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Universal Credit: Be careful what you wish for

I am regularly asked: “What impact will spousal maintenance have on my Universal Credit?”. For those of you who haven’t seen the political debates over this, Universal Credit is the new single benefit which pretty much replaces all fresh claims for most means-tested benefits. This includes income-based Jobseekers Allowance, tax credits and housing benefits. Transitional arrangements will be in place to ensure all existing live claims are transferred over to UC by 2019.

Universal Credit is a means assessed benefit. In order to calculate UC, both earned and unearned income is taken into consideration. Unearned income includes things like pensions, rental income and spousal maintenance. Under the current benefits system of tax credits, both spousal and child maintenance are disregarded when calculating entitlement. Child maintenance will continue to be disregarded for UC but spousal maintenance will be deducted from any UC entitlement. This is a huge and significant change to our current system! It could have a profound effect on separating couples. Or, those where a maintenance order has been made already and you are about to transfer over to UC. Although, with regard to the latter, the government has given assurances that on transition people will not be worse off on UC. See their support article here.

What is spousal maintenance?

Spousal maintenance is an ongoing payment made from income by one ex-spouse to the other. It’s usually on a monthly basis for either a fixed term, upon various triggering events or joint lives. There are many complexities involved in spousal maintenance. In essence, its purpose is to meet the ongoing reasonable needs of the financially weaker party. When negotiating terms of the settlement, you will look to see if all of the income needs of one party are being met from their own income whether earned or unearned. This includes all outgoing on the house, running the car together with all other reasonable needs of that individual. If they are not being met, then you will look to the other spouse to see if their income resources are able to meet any shortfall.

Impact of Universal Credit upon spousal maintenance

It is not uncommon for the spouse with the weaker financial position to have an expectation for ongoing financial support from the other. You may not agree on this issue until many months after separation. Claims for Universal Credit, if entitled, would no doubt be in payment at this stage. Any spousal maintenance subsequently agreed/paid will reduce your Universal Credit entitlement pound for pound. Unfortunately, this may even negate any entitlement at all. An overpayment may well have to be repaid. Unless due consideration is given to this fact then you may be financially prejudiced after the event and without any form of redress through the court.

If you are not yet in receipt of Universal Credit then your current benefits will be transferred over to this as part of the transitional process with a timetable of next year. Then you may find your income reduces if you are also in receipt of spousal maintenance – despite the assurances of Government. If this were to happen, you could justify an application to the court for a variation of the existing terms of maintenance paid.

What you need to take into consideration

It is important to take these factors into consideration when negotiating spousal maintenance in terms of quantum and recitals to orders to take into consideration potential variation upon transfer from Tax Credits to Universal Credits. There are lots of factors to take into consideration when negotiating a financial settlement. And this is not only in relation to meeting your own needs! But also with regard to potential changes which may subsequently impact upon you. Our specialist family team and mediation services are here to help.

Please don’t hesitate to contact us via family@174law.co.uk. It’s always better to be safe than sorry.