How your relationship status can leave you financially worse-off

Universal credit is a lifeline for those of us who have found ourselves in a difficult financial situation. In the fallout of the Covid-19 pandemic and Brexit, the cost of living crisis has seen the amount of people in the UK who claim this benefit increase dramatically.

In July 2019, the number of people receiving universal credit was 2.3 million; however, by July 2022, this figure had increased by 152 per cent to 5.8 million. Out of those 5.8 million recipients, couples make up a measly 16.7 per cent. Such a small percentage suggests that couples who cohabit are generally better off financially than those relying on a single income to support themselves. This assumption holds water: pooling two incomes together provides a larger reservoir to draw from when paying expenses.

But is this really how modern couples function? Certainly not all; perhaps not even most. It isn’t how my partner and I, fresh out of university, decided to handle our finances when we moved in together in 2018 – we kept our finances separate. Skip forward a couple of years and, like many others, the cost of living crisis had a significant impact on how far my earnings stretched when it came to my living expenses. That was when I decided to make a claim for universal credit.

When applying for universal credit, the current system takes both incomes and savings into account for cohabiting couples, regardless of marriage status or length of relationship. To justify this policy, the government uses the term “living together as a married couple” (or LTAMC for short), but the definition is somewhat vague.

LTAMC is not a legal definition, and as such confusion is sure to ensue. You have to really go digging if you want to find any information at all on what this actually means. And so, dig I did. In the Advice for Decision Making guidebook (ADM), Chapter E4 attempts to shed some light on this confusing term.

One section (E4098, if you’re interested) encourages the “Decision Maker” to look at how household income is used; however, the guidebook also states that this “has to be looked at in the context of the whole relationship”. Again, extremely vague.

I called the universal credit helpline several times to ask for more information on the definition of LTAMC. Every operator I spoke to shot me down when I attempted to question what this meant: “If you live with your partner, you must make a joint claim.” To add more confusion to the mix, the Gov.uk website on universal credit eligibility won’t provide you with any more information on LTAMC. Instead, under the section “If you live with your partner”, it states: “You will both need to claim for universal credit. You must [emphasis added] make a joint claim for your household, even if your partner is not eligible.”

This is my exact situation: I live with my partner but he is not eligible for benefits as he makes significantly more money than I do, pushing us out of the qualifying bracket for financial aid. If we lived separately, I would qualify for universal credit. I work and earn a living, and it is not the responsibility of my partner to financially support me. We split the rent, bills and some groceries. Is this not exactly how housemates handle things?

So, what makes us LTAMC? Well, according to the guidebook, it is the emotional component. If we lived exactly how we did but had no feelings for one another, bar a casual sort of affection, I would indeed qualify for financial help.

The presumption that cohabiting couples are essentially married is a strange and outdated belief. When you make a joint claim, there is no option to provide evidence that you do not rely financially on your partner. To be denied such an option is indicative of an unjust system.

Multiple studies into modern relationship dynamics have drawn attention to our shift in values. The second demographic transition – a cultural shift that emphasises individualism and autonomy – has been linked to a decrease in marriage in favour of cohabitation. According to an article published in the European Journal of Population, empirical evidence from research conducted into how modern couples handle finances shows that couples are increasingly likely to manage their economic resources separately.

And yet the Department for Work and Pensions is still pushing the concept of the household as one economic unit when it comes to benefit claims. How many people will be missing out on the means-tested cost of living payments coming this spring because they cannot prove their financial independence?

From a gender perspective, this is also a major disadvantage to women. According to research conducted by the Office for National Statistics on behalf of insurer Royal London, men still out-earn women in heterosexual relationships by 72.4 per cent in 2019, a percentage that is expected to have risen following the Covid-19 pandemic.

It is my belief that the current system is out of touch with how young couples truly function and is doing a disservice to those low earners – who are statistically more likely to be women – who do not qualify for universal credit despite their financial situation. This anachronistic policy needs to be updated immediately.