Welfare Reform Act 2012

Changes to your benefits

The Welfare Reform Act 2012 is new legislation introduced by the government. It makes a series of changes that will affect those residents who receive benefits. Dates for the start of the new style payments are April 2013 and October 2013.

Through a series of updates on our website and other communications and activities we will be explaining the changes to you and letting you know where to get help and guidance.

If you are concerned about how you will be affected, please get in touch with us at the housing office. A leaflet produced by the National Housing Federation may also help.

How will the new rules affect you?

Benefit Cap

What is it?

From April 2013 a cap will be introduced on the total amount of benefit that working age people can receive. This will mean that workless households should no longer receive more in benefits than the average earnings of working households.

How will it affect you?

The government will add up the combined income from the main out of work benefits including

  • Housing Benefit
  • Jobseeker's Allowance
  • Employment Support Allowance
  • Child Benefit
  • Child Tax Credit
  • Carer's Allowance

If the total comes to more than the maximum amount allowed, your Housing Benefit will be reduced. The cap will be set at £500 per week for couples and lone parents and £350 per week for single adults. The local authority will apply the cap to both new and existing claimants via a deduction from Housing Benefit.

Some people will be exempt from the cap. It will not apply:

  • If you get Working Tax Credits or Pension Credit
  • If any member of your household gets Disability Living Allowance, Attendance Allowance, Personal Independence Payment, the support component of Employment and Support Allowance, Industrial Injuries Benefits or a War Widows and War Widowers Pension.

See the Gov.UK website for more details (this website replaces Directgov).

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How many bedrooms do you have?

From April 2013, the amount of Housing Benefit paid may be reduced if residents have more bedrooms than they need. The government is introducing new rules about the number of bedrooms households need.

What happens if you have a spare bedroom?

If you have one spare bedroom, your Housing Benefit will be cut by 14 per cent of the rent you pay every week. If you have two or more spare bedrooms, you will lose 25 per cent. If your benefit is cut you will have to pay the difference between your housing benefit and your rent. This could affect you:

  • If you are 16 to 61 years old
  • If you only get a small amount of Housing Benefit – e.g. if you are working
  • If you are sick or disabled

You won’t be affected if either you or your partner is old enough to receive pension credits. In April 2013 the pension credit age will be around 61 years and six months.

If you have more bedrooms than you need, the maximum Housing Benefit you can receive will be reduced by:

  • 14 per cent if you have one extra bedroom
  • 25 per cent if you have two or more extra bedrooms.

You will be expected to pay the extra amount yourself.

Under the new rules you will be allocated a room for:

  • Each adult couple
  • Any other person aged 16 years or over
  • Children of the same sex under the age of 16
  • Two children under the age of ten, regardless of their sex
  • Any other child
  • A carer (who does not normally live with you) if you or your partner need overnight care

The new rules will also apply if:

  • You have a spare room for when your children or other people come to stay
  • You and your partner need to sleep apart because of illness or disability


  1. A couple living in a three-bedroom property: They have no children. Their rent is £115.00 per week. From April 2013, the amount that they would have to pay themselves would be £28.75 per week. Their Housing Benefit would be reduced by 25 per cent because they are deemed to have two spare bedrooms.
  2. A couple live with their two boys: 12 and 15, in a three bedroom house. Their rent is £100 per week and they receive £10 per week in Housing Benefit. Under the new rules their children will be expected to share a bedroom and so they will be treated as having one spare. Their Housing Benefit will be reduced by 14 per cent of £100 (£14), and so they will lose all their Housing Benefit.
  3. A couple living in a two-bedroom property: They have no children. At the moment they receive Housing Benefit to cover all of their £90 per week rent. In April 2013 this will change. Then, the maximum Housing Benefit they could get will be £77.40 Their Housing Benefit is reduced by 14 per cent because they are deemed to have one spare bedroom. They will have to pay £12.60 per week themselves.
  4. An older person over pensionable age living alone in a two-bedroom property: She is not affected by these changes as she is of pensionable age. Those of pensionable age will not be affected by these changes. For benefit purposes, you will be over pensionable age in April 2013 if you were born on or before 5 October 1951.

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Universal Credit

What is it?

Universal Credit will simplify the benefits system by bringing together a range of working-age benefits into a single streamlined payment. From October 2013, new claims for Universal Credit will start and existing claimants will begin to be moved onto the new benefit. You will need a bank account to be in receipt of your payment.

Universal Credit will include the housing amount to pay your rent. This will replace Housing Benefit. You will need to make your own arrangements to pay your rent to us. Unless there are exceptional circumstances, you will not be able to ask for the housing amount to be paid directly to us.

