‘It’s a disgrace’: Veterans told to repay thousands in universal credit payments

Armed forces veterans say they have been financially “crippled” after being told to repay their universal credit payments with some having to return thousands of pounds. The Department for Work and Pensions (DWP) contacted veterans who are in receipt of the benefit to tell them their military pensions were classed as unearned income – something that is considered when calculating UC payments. This has resulted in some veterans who served in the armed forces, being asked to repay huge sums, with many concerned about where they will find the money to do this with some having received payments for more than a year. Thousands could be affected. As of August 2025, there were 83,000 UC claimants who had served in the Armed Forces and 4,700 currently serving, according to official figures. Shorts Many believe their pension should be classed as earned income instead of unearned as this means, when calculating a claimant’s entitlement, the maximum UC payment is reduced by £1 for every £1 they receive. ‘I served my country – I expected to get help’ Tim Pearse, 57, joined the army in 1986 and served for 22 years. In December last year he fell ill and could no longer work, leading him to claim Universal Credit in January 2026. He was receiving around £852 a month but had his payments stopped after two months as he was claiming his army pension. “I served my country; I have paid into the system my whole life and so I expected I would be able to get some help. I am never going to be able to get Universal Credit because of my army pension,” Tim said. He feels as though he is being “forced” to go back to work sooner than he probably should now that he won’t receive UC payments anymore. “I need to get back to work to earn some money. I still have bills to pay; I am having to use up my savings which are slowly going. I have been trying to sell bits and bobs to help pay for things,” Tim explained. He hasn’t been contacted yet by the DWP to discuss repaying the UC payments he received but says it will be a “financial knock” when he does. There are a number of ways the DWP can recover overpayments. Where the claimant is unable to repay by a single lump sum, the DWP will recover the money by deducting it from the customer’s benefit each money. If a person is not in receipt of benefit, they will be asked to arrange an affordable repayment plan. Michelle, left, and Peter Sharples, right, both say they are concerned about having to pay back universal credit payments Peter Sharples, 59, similarly had his UC payments reduced by £463 a month even though he says the DWP were aware he was receiving his military pension. He said: “I asked the DWP if this would impact my universal credit, and it told me it was fine. In January 2025 I had my review and it said it could see I had a military pension, it was classed as unearned income and I owed them £8,800. I nearly fell to the floor.” Peter was also told his terminal gratuity payment – a lump sum benefit provided to employees at the end of their service – was classed as ‘capital’ and would therefore also reduce his benefit payments. Earned income compared to unearned income Peter, who is chief executive of The Veterans Institute – an organisation supporting veterans and their families – believes military pensions should be classed as earned income. For UC purposes, earned income is money from a job or self-employment. For every £1 you or your partner earns from work, your Universal Credit payment reduces by 55p. Meanwhile, unearned income is money from other sources like benefits or pensions. It reduces your UC payment pound-for-pound. Armed Forces Pension Scheme pensions are not unique in being deducted from UC. In general, most occupational and personal pensions are treated as unearned income. Michelle Jarvis, 40 was also taken by surprise when she was told her UC payments would be stopped. She was medically discharged from the army last year due to contracting meningitis and having a brain injury. Michelle was awarded a service invaliding pension – one given to armed forces personnel discharged due to injury, illness, or disability caused or aggravated by service – with payments based on rank, length of service, and the severity of the condition. She began receiving £222 a month in UC in November 2025 but has now been told this will stop and she will have to repay what she was given because of her pension – totalling nearly £2,000. Service invaliding pensions can be exempt from being classed as income if it is classed as “service attributable.” Michelle has been waiting nearly 19 months for her claim to be reviewed but has still not heard anything. If her pension is not classed as service attributable, she will no longer be able to receive UC. “How can my pension be an unearned income? I earned it with a brain injury and other conditions during my 15 years of service, and it is a disgrace it is being classed as that,” Michelle said. Although Michelle was told by a UC adviser her payments will stop because of her military pension, she confirmed she is still receiving payments which she hopes she will not have to repay. Judicial review Peter, alongside a group of other veterans, is planning to bring a judicial review to get the current treatment of military pensions overhauled. He said: “All I wanted was enough to get by and have peace of mind but now we are just existing day to day [without my UC]. I am in mental health therapy. I go days without sleeping and I just lie there and worry about what is going to happen.” Peter feels what is currently happening with veterans and their UC payments goes against the Armed Forces Covenant – a promise ensuring that those who serve or have served in the Armed Forces, and their families, including the bereaved, are treated fairly. A spokesperson for the DWP said: “We have enormous gratitude and respect for those who have served our country, and we want to make sure veterans get every penny they are entitled to.“Lump sum payments are disregarded when assessing eligibility for Universal Credit for up to 12 months, and even longer if the funds are placed into a trust or annuity.“Regular Armed Forces pensions intended to provide income in retirement are treated as unearned income and are taken fully into account, in line with the approach for other occupational pensions.”