DWP issues ‘don’t ignore’ warning as important update affects millions | Personal Finance | Finance

The Department for Work and Pensions (DWP) has released new guidance for Tax Credit recipients over the state pension age, alerting them to an important letter arriving by post before the end of this financial year, signalling the end of the legacy benefit.

This letter will clarify whether they must apply for Universal Credit or Pension Credit to maintain their financial aid.

Those directed to shift to Universal Credit will be sent a Migration Notice, while those transitioning to Pension Credit will receive a Tax Credit Closure Notice.

The DWP started sending these letters out last month and is emphasising the importance of not missing the ‘deadline day’ for submitting claims, which will be at least three months from when the notice is issued.

Claimants can request an extension to this deadline if they do so before it passes and can provide a “good reason why they are not able to apply within the original deadline”.

The end of the Tax Credit award will occur 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 if no claim is made, or the claim is made after that date.

Individuals who already receive Pension Credit will get a Tax Credit Closure Notice, which states when their Tax Credit will end, usually two months after the notice is sent.

The DWP explained that these claimants receive a shorter notice period because they will automatically continue with Pension Credit without needing to file a new claim, according to the Daily Record.

Which benefit will pension-age Tax Credit claimants be asked to move to?

Under certain conditions, those of pension age claiming Tax Credit will be nudged to apply for Universal Credit. These include:

• If the person is not already claiming Pension Credit
• If they receive Working Tax Credit or Working Tax Credit and Child Tax Credit
• If they are entitled to Working Tax Credit but only in receipt of Child Tax Credit (because their income has reduced their Working Tax Credit to nil)
• If they are a member of a mixed-age couple in receipt of Working Tax Credit and/or Child Tax Credit

Typically, individuals who have reached state pension age (which is currently 66) are not eligible for Universal Credit, unless they are part of a mixed-age couple.

In specific circumstances, Pension-age Tax Credit claimants will be urged to claim Pension Credit, such as if they only receive Child Tax Credit.

However, 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.

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 if:

• 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

Meanwhile, Pension-age Tax Credit claimants who are part of mixed-age couples will be asked to apply for Universal Credit if:

• 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.

Transitional protection

People who receive a Migration Notice or Closure Notice may be eligible for additional funds to offset any loss in benefits following the termination of their Tax Credit claims, known as a transitional additional amount.

For those transitioning to Universal Credit, this support is provided as a transitional element.

Those deferring their State Pension or other pensions when they receive their closure notice can have their unclaimed pension income disregarded for up to one year during their Pension Credit award period.

The Department for Work and Pensions (DWP) clarified that unclaimed pension income is ignored for Tax Credit purposes, allowing claimants time to adjust to the new rules.

Claimants with a Universal Credit transitional element that ends (unless due to increases in other parts of the award) or those applying for Pension Credit will lose access to Universal Credit, as the standard upper age limit will then apply.

Individuals may secure transitional protection within their Pension Credit if:

• They received a Tax Credit Closure Notice
• They are entitled to an award of Child Tax Credit on the day before the deadline day
• If new claimants 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 advice on how to handle a Migration Notice or Tax Credit Closure Notice for Universal Credit or Pension Credit claims, individuals can turn to the nationwide Citizens Advice network.