Fair Repayment Rate comes into force

The Fair Repayment Rate came into force on 30 April 2024, capping deductions from Universal Credit at 15%, down from 25%¹. The change applies to deductions taken from benefit payments, including those arranged to clear arrears and to pay ongoing bills¹.

Third Party Deductions are a way to pay bills directly from benefits. They are available to people receiving Income Based Job Seekers Allowance, Income Related Employment and Support Allowance, Income Support, Pension Credit and Universal Credit¹. Deductions are made each time benefits are paid, with £4.65 deducted from each benefit to pay off debt owed, sometimes plus an extra amount to cover future bills¹.

Under the rules described, a claimant cannot have more than three deductions for debts they owe, but can have more than three deductions towards current bills. For example, someone owing money to a water provider, a landlord and a gas company could have those three deductions, but could not add further debt repayments this way. Current water, rent, gas and other bills can still be paid through deductions because these cover what is being used now¹.

Where a claimant receives Universal Credit, a landlord can request Third Party Deductions from the benefit to help clear arrears, as part of an application for an Alternative Payment Arrangement¹. Deductions cannot be used to pay an old supplier, so a claimant who has moved house cannot pay a former landlord this way, and someone who has switched energy provider can only pay their current supplier through this route¹.

The source states that if the total deduction from a benefit is more than 25%, the claimant has to formally agree to it¹. It does not set out how the 15% cap interacts with that agreement threshold, and no further detail on that point has been reported.

Why it matters for households

The cap changes the maximum share of Universal Credit that can be taken before payment reaches a household. For claimants with deductions for rent arrears, utility debts or advance repayments, the amount deducted each month is now limited to 15% rather than 25%¹. The change took effect from 30 April 2024¹.

The £4.65 per benefit deduction for debt repayment is unchanged in the source, and the limit of three debt deductions remains¹. Households with deductions covering current bills are treated differently from those covering arrears: the three-deduction limit applies to debts owed, not to ongoing bills¹.

Anyone repaying a Universal Credit advance or managing deductions from Universal Credit is affected by the cap on the total taken from each payment. The source does not state whether existing deductions are recalculated automatically or whether claimants need to take any step, and that has not been reported.

What happens next

The source gives no further dates beyond the 30 April 2024 commencement¹. It notes that to set up a Third Party Deduction, a claimant contacts Job Centre Plus and the company they wish to pay, and Job Centre Plus assists in setting up the deduction¹. No timetable for any review of the 15% cap has been reported.