People claiming a number of five Department for Works and Pensions benefits are expected to escape the energy price cap hike. Just yesterday it was announced that the cap would increase by 80% to £3,549 a year by October.
This means that 24 million households will face higher bills in just a few months, as suppliers raise their gas and electricity prices. Being able to pay the increased amounts is likely to be difficult for households.
However, the latest DWP guidelines state that anyone who pays for their household energy through deductions from their benefits will not be affected by the price cap change. It blocked providers from asking for higher amounts to be taken out of benefit payments until April 2023.
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This affects people with the following benefits:
- Income support
- Income-Based Jobseeker’s Allowance
- Pension credit
- Employment and Income Support Benefit
- Universal Credit
Claimants who are in debt with their gas and electricity may face deductions that come directly from their benefit payments to clear arrears, under the DWP’s Fuel Direct policy. Previously, suppliers could also charge additional amounts to cover an applicant’s current energy consumption, but this has been stopped due to the cost of living crisis, reports BirminghamLive.
The DWP said in a new update: “From April 1, 2022 through April 1, 2023, the DWP has introduced a temporary change to Fuel Direct to protect claimants in light of unprecedented energy prices. During this time, energy providers can no longer claim new deductions or increased payments from a claimant’s compensation to pay for continued fuel consumption.
“For claimants who pay for their ongoing fuel usage directly from their benefits, the amount they pay has not been automatically increased if their bill increased in April 2022 and will not automatically increase when the price cap changes. in October 2022.
“If claimants are using Fuel Direct and feel they are able to pay their increased bills, they should contact DWP to modify their existing arrangement.
“Applicants of Universal Credit can use their Universal Credit log to make this application or call 0800 328 5644. Applicants for Income Support, Jobseeker’s Allowance and Employment and Support Allowance can call 0800 169 0310. For pension credit claimants can call 0800 99 1234.”
What benefit deductions can be taken?
The DWP can deduct a fixed amount for arrears under Schedule 9 of the Social Security (Claims and Payments) Regulations 1987. The amount is deducted from the individual’s benefits at source and paid directly to the provider until the debt is cleared.
Applicants may also request that an additional amount be deducted to cover current consumption charges. This is to prevent new debts from accumulating and to help the applicant establish their budget. When a person pays for his energy with a prepayment meter, only a deduction for arrears can be taken.
Once a debt is repaid, the deduction generally ends. But in some cases where the person “repeatedly mismanaged their money,” a deduction may continue to cover ongoing charges.
When there is more than one debt, the DWP can take a maximum of three deductions at a time. The DWP will apply a priority order when more than three requests are made to have money taken out of someone’s benefits.
The order of priority reflects the degree of risk to the individual or their family by the enforcement action that may result from non-payment, the DWP said. The command is:
- Housing costs for specific mortgage arrears
- Miscellaneous accommodation costs; retirement homes, private hospitals
- hostel fees
- Rent arrears, including rental charges
- Network fuel costs; gas and electricity
- Water charges; water then sanitation if two debts
- Municipal tax and arrears of community charges
- Alimony under the old regime
- Refugee Integration Loans
- Eligible loans
Most third-party deductions are taxed, but there are instances where the consent of the individual is required. This applies where the total amount of all deductions (including amounts to cover ongoing costs) exceeds 25% of the main benefit, including any Child Tax Credit and Child Allowance. Consent is only required for the following types of debt:
- Housing cost arrears not covered by direct mortgage interest scheme
- Rent and charges
- Fuel costs
- Water costs
- Integration Loans
- Eligible loans