The glitch-ridden Universal Credit benefit system left claimants destitute over Christmas, with one ending up with just 9p in the bank and living off food parcels.

Caroline Rae was made redundant from food supplier Compass Group in September. She received a redundancy payment of around £2,000, which she had been relying on, but says half of that amount was deducted straight out of her Universal Credit payments in an apparent error by the Department for Work and Pensions.

In another case, a woman had her benefits wrongly reduced by 80% because her December salary came in a few days early, again leaving her struggling to make ends meet.

Rae, who was in the midst of a separation from her husband and was leaving their shared home, had to take out a loan to cover her moving costs because of her underpayment.

She is living off food parcels and in a one-bedroom flat in Hartlepool without a bed, sofa or fridge. She sleeps on a fold-out camping bed and at one point told HuffPost UK she had not eaten for four days. 

She is challenging the deduction with the DWP. The department claims it will not penalise claimants for redundancy payouts unless they are more than £6,000, but said it could not comment on Rae’s individual case. It encouraged her to appeal.

Rae told HuffPost UK: “I worked for Compass for seven years at a national minimum wage job. Obviously I didn’t come out of it with pension as I was on too low pay.”

The 51-year-old added: “I haven’t got anything. I’ve been left destitute with no chance of a job and in major debt. I’ve got no savings either. I don’t understand with how the government has been allowed to get away with doing this, whereas they’re just handing out money left, right and centre to big companies.”

Universal Credit treats any redundancy payments as capital.

Capital between £6,000 and £16,000 can reduce Universal Credit payments, though the government insists capital under £6,000 will not affect payments, making Rae’s situation something of a mystery. While her former husband was initially listed on her claim for Universal Credit, he doesn’t have savings either so the reason for the deduction cannot be explained.

Rae said: “I could understand it if I had £16,000 in savings – of course they’d take that into consideration. But I haven’t and they’ve wiped me out.

“Maybe it’s the government’s sneaky way of making the poorest pay. I can only imagine the scale of people this is going to happen to.”

A DWP spokesperson was unable to comment on Rae’s specific situation but said: “We know this is a difficult time for many, with Universal Credit providing a vital safety net.

“As with savings above average levels, redundancy payments are taken into account when calculating benefit payments to ensure fairness for the taxpayer, whilst maintaining a genuine welfare safety net for those who need it.”

The spokesperson added that claimants should ask for their awards to be reviewed if they believe the decision on the claim is incorrect. 

Meanwhile a single mother who asked to remain anonymous found herself having to dip into her hard-earned savings after her benefits were reduced from £1,000 to £200.

The fitness trainer was paid early in December – something many employers do to ensure employees have enough money to celebrate Christmas. But the Universal Credit system wrongly deduced that her salary had doubled, and slashed £800 from what she was owed.

The 33-year-old said: “I’m lucky that I haven’t had to turn to food banks. I’m sure there are literally thousands of people who have.

“There’s already a stigma about receiving benefits, even if you are a working person. It’s already a highly anxious time with Covid and it’s the added stress that you might not be able to make payments or you might have to call on your family to help you when everybody else is already going through a difficult time. It’s not something you really want to have to do.”

She told HuffPost UK the same thing happened last December and despite all her efforts to regain the money she lost then, she has been unsuccessful. She fears the same could happen this time round.

A DWP spokesperson said: “We have changed Universal Credit rules so that monthly-paid claimants who have two payments in one assessment period can have the second payment moved to another assessment period. This ensures stability for claimants when receiving their benefit.

“When two monthly payments are received in one assessment period, claimants should report it to their work coach.”

The department alleged that this change was effective from October – but our source has shared her Universal Credit online messages with HuffPost UK that show the error still occurred and has yet to be been resolved.

She added: “I’ve had to deal a lot with Universal Credit and the council over the past year and a half, and I’ve got to a point where my anxiety is so high due to the stress. I almost wanted to let the problem go, but I can’t let it go because I need the money.”

Universal Credit has been beset by controversy. Last year, an appeal court ruling said the rigid payment rules that left tens of thousands of working benefit claimants out of pocket were irrational and unlawful.

The DWP has always maintained that as well as incentivising work, Universal Credit was designed to reduce error and fraud, which it claims was a big problem for the previous benefits system. 

It said £390m was lost to fraud or overpayments in the financial year 2008/9. 

It comes as it was revealed that a strict government cut-off date had left many people excluded from the furlough scheme – designed to keep individuals afloat if they are unable to work due to the coronavirus lockdown.

Workers who began new roles at the end of the year are unable to claim furloughed income if they were not on the payroll by October 30, meaning anyone who began new work or changed jobs after that date is ineligible for support. 

It has seen some firms forced to sack staff leading to accusations of “deliberate callousness by the Treasury to try to lower their costs”.