What we know about possible cuts to PIP and universal credit

The government is reportedly planning cuts to benefit payments. 

The proposed changes, first reported by ITV News over the weekend, aim to make people more motivated to stay in the work-search category of benefits, even if they have disabilities or health conditions.  

If introduced, the cuts will impact key disability benefits, freeze some payments in 2026 and change how universal credit is calculated.  

Here's what we know so far: 

What’s happening with PIP? 

Personal independence payments (PIP) help people with disabilities cover the extra costs of living. But it's under scrutiny for reform.  

Here's what might change: 

• Harder to qualify: the government reportedly plans to tighten the rules for qualifying for PIP, making it harder for people to claim.  

• £5bn savings: the goal is to save £5bn by reducing the number of people who qualify for the benefit. 

• A freeze on PIP payments in 2026, preventing them from rising with inflation. 

What’s happening with universal credit? 

Universal credit is designed to help people who are on a low income or out or work.   

Changes to this benefit are also on the horizon: 

• Increase for those in work: the basic rate for universal credit will rise for those actively looking for work or already employed. 

• Cuts for those unable to work: the rate will be cut for those deemed unfit for work, a move that’s raising concerns. 

Why the changes? 

The government is worried that the number of people going back to work has not returned to what it was before the Covid pandemic hit. 

The chancellor Rachel Reeves recently said: "Everyone who can work should be working." 

What’s the criticism?  

The plan has attracted criticism.  

Impact on vulnerable people  

A big concern is how the proposed changes will affect vulnerable people.  

Rebecca Lamb, our external relations manager, explains that while we understand the need to reduce the overall benefits cost to the country, it’s “essential that any changes do not leave the most financially vulnerable people struggling.” 

Many of the individuals claiming disability or incapacity benefits who come to us for help are already facing significant financial hardship.  

• average disposable income of those claiming disability or incapacity benefits is minus £138 (meaning they don’t have enough to cover essential costs) 

• 57% need food vouchers 

For comparison: 

• average disposable income for people in work (not claiming benefits) is minus £9  

• 43% need food vouchers 

In situations where customers are struggling to make ends meet, we offer a range of advice, including: 

• budgeting 

• income maximisation 

• benefits assessment and help 

• rent and utilities support 

• debt solutions 

Rebecca Lamb warns that the reason there’s a need for PIP seems to have been lost in the debate.  

“It is important to recognise that it was never designed to get people back into work—it exists to help cover the additional costs associated with being disabled or having a long-term health condition,” she said. “These costs, such as specialist equipment, transport, and higher energy bills, can make day-to-day living far more expensive.  

“Any reform must recognise this and ensure that those with disabilities or long-term health conditions are not pushed further into financial crisis.” 

Charities speak out 

16 charities, including Scope, Mind and the Trussell Trust, have urged the government to rethink its plans, warning that the cuts could push 700,000 more disabled households into poverty. 

"We would urge you to safeguard disability benefits from cuts, we fear the cost of cuts is too great,” the campaigners note.  

Mental health and money worries  

With such reforms potentially driving up poverty, the impact of money worries on mental health can’t be ignored in this discussion.   

Money worries can really take a toll on your mental health, causing, stress, anxiety, sleepless nights and making it hard to focus.  

Similarly, mental health struggles can make it harder to manage money, sometimes leading to financial problems and debt.  

1.5 million people in England alone are facing both debt and mental health problems, according to research by the Money and Mental Health Institute. The rising cost of living is only making things worse. 

A new report from the Institute for Fiscal Studies (IFS) confirms that mental health has worsened since the pandemic, with many people now claiming disability benefits due to mental health problems. 

The research shows:  

• Rising disability claims: over 500,000 new claimants on disability benefits have mental health issues as their main condition. 

• Increased deaths: deaths due to alcohol, drugs and suicide rose by 24% in 2023 compared to before the pandemic.  

Iain Porter, senior policy adviser at the Joseph Rowntree Foundation, said: "This trend is real and growing and we need our government to look carefully at the health of the nation, rather than relying on benefit cuts to fix the problem." 

In response to the study, Brian Dow, deputy chief executive of Rethink Mental Illness, said:  

“Growth won’t come from slashing benefits for the most unwell or cutting essential services – it comes from improving access to timely mental health treatment. We also need to urgently develop a better understanding of the complex reasons behind why more people are experiencing mental health problems, with an increased focus on preventing people from becoming unwell in the first place.” 

How we’re helping customers with mental health issues  

Here at Money Wellness, we’re committed to supporting people facing mental health challenges. Our advisors are trained to assist anyone struggling with poor mental health and, when needed, we refer customers to organisations like Rethink Mental Illness for further support.  

In the course of a year, we make about 5,000 such referrals.  

You don’t have to suffer alone 

If money worries are impacting your mental health, there’s plenty of organisations that can help: 

• Mind is always available to guide you toward the right support.  

• Rethink Mental Illness offers local mental-health support. You can search for help in your area.  

• Samaritans will listen to you and help you talk through your concerns, worries and troubles. You can call them free any time and from any phone on 116 123.  

• CALM (Campaign Against Living Miserably) is helpline for those struggling with mental health, especially around suicide. Call 0800 58 58 58 (5pm to midnight, every day) or use their webchat.  

• SHOUT 85258 offers immediate support. Text SHOUT to 85258 for free, confidential support, 24/7.