Millions of people across the UK who rely on state support could see their benefit payments significantly reduced due to an often-overlooked government rule. The Department for Work and Pensions (DWP) can authorise direct deductions from benefits to pay off certain debts, a process that can cut an individual's income by up to 15%.
What Are Third-Party Deductions?
These reductions, officially termed 'third-party deductions', are applied when someone receiving benefits has outstanding debts that they have not paid. The DWP typically steps in after other attempts to recover the money have failed. The debts in question can include court fines, rent arrears, unpaid council tax, or overdue energy bills.
Generally, deductions are set at a fixed rate and continue until the debt is cleared. The system allows for a maximum of three separate debts to be recovered in this way at any one time.
How Much Could Your Payment Be Cut?
The scale of the reduction depends on which benefit you receive. For those on Universal Credit, each debt triggers a standard 5% deduction from the monthly standard allowance. However, this figure can rise sharply for rent arrears, where deductions can range from 10% to 15% of the payment.
Claimants of older, legacy benefits are also affected. Those on income-based Jobseeker’s Allowance (JSA), income-related Employment and Support Allowance (ESA), and Income Support face a weekly reduction of £4.55 per debt.
The DWP states that affected individuals will be notified of the decision by letter or via their Universal Credit journal. The department advises: "If you want to pay more than the fixed rate towards your debts, you must arrange this with the organisation you owe money to."
Special Arrangements for Energy Bills
For those struggling with 'fuel debt' – money owed for gas and electricity – a specific scheme called Fuel Direct can be used. This allows for regular deductions from benefits to cover both ongoing usage and arrears.
To set this up, you must contact your energy supplier. "They’ll need your consent to request this for you. You can give consent on the phone. It does not need to be in writing," the DWP guidance explains. You agree on an amount that covers your current energy use, and you can stop these deductions at any time by contacting the office that pays your benefit.
The DWP adds that if you cannot afford the deductions, your supplier can inform you about the help available for people on low incomes and may arrange an alternative payment method.
Which Benefits Are Affected?
According to official information, five main benefits can be subject to these third-party deductions:
- Universal Credit
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Income Support
- Pension Credit
Challenging a DWP Deduction Decision
If you believe a deduction from your benefits is incorrect, you have the right to request a mandatory reconsideration. You must usually submit this appeal within one month of the decision and provide a 'good reason' for your challenge.
Valid reasons include disagreeing with the decision's rationale, wanting it reviewed again, or believing there is an error or missing evidence. The DWP notes that some decisions cannot be reconsidered, while others may go straight to an appeal, details of which will be in the original decision letter.
This mechanism highlights the critical importance for benefit claimants to manage official correspondence and understand their rights when facing financial pressures that could lead to these direct payment cuts.
