Managed Migration to Universal Credit - with Income Protection

Hi. I am awaiting the managed migration letter which could now come anytime. I currently claim Tax Credits and also have an 'active claim' under a private Income Protection Policy. This private policy does not affect Tax Credits claim, as it is a non taxable monthly payment and Tax Credits are only concerned with Taxable Income. 

My question is this: When I move under managed migration to UC, how will this Income Protection payment be treated/counted? I am assuming it would count under UC as 'Unearned Income' as UC counts all income, regardless of whether it is taxable or not. If I was making a brand new claim for UC I wouldn't be entitled to it due to this unearned income, but can soemone please tell me if Transitional Protection will still allow a clain for UC to be considered? In other words, will Transitional Protection allow a monthly amount of 'unearned income' to be disregarded under a mangaed migration to UC? 

I hope this makes sense. It is all a bit complicated!



  • Icequeen1
    Icequeen1 Posts: 430
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    UC doesn't take into account all income as unearned income - it only takes into account income that is specifically defined in legislation as unearned income. 

    It depends on the exact nature of the payment and only if that is included in the regulations would it be income for UC. 
  • Icequeen1
    Icequeen1 Posts: 430
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    The Regulations do include:

    a payment received under an insurance policy to insure against—

    (i)the risk of losing income due to illness, accident or redundancy

    as unearned income

  • Newcad
    Newcad Posts: 792
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    edited 4 October 2023 at 1:11PM
    As said it depends just what this policy is whether it counts as unearned income or not.
    But from how you describe it I think that it will.
    The only 'disregard' that I am aware of is the £16K savings disregard for 12 months.
    You (may) get a Transitional Element to make sure that 'your payment with UC is no less that you were getting before' with TC.
    So you would then be entitled to the normal UC elements, plus extra from a Transitional Element.
    But that's as far as the Transitional Protection goes. (Leaving aside the savings disregard for savings over £16K).
    If the income from the private policy would normally be counted in UC then it will be deducted as usual from UC as unearned income; ie. £ for £.
    So it's all going to depend on how much TE you may be awarded.
    if what you get from the policy is less than than your normal UC amount  plus the TE then there will still be some UC to pay.
    However if what you get from the policy is more than than your normal UC amount  plus the TE then there will be no UC to pay.
    Of course any earned income that you have will also reduce UC by the 55p taper rate, which also has to be factored in.

  • Yamor
    Yamor Posts: 312
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    You would seem to fall within a case where current DWP practice does not follow the law.

    When calculating the transitional element, according to the Regs, DWP should take into account this sort of unearned income, meaning you would potentially be awarded a traditional element (or an increased transitional element) due to this income.

    However, it seems that currently DWP only use income information from tax credits when calculating the transitional element, meaning they would not take your unearned income into account in their calculation.

    If this does in fact happen to you, then you should request a Mandatory Reconsideration on their decision as to your entitlement for your first Assessment Period, and potentially take it to appeal if necessary.
  • aski
    aski Posts: 2
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    Thanks for the comments everyone. I think it is a case where the only way I will find out for sure will be when I put the claim for UC in once my letter comes through. Although the idea of requesting a Mandatory Consideration - so that the case gets looked at 'properly' before being dismissed is a very good one, thanks for that Yamor.

  • poppy12345
    poppy12345 Posts: 17,722
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    edited 4 October 2023 at 10:59PM
    While reading this something else came to mind, which i hadn't given a thought to. Now i know this is a different situation to the OP but it's still involves managed migration so i thought i'd ask here.

    What happens if someone is claiming Tax Credits and also receives a private pension? Now we know pensions reduce UC £1 for £1 but will TP cover that pension amount? It's not something i've come accross before and i'm interested to know the answer. It may also help other members if they see this.
  • Yamor
    Yamor Posts: 312
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    This is again a case where DWP practice does not currently follow the Regs, but in a slightly different way to the OP’s case.

    What is supposed to happen is that the transitional element should be calculated by comparing current entitlement to tax credits (which should already take into account the pension income, unless it had recently started), to an “indicative UC amount” which should be calculated by taking into account ACTUAL monthly unearned income as at the day prior to the UC claim.

    What seems to actually be happening is that DWP simply take the “other household income” figure as held by HMRC for the tax credits award, convert that to a monthly amount, and use that as the “unearned income” figure for the “indicative UC amount” calculation.

    This creates some winners and some losers (and some with no change).

    For example, if the pension income recently started, then the unearned income figure used by DWP will likely be much lower than it should be (as HMRC may have a part-year figure, or even simply last year’s figure, which could be nil). This would lead to a lower transitional element than the claimant should get.

    On the other hand, if the pension income was previously higher (which I realise is unlikely with pension income), then the transitional element would be higher than it should be.

    If the pension income has been stable for some time, then the transitional element is likely to be about right.

    In any case where the transitional element is lower due to current DWP practice, my advice would be to request a Mandatory Reconsideration against the first entitlement decision made on the claim, and potentially take it to appeal.
  • Auti
    Auti Posts: 351
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    Poppy12345 - I get an ill health pension and am in process of migration from CTC - I thought I would lose my pension as it would be counted £ for £ against UC amount, all calculators show me as being a very reduced income on UC compared to tax credits. I really don’t understand how it is worked out or what is financially going to happen and I also fear, as DWP don’t seem to have an idea, that overpayments will be made and money then owed so am reluctant to spend UC in case they ask for it back but then it counts as capital. 
  • Newcad
    Newcad Posts: 792
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    As @yamor says, the way that the DWP are currently calculating TP from Tax Credits in some, call them not standard, situations is becoming an increasing issue.
    There is more than one area where it is not happening in line with the legislation, as well as there being some grey areas.
    The DWP say this is part of their 'Test and Learn' process. The big welfare organisations are aware and shouting about it.
  • andrewmp
    andrewmp Posts: 1,733
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    edited 5 October 2023 at 6:40PM
    I have a friend who is a student.  He stands to lose about £1k a month in tax credits once he moves.

    He's not going to claim as he doesn't think it's worthwhile now as he thinks he's just been lucky up to now. I told him to apply and let them take it away from him.  That way he might get it back once it's challenged.

    He said he just doesn't have the time as he's in his final year and wants to concentrate on becoming a doctor.
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