The introduction of Universal Credit in 2013 is going to be disruptive, to say the least.

The government's single payment initiative for state benefit recipients will require claimants to manage all financial commitments from one monthly imbursement paid in arrears directly into their bank account. 

Today, most benefits recipients budget on a weekly or fortnightly basis, according to how often their benefits are paid. Among them are many who struggle to manage their finances effectively from one week to the next.  How then will they cope when forced to revise their financial behaviour in order to manage all their outgoings from one monthly payment?

Many of today’s recipients don’t have a bank account either, nor any means of obtaining one. This raises two more problems. Firstly, without a bank account, how can they receive the Universal Credit payment to which they are entitled? Secondly, if they don’t have an account, neither do they have a bank manager to turn to for advice. Who then will support these individuals with their financial planning as they grapple with transitioning to a monthly payment model? Suppose they have a disability which inhibits their capacity to manage their account? What then?

What is patently clear is that in order to continue to receive state benefits the unbanked must obtain an account facility of some kind. Fortunately, e-money institutions can offer anyone a prepaid e-account complete with an account number and sort code - account holders need only provide proof of identity and address. When obtained via a Credit Union, individuals can also access the financial guidance and support they will need during their transition to the Universal Credit system and beyond.  Additional cards can also be made available, meaning a relative or carer can play an open and active role in managing a claimants financial affairs, should they be unable to do so themselves.

Prepaid facilities not only offer individuals a means of receiving and making payments, but also provide a platform to facilitate better money management. By offering ‘jam jar’ accounting facilities - where cardholders are able to separate incoming funds into different ‘jars’ for different purposes - prepaid solutions can facilitate effective monthly budgeting for those unfamiliar with the practice.  As cardholders can only ‘spend what they load’, prepaid solutions can also help to mitigate against debt.

With an anticipated eight million Universal Credit payments expected over the first four years alone*, financial solutions designed for low income individuals and those with developing financial skills will grow dramatically in 2013.  e-Money institutions have been working hard to create solutions for this sector that deliver far greater benefit to account holders than a traditional bank could offer, linking their account to rewards and incentive programmes that enable individuals to generate cashback on the money they spend.

Once they have weathered the transition to monthly payments, many Universal Credit claimants that have opted for a prepaid e-money solution are likely to find themselves in a more stable, accessible and beneficial environment through which they can manage their financial affairs.

* Department of Work & Pensions