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Government: 'New financial products needed to help benefit claimants manage money'
Published 17 September 2012 by Lucy Bower
The government is calling for new financial products that will help benefit claimants budget effectively when the Universal Credit is rolled out next year.
The Government has called for new financial products to help benefit claimants manage their money with the introduction of Universal Credit next year.
The Government has dismissed calls to delay the introduction of the new Universal Credit, according to the BBC. This benefit will replace tax credits, jobseeker's allowance, income support, employment and support allowance (previously incapacity benefit) and housing benefits with a single monthly payment. It will be trialled in the North-East in April next year and introduced nationwide in October 2013.
Research by think tank SMF reveals that there are concerns in many households that the benefit reform could cause financial hardship - possibly sending benefit recipients into debt.
According to their research, most households are against the change from weekly / fortnightly payments to monthly, because people could run out of money by the end of the month. There was also opposition to social tenants paying landlords themselves - instead of benefit payments going directly to landlords - because people could risk being evicted if they miss payments. The research also highlighted that people who lose their job could have to wait up to a month before receiving any benefit payment, possibly resulting in financial hardship.
Dr Nigel Keohane, SMF Deputy Director and co-author of the report, commented: "Instead of mandating monthly payments and centrally planning which families to exempt, the Government should allow low income families to take the decision themselves through an online budgeting tool."
The Government is in favour of benefit recipients using budgeting tools to manage their money more effectively. Lord Freud, Minister for Welfare Reform, has asked for new financial products that would help people on low incomes to budget for everyday expenses.
He said: "Accounts that provide people with extra budgeting services could help to ensure people's essential bills are covered - helping them to build up their credit rating and break the cycle of financial exclusion."
And Andy Burrows, the Head of Post Offices at Consumer Focus, commented: "Our research shows significant need for budgeting bank accounts, often referred to as 'jam-jar accounts', to help people manage what will be a major change in how benefits are paid."
A spokesperson for thinkmoney commented: "If you think you might need a 'jam-jar' account that could help you to manage your money, you could look into the thinkmoney Managed Current Account - an alternative to a bank account. Our account splits your income into two accounts: one for essential bills and one for the money that you're free to spend as you wish. With its built-in budgeting service and predictive account management, it could be the ideal account to help you manage your monthly income."
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Apply for a thinkmoney Managed Current Account today.