Direct Payments

1. DirectPayments • Benefits and Pensions to be paid by direct credit into bank; building society; or post office card accounts; • Phased in between 2003 – March 2005 • Order books phased out by 28th February 2005 • By the 1st March 2005, 85% of benefit claimants will be paid by direct payments

2. Why Direct Payments? • Reduce Government expenditure • Bank credit costs 1p per transaction compared to 68p per foil of order book and £1.47 per giro cheque. • Potential savings of £500m per year • Reduce fraud • £80m is the estimated cost of fraudulent use of order books • No longer have to withdraw whole amount of benefit – reduced the risk and consequence of claimants being robbed in the street. • Once a payment has been authorised it is sent and received securely – DWP has no evidence of the weakness in the system of delivering Direct Payments.

3. Why Direct Payments? • Boost financial inclusion • 3.5m adults previously did not have access to any form of bank account Basic Bank accounts offer direct debit facilities, but no credit facilities – however, risk of claimants having unauthorised overdrafts.

4. Why Direct Payments? • A more convenient way of banking • Benefit recipients prefer to manage financial affairs via bank accounts. • Payment utility bills by direct debit • Post Offices were losing trade • 60% of new pensioners and child benefit claimants opted to have their benefit paid directly into their accounts

5. Cost • Media campaign – £25 million • Estimated cost between 2003 – 2010 of £1 billion to introduce and maintain Post Office card accounts • Only a summary of the cost benefit analysis is available (on a confidential basis). The full report although prepared by the Govt is not available due to sensitivity.

6. Cost • Post Office card account is partly funded by the main high street banks and Nationwide Building Society who will contribute £180m over the period 2003 – 08. There is concern over the uncertainty of the funding of the card account after 2008

7. Bank; Building Societies vs. Post Office • The first three points of contact invite claimants to have their benefit paid into bank & building societies • There is no mention of how to open up a Post Office card account • Have to specifically request to open up a Post Office card account • Have to then be invited to open up a card account • To open up a Post Office card account it requires eight steps

8. Post Offices penalised • More steps and more complicated to open up a Post Office card account – why couldn’t the Post Office be allowed to use the same basic procedures as banks? • Claimants have to ring the call centre staff to open a card account and will again be asked whether they have considered the banking options before agreeing to send out the necessary forms to open up a card account – Whose preferred choice?

9. Post Offices penalised • The DWP failed to make it clear in their media campaign that: • Some accounts were not available at the Post Office • That benefits could be paid into alternative accounts that were PO compatible. • The choice of opening up a Post Office card account.

10. Why have benefits paid at Post Offices • 83% of claimants had suitable accounts but still opted to have benefits paid at Post Offices via order book • 79% of claimants prefer to keep benefits and bank accounts separate • Assists local economic regeneration • Integral part of community life – Relationships built up between Post Masters and claimants

11. Problems • Remembering the PIN number • Vulnerable groups for whom the future requirement to remember and use a PIN would be cause for concern. • PIN pad not accessible to all • People with sight problems • Little mobility in the hands • Wheelchair users • Key pad has small keys that are close together

12. Problems • Third party payments • No system to allow irregular third party collection • Many carers who collect benefits and pensions on behalf of more than one individual will have to memorise numerous PINs, or change the PINs in order to help them remember them • Many LA’s prohibit carers from having access to claimants bank accounts

13. The Exceptions Service • The DWP failed to develop this service in advance of the introduction of Direct Payments • This has led to uncertainty and confusion for some groups of disadvantaged people • Lack of information of which groups of claimants would fall into this category • Lack of information/knowledge of how payments are going to be made: • Electronic transmission of money available at Post Offices or other outlets • Cash or cheque delivered to their home

14. The Exceptions Service The DWP spiel: • Giro cheques will be paid to those in the short term who: • Are still in the process of providing details/opening up appropriate accounts • Cheques payments will be introduced to those indefinitely who • Are severely disabled (cannot sign their own name) • Cannot remember their PIN numbers • Cannot obtain the necessary ID • For those who cannot do it themselves, the DWP are suggesting claimants nominate an appointee.

15. The Exceptions Service What the DWP don’t say: • Claimants are entitled to the benefit and it has to be paid • Claimants can refuse to provide details and will have to be paid benefit by giro/cheque Although without providing reasons why they don’t want their benefit paid into an account, it is expected that they will continue to be harassed

16. Pros • Flexibility • Access benefit payments at any Post Office or at ATM’s or at other branches • Do not have to withdraw all benefit entitlement.

17. Cons • Difficulty in keeping track of whether a payment has been made • Harder to keep track of finances – have to wait for a statement • Claimants not receiving payments on the right day (8%) • Incorrect amount of payments be paid into accounts (3%) • Easier to stop benefit payments – claimants finding out benefit payments have ceased before receiving a decision

18. Cons • Lack of information • No account number of Post Office cards • Difficulty in identifying what benefits have been awarded • Only record of benefit entitlement is on award notices or on annual up rating notices • Lack of responsibility by DWP when benefit has been paid into another person’s account