available at

8 GfK Group, 2012

9 TNS BMRB, 2012

10 GfK Group, 2012

11 68% thought it was important, and 76% that it would be convenient to be able to do this at the local Post Office

12 76% thought it was important, and 78% that it would be convenient to be able to do this at the local Post Office

13 The Post Office network is underpinned by minimum access criteria to ensure fair access for all. The five access criteria that apply can be found in Securing the Post Office Network in the Digital Age, Department for Business, Innovation & Skills, Nov 2010. Available at:

14 GfK Group, 2012

15 Ibid

16 GfK Group, 2012 and TNS BMRB, 2012

17 GfK Group, 2012

18 Ibid

19 Ibid

20 GfK Group, 2012 and TNS BMRB, 2012

21 Opportunity Knocks, Consumer Focus, January 2010. Available at

22 Ibid

23 Credit where credit’s due, Consumer Focus, May 2012. Available at

24 Credit Union Expansion Project—Project Steering Committee Feasibility Study Report, Department of Work & Pensions, May 2012. Available at

Prepared 21st November 2012