It is very important that for you to make arrangements to pay your rent, so you do not fall into rent arrears, this could lead to losing your home. The easiest way to do this is by setting up a Direct Debit with your bank, building society or credit union. 

Guidance notes on bank accounts and charges

The council launched a take up campaign with the London Mutual Credit Union. See website for information on the credit union for you to consider opening an account and setting up direct debits. Information is also available in the housing office. Most high street banks offer a basic bank account, these offer features of a current account but do not provide access to an overdraft. Many of these accounts have no fee but will incur penalty fees for returned payments. 

The information below will give you a bit of advice on what type of bank account to open; please do your research on opening a bank account. Look at the costs.

Comparison of features of current and basic bank accounts

Current account versus basic account Current account Basic account
Cash card with a PIN to get cash out of a machine Yes Yes
Direct Debit and Standing Order Yes Yes
Online and telephone banking Yes Yes
Pay in money via cash,cheques, wages, electronic transfer, pensions or benefits Yes Yes
Debit card Yes Sometimes
Cheque book Yes No
Interest on credit balances Sometimes No
Monthly statements Yes Statements are available but not always monthly
Access to credit i.e. overdraft Yes No – some have a small buffer £10 - £15.  Charges for direct debits and standing orders will take you over your limit. Can cost from £5 to £38
Access to cash machine Yes Yes, although some banks only allow you to use their machines
Counter service in branch Yes Some basic accounts have full counter service, some have restrictions.  Basic accounts allow you to use a Post Office to pay in or withdraw money

Providers of basic bank accounts

Provider Account Receive Payments Standing Order and Direct Debit
Bank of Scotland Cash Account Yes Yes
Barclays Cash Card Yes Yes
Clydesdale Bank Readycash Yes Yes
Co-op Bank Cashminder Yes Yes
Halifax Easycash Yes Yes
HSBC Basic Bank Account Yes Yes
Lloyds TSB Cash Account Yes Yes
Nationwide Cash Card Yes Yes
NatWest Basic Account Yes Yes
Royal Bank of Scotland Basic Account Yes Yes
Santander Basic Account Yes Yes
Secure Trust Bank Current Account Yes Yes
Ulster Bank Step Account Yes Yes
Yorkshire Bank Readycash Yes Yes

How will Universal Credit affect you?

Universal Credit is the new benefit introduced from October 2013, replacing current means-tested benefits and tax credits for people of working age. The following benefits will be replaced by Universal Credit:

  • Income Support
  • Income-based Jobseekers Allowance
  • Income-based Employment and Support Allowance
  • Housing Benefit
  • Child Tax Credits
  • Working Tax Credits.

Other benefits will remain, including:

  • Contribution-based Jobseekers Allowance
  • Contribution-based Employment and Support Allowance
  • Child Benefit
  • Carer’s Allowance
  • Statutory Sick Pay
  • Statutory Maternity Pay, Paternity Pay and Maternity Allowance.

Those people who currently claim will gradually be moved from their old benefits onto Universal Credit between October 2013 and the end of 2017. The differences are:

  • Most claims will need to be made online
  • There will be a single monthly payment paid into your bank account
  • There will be a limit to the total amount that a claimant can receive - for more details, check out the information in the Benefit Cap section above which includes a calculator to work out how you could be affected
  • Couples where one has reached the qualifying age for pension credit and one is of working age will have to claim Universal Credit until they have both reached the pension credit qualifying age
  • It will be paid both to claimants in work and those out of work.

The government has not said how much the different elements of Universal Credit will be, or how earnings will be treated. We will update the website as more information becomes available. The government has stated that no-one will be worse off. If the amount of Universal Credit is less than the amount that you currently receive, you will get the same amount for the time being - ‘transitional protection.’

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Older age

Most of the changes will affect only people who are of working age. However, people who haven’t already claimed Pension Credit when the new rules are bought in may find that they are classed as working age.

Changes affecting pensioners

Most of the changes brought in by the Welfare Reform Act 2012 only affect people of working age, but some changes affect older people too. It is very important that you make a claim for Pension Credit before October 2013 if you think that you might be entitled to it. You may be affected by the changes if:

  • Your partner is under Pension Credit age, and you are over Pension Credit age. You will no longer be able to make a new claim for Pension Credit – your partner will have to claim Universal Credit instead. But if you are already claiming Pension Credit when the change comes in you won’t be affected (unless there is a break in your Pension Credit claim for some reason)
  • Your partner has to claim Universal Credit. You will be affected by the changes to rules on how much you can receive in benefits (also known as the benefit cap) and also the new rules on under occupation.
  • Do you have dependent children living with you?
  • Child Tax Credits will be abolished. Financial help will be provided under Universal Credit or through additional amounts of Pension Credit
  • If you are working in a low paid job and over Pension Credit age, you will no longer be able to claim Working Tax Credits.

