The Department for Work and Pensions (DWP) has released new guidance for eligible Tax Credit claimants over State Pension age, who are set to receive a crucial letter in the post before the end of the current financial year, signalling the termination of the legacy benefit. This letter will indicate whether they need to apply for Universal Credit or Pension Credit to maintain their financial support.
Those being asked to transition to Universal Credit will receive a Migration Notice, while those being asked to switch to Pension Credit will receive a Tax Credit Closure Notice.
The DWP confirmed that these letters began being sent out last month and urged individuals not to disregard the ‘deadline day’ to submit their claim by, which it stated will be no less than three months from the date the notice is dispatched. The deadline day can be extended as long as the Tax Credit claimant requests one before the date arrives and there is a “good reason why they are not able to apply within the original deadline”.
The Tax Credit award will cease on the earlier of:
- the day before the Universal Credit or Pension Credit award starts, if a claim is made on/before the deadline day or
- the day before the deadline day if no claim is made, or the claim is made after that date.
People already receiving Pension Credit will get a Tax Credit Closure Notice to tell them when their Tax Credit award is to end, which is usually two months from the date of issue. The DWP said a shorter notice period applies to these claimants as they will stay on Pension Credit and will not need to make a new claim, reports the Daily Record.
Which benefit will pension-age Tax Credit claimants be asked to move to?
Those of pension age claiming Tax Credit will be prompted to apply for Universal Credit under certain conditions:
- not already claiming Pension Credit
- in receipt of Working Tax Credit or Working Tax Credit and Child Tax Credit
- entitled to Working Tax Credit but only in receipt of Child Tax Credit (because their income has reduced their Working Tax Credit to nil)
- a member of a mixed-age couple in receipt of Working Tax Credit and/or Child Tax Credit
Normally, individuals who have reached State Pension age are not eligible for Universal Credit, unless they are part of a mixed-age couple.
Pension-age Tax Credit claimants will be encouraged to claim Pension Credit in specific circumstances:
- in receipt of Child Tax Credit only
If Pension-age Tax Credit claimants already receive an award of Pension Credit on the day they receive a closure notice, they will continue to receive Pension Credit.
So, which mixed-age couples will be asked to switch to Pension Credit?
Pension-age Tax Credit claimants who are part of mixed-age couples will be asked to apply for Pension Credit only under certain conditions:
- they are currently entitled to pension-age Housing Benefit (which means they are also eligible to claim Pension Credit) and
- their Tax Credit award is for Child Tax Credit only
Pension-age Tax Credit claimants who are part of mixed-age couples will be asked to apply for Universal Credit under specific circumstances:
- they are currently entitled to pension-age Housing Benefit but
- their Tax Credit award is for Working Tax Credit or Working Tax Credit and Child Tax Credit
The DWP has stated that because a claim to Universal Credit would terminate their pension-age Housing Benefit award, the rules have been adjusted to allow these claimants to re-claim pension-age Housing Benefit provided they do so within three months of the end of their Universal Credit award.
If they do not claim Universal Credit or are not entitled to it, they must re-claim within three months of the end of the Housing Benefit award – this is because the Housing Benefit award will cease when their Tax Credit award ends.
Transitional protection
Citizens who are notified with a Migration Notice or Closure Notice might be eligible for extra funds to compensate for any loss in benefits following the termination of their Tax Credit claims. This supplemental assistance is known as a transitional additional amount.
For individuals transitioning to Universal Credit, this support takes the form of a transitional element.
Those deferring their State Pension or non-State Pension when they receive their closure notice can expect their unclaimed pension income to not be accounted for up to one year into their Pension Credit award period.
The Department for Work and Pensions (DWP) clarified, As unclaimed pension income is ignored for Tax Credit purposes, this exception to the normal rules on the treatment of such notional income applies to these claimants to allow time to adjust to the new rules. .
Claimants who have been granted a Universal Credit transitional element that ends for reasons other than reductions caused by increases in other parts of the award or those who apply for Pension Credit will lose access to Universal Credit, as per DWP. This is because the standard upper age limit for Universal Credit will then be in effect.
Individuals may secure transitional protection within their Pension Credit under specific conditions:
- the person has received a Tax Credit Closure Notice
- they are entitled to an award of Child Tax Credit on the day before the deadline day
- (for new claimants) they apply for Pension Credit by the end of the one month starting on the deadline day in the notice
- they were a couple for Tax Credit purposes when the notice was issued and are members of the same couple for Pension Credit purposes on the day before the deadline day
- they were single for Tax Credit purposes when the notice was issued and are single for Pension Credit purposes on the day before the deadline day
For guidance on how to proceed with a claim for Universal Credit or Pension Credit upon receiving a Migration Notice or Tax Credit Closure Notice, individuals can seek help from the nationwide Citizens Advice network.
