Research and analysis

Executive summary

Published 7 October 2024

About the research

Universal Credit (UC) is a single monthly benefit payment for people in or out of work. When an individual first makes a claim for UC there is a one month assessment period, after which it takes up to seven days for payment to reach their account. This means the time period between making a UC claim and receiving the first payment is around five weeks.

Claimants can apply for an advance payment of up to the full amount of their estimated first payment if they need financial support during the first five weeks. The advance payment is interest free and is repaid through the claimant’s monthly UC payments.

Ipsos MORI undertook qualitative research for DWP to understand the decision-making process about whether or not to take the advance payment. A total of 50 in-depth interviews were conducted, comprising 31 interviews with those who had taken the advance payment and 19 interviews with those who had not. The sample also comprised a mix of claimant demographics, including age, gender, work status and reported confidence in managing their finances.

Claimant context

Claimant circumstances at the point of making their UC claim strongly affected the level of support they required to understand the advance payment. Those with a disability or long-term health condition or who had difficult personal circumstances, such as being a refugee or leaving an abusive relationship were likely to need support to understand the transition to UC, the advance payment and to manage their finances but were unlikely to seek this out themselves.

Claimants who had a sudden change of circumstance which meant they now needed to claim UC having previously been working had limited capacity to change their circumstances or look beyond the immediate crisis. This limited their ability to absorb information or look for additional support.

Claimants who were working and received UC to top up their income demonstrated good financial management skills and ability to understand UC and the advance payment. They needed least support from DWP.

Understanding of the advance payment

There were claimants who did not remember being told about the advance payment until after they had made their claim or reached the end of their first assessment period. This may have been because of poor recall or there may be inconsistencies in the information being provided at Jobcentres.

Claimants who had little or no knowledge of either the five week wait or the advance payment before attending the Jobcentre to make their UC claim were reliant on the work coach at the Jobcentre to explain this. They expected the Jobcentre to provide authoritative information on UC (and therefore the advance payment), which reduced their motivation to seek additional information from other sources. However, in the research, these claimants also demonstrated poorest recall and understanding of the specific details of the advance payments.

Claimants with stronger financial management skills who were more digitally confident were more likely to have sought information about UC from a third party such as a debt charity before making their claim. They were better prepared for the five week wait and could make a more informed decision about taking the advance payment. These claimants also had strongest recall of the specifics of the advance payment.

Providing claimants with written information about the advance payment could help support recall and act as a prompt for work coaches to discuss the advance payment with all claimants.

Claimants who decided not to take the advance payment

Reasons for not taking the advance payment included:

• not knowing about it
• feeling that they did not need it. These claimants had other sources of income and felt that they could manage financially until their first UC payment decided not to take the advance payment
• aversion to debt. This was linked to poor understanding of how the advance payment differs from commercial loans
• long term impact on their UC payments. These claimants felt that a reduction in their UC payments would have a more negative impact in the long term

Claimants who did not need the advance payment were able to arrange their finances to cover the gap in payments. Claimants who did not take the advance payment but did need additional funds during this time borrowed money from family and friends, used their credit cards or overdrafts. Other strategies those who did not feel they needed the advance payment used during the assessment period included making reduced payments for utilities and/or rent and using food and/or clothing banks.

Claimants who decided to take the advance payment

Claimants who took the advance payment did so because they felt they needed the money. There were examples of claimants who were concerned about taking the advance payment but feeling they had no choice as they had no other income. Claimants who only found out about the 5 week wait and advance payment when they made their claim for UC were particularly likely to feel this way, as they had no opportunity to explore alternative options. Reluctance to take the advance payment stemmed from concern about borrowing money which had to be repaid and / or about the long-term reduction to their UC payment.

Claimants reported knowing what they would spend their advance payment on and sticking to this plan. Claimants reported spending their advance payment on essential living expenses such as food, bills and rent or to pay for a large, unavoidable expense such as a rental deposit.

Claimants with stronger financial management skills planned how much advance payment to take, for example, by calculating how much money they could live off during the assessment period and requesting this. Claimants with poorer financial management skills picked an amount they thought or hoped would be enough but did not demonstrate having planned this in detail, or in some cases, having the skills to do so.

There was also variation in how well claimants understood the advance payment repayments. Those with stronger financial management skills had a clearer understanding of this, in contrast to those with poorer financial management skills who had a weaker understanding. Those with less understanding of how and when the advance payment would be repaid reported finding it harder to manage when this was deducted from their UC payments. Claimants who reported receiving less money on UC than legacy benefits, or whose UC payments varied each month also reported finding it hard to understand how their repayments would affect their monthly income.

Information needs

As noted, recall of the detail of the advance payment and repayments varied across the sample and was linked to existing financial management skills and capacity to understand and retain this type of information^{[footnote 1]}. To address this, it may be useful to provide claimants with written information about the advance payment which they can take away and refer back to.

To make an informed decision about the advance payment, claimants wanted:

• information about how much UC payment they would receive each month. This was seen as essential to helping them understand how deductions to repay the advance payment would affect their income
• Information about the advance payment. Specifically, that it must be repaid; it is interest free; how much they can receive; when repayments start; over how long they can repay it; how much their monthly repayments will be

Claimants expected information about the advance payment to come from the Jobcentre and DWP through the UC website. This was viewed as the authoritative source of information about UC and the advance payment. It was important for information to be tailored to the individual’s circumstances and needs, for example their family circumstances; if they had other forms of income; and their experiences of, and capability to, budget monthly.

1. There may also be variation in the detail which work coaches are providing about the advance payment but this report cannot comment on this as work coaches were not included in the sample for this study. ↩