Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, for what reason (a) statutory maternity pay is treated as earned income and (b) maternity allowance is treated as unearned income for the purposes of calculating universal credit.

Universal Credit is a means tested system of support and where an individual claims Universal Credit, their award is adjusted to take account of any other financial support that the claimant is already receiving – including earnings, income and benefits.

Maternity Allowance is a benefit paid by the State which is unearned income for Universal Credit purposes. Unearned income that is available to help meet daily living costs is taken fully into account in determining the amount of Universal Credit that an individual can be paid. As such, in determining the amount of Universal Credit that is available, Maternity Allowance is deducted pound for pound from the total value of the award.  This principle applies to other benefits, such as new style Jobseeker’s Allowance and new style Employment and Support Allowance.

Maternity Pay (SMP) is more akin to earnings and is treated as a form of earnings in common with other statutory payments paid by employers. As a result, when adjusting the Universal Credit award, as with other earnings SMP is subject to the work allowance and tapering rules that are built into Universal Credit. Claimants retain 37p for every pound of earnings (or more if they are entitled to a work allowance).