Pension Credit is changing

Since Housing Benefit is being abolished, Pension Credit will change. It will include a new housing credit to help towards the rent. The government has said that you will be able to ask for this to come straight to us, your landlord if you want.

It is expected that new claims for Pension Credit will include a housing credit from October 2014. If you are already getting Housing Benefit, you will be transferred to the new Pension Credit system between 2014 and 2017.

Pension Credit will also include additional amounts for dependent children as Child Tax Credit is being abolished.
There will be a new savings limit for Pension Credit. At the moment there is no limit to the amount of savings you can have and still qualify for Pension Credit. However, the government has said it plans to introduce a limit so if you have too many savings you will not qualify at all. The limit is expected to be over £16,000.

If you lose your Pension Credit because of this rule, you will also not be entitled to any help towards your rent.

It will also be easier for carers to claim an extra amount for carers in Pension Credit.

Personal Independence Payments will replace Disability Living Allowance for those aged under 65 years. If you are over 65, you should continue to be able to claim Disability Living Allowance. However, the government has not yet decided whether it will re-assess people over 65 to make sure they are still entitled to the Disability Living Allowance that they are getting.

Raising the state pension age

The age at which someone becomes entitled to a state pension is gradually increasing. The current state pension age is 65 years old for men. For women it is gradually increasing from 60 to 65 in two monthly stages. From April 2013 it will start increasing more quickly so that by November 2018 it will have reached 65. It will then continue to increase for both men and women. The government has proposed that by 2046 it will have reached 68. See table.

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Personal Independence Allowance

What is it?

From April 2013 disabled people will claim Personal Independence Payments as Disability Living Allowance for working age people is being abolished. Existing claimants of Disability Living Allowance will also have to claim the new benefit.

Paid for all new claimants from June 2013. But if you already receive Disability Living Allowance and report a change of circumstances after Other claimants getting Disability Living Allowance will be gradually moved onto Personal Independence Payments between 2013 and 2017.

How will it affect you?

The government has said that it will do this by writing to all claimants and inviting them to make a claim for a Personal Independence Payment, and informing them that their Disability Living Allowance will be stopped.
Personal Independence Payments will be made up of a daily living component (similar to the Care Component of Disability Living Allowance) and a mobility component. Awards will be made up of one or both of these components. Each component has three rates – a standard rate and an enhanced rate.

The government has proposed that entitlement to Personal Independence Payments will be based on a point-scoring system similar to that currently used to assess claims for Employment and Support Allowance. The proposed scoring system can be found on the Department of Work and Pensions website. As Disability Living Allowance has three rates for the care component, it is expected that people currently getting the low rate of the care component will be particularly at risk of lose their entitlement.

How might this affect other benefits?

As Disability Living Allowance acts as a ‘passport’ to receiving other benefits and increased amounts of other benefits, it could have a knock on effect. The government has confirmed that both rates of the daily living component will act as a passport for the person caring for a disabled person to be able to claim Carers Allowance.

Currently receipt of any rate of Disability Living Allowance means that the claimant is entitled to an additional amount on other means tested benefits they are getting. This is known as either a disability premium or disability element. The government has said that receipt of Personal Independence Payments will entitle claimants to an additional amount with both existing means tested benefits such as Income Support and Pension Credit and also with the new Universal Credit, but it has not decided on the amount yet.

People getting the high rate of the care component can also have an enhanced disability premium added to their other benefits. The government has confirmed that the enhanced element of Personal Independence Payments will qualify claimants for an enhanced disability premium, and that there will be a higher disability element within Universal Credit, but again it has not decided on the amount. Those getting any rate of the care component do not have a non-dependent deduction taken from help towards their rent or housing costs. If you are not awarded either of the daily living components of Personal Independence Payment and you have another adult living in your house with you (apart from your partner), you may have to pay a top up towards your housing costs.

Need help?

  • Contact your housing office for an assessment
  • Lambeth benefits cap response team, a point of call to advise families who will be affected by the benefits cap. A cap means that many of you may see your weekly income drop significantly – please get in touch with the team to discuss options by phone on 020 7926 3191.
  • Turn2us is a charitable service which helps people access the money available to them – through welfare benefits, grants and other help. Their free, accessible website has been designed to help you find appropriate sources of financial support, quickly and easily, based on your particular needs and circumstances.
  • Money Advice Service is a website to give you advice, tips and tools to help you get your finances under control and make your money go further
  • Citizens Advice Bureau
  • Lambeth Law Centre
  • Christians Against Poverty
  • Lambeth Every Pound Counts
  • HomeSwapper

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(updated 31/10/2012)



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