Chapter 3 Flashcards
What factors affect the availability of state benefits? Name at least 4
Income and saving level
Employment status
State of health
Age, marital status and dependent status
Mortgage debts
How can state benefits affect financial planning cover?
Providing safety net - smaller shortfall in terms of financial protection needs, less private cover required
Emphasising the need for cover - so basic you can’t solely rely on them
How are state benefits paid?
Normally through DWP
Sometimes through HMRC eg Working and Child tax credit
Name 2 ways means testing is conducted?
1 - is your national insurance contribution record good enough. If not benefits may be scaled back - known as contributory or non-contributory planning
2 - are you too wealthy. Benefits removed if you have either too much income or capital
What areas do state benefits cover? Name at least 5
Unemployment/ low income
Short and long term sickness
Bringing up children
Mortgages
Disability
Retirement
Death of spouse or civil partner
What benefits are available to those unemployed or on a low income?
Job seekers allowance
Income support
Working tax credit
Statutory redundancy payments
Explain what job seekers allowance is?
Unemployment benefit for those fit and available to work and actively seeking employment
What is income support?
Financial support for those working but on a low income. No longer available to new applicants as replaced by universal credit
What is the Working Tax Credit?
In-work credits to those on low incomes, paid through HMRC
Can be claimed by individuals with or without children
No longer available to new applicants as it has been replaced by universal credit
What is statutory redundancy pay?
Employer redundancy payments in line with statutory, set criteria for
Who is eligible for job seekers allowance? What do they get?
Aged 18 and state pension age working less than 16 hours weeks
Under 25 eligible for up to £71.70
Over 25 eligible for up to £90.50
Who is eligible for income support?
Aged between 16 and state pension age working less than 16 hours weekly
Who is eligible for Working Tax Credit
Individuals aged over 16 with children, working at least 16 hours weekly
Individuals without children, aged over 25, working at least 30 hours
Individuals aged over 16 without children, working at least 16 hours weekly with a disability
Who is eligible for statutory redundancy payments ?
Employees that have worked at an employer for at least 2 years
Is JSA means tested or contribution based?
How is job seekers allowance paid?
Contribution based job seekers allowance (based on national insurance contributions record, not means tested) is paid for maximum initial 6 months
Income based job seekers allowance (not based on NICs record but means tested ie income/capital less that £16,000) was paid thereafter
Now replaced by universal credit
Is income support means tested?
When will pay reduce?
Capital and income means tested
Capital of £6,000 and above will reduce income support paid
No benefit paid if capital above £16,000.
Benefit reduces £1 for every £250 capital
Not based on NICs record
Is the Working Tax Credit means tested?
What elements are there?
Income means-tested
Single or joint payments, plus disability and child-care additional elements
(Child care element reduces for incomes over £19,995)
How much does statutory redundancy pay give out?
Half weeks pay for each service year if aged under 22
One weeks paid at if 22-40
1.5 weeks pay if 41+
20 year cap on service years
Which benefits for unemployment or low income are taxable/ non taxable?
JSA - taxable
IS - non taxable
Working tax credit - non taxable
Statutory redundancy payments - first £30k tax free, excess taxable
What state benefits are available for short and long term sickness?
Statutory sick pay
Employment and support allowance (ESA)
What is statutory sick pay?
A benefit paid by employers for employees off sick for four or more days in a row
How much do you have to earn to be eligible for statutory sick pay
What is the weekly rate?
Employee income must be an average of at least £123 per week - lower earnings limit
SSP weekly rate £116.76
How long is statutory sick pay paid?
Is it means tested?
Not means tested
Paid for maximum of 28 weeks
What is employment and support allowance (ESA)?
What has it been replaced by?
Financial support for individuals unable to work due to sickness or disability
Aims to provide support whilst encouraging individuals to get back to work
Replaced by incapacity benefit
Who is eligible for ESA? How long to claim this for employed/ self employed?
Age 16- state pension age
Self employed can apply immediately
Employees may received SSP for first 28 weeks
What are the 2 phases for receiving ESA?
How much is paid in each phase
Assessment phase - 13 week assessment period where work capacity assessment completed - under 25 up to £71.70, over 25 up to £90.50
Main phase - put into support group (£143.00) or work related activity group (£90.50)
What are the two types of ESA?
Contributions based and income based
Is contributions based ESA means tested? What does the amount received depend on?
Not means tested
If you received private pension could affect how much you get
Dependent on NICs record
Is income based ESA means tested? What does the amount paid depend on? Can you still claim this?
No new claims allowed
Means tested, not dependent on NICs record
Household income/savings of £6000+ may affect claim
£16,000+ no entitlement
Which benefits for long and short term sickness are taxable/non taxable?
Statutory sick pay - taxable
Contributions based ESA - taxable
Income based ESA - non taxable
What benefits are there related to bringing up children?
Child benefit
Child tax credit
Maternity Allowance
Statutory maternity pay
Statutory paternity pay
What is child benefit?
Paid to individuals to support the bringing up of children
How does employment affect child tax credit?
Paid regardless of whether parents work
What is the purpose of maternity allowance?
Intended for those who cannot claim statutory maternity pay eg low earners or no SMP from employer
What is statutory maternity pay?
Paid to expectant mothers that are employees, direct from employer
What is statutory paternity pay?
For new fathers
Pays 1 or 2 weeks at standard rate
Who is eligible for child benefit?
How much does it pay?
Adults responsible for a child aged under 16, or under 20 if in full time education
Can start as soon child is born
£25.60 per week for first child and £16.95 for subsequent children
Who is eligible for child tax credit?
When is this withdrawn?
Individuals with children living with them under 16 or 16-19 if in full time education
Withdrawn if annual sole or joint income exceeds £19,995 by 41p for every £1 over
Who is eligible for maternity allowance? How much is paid? How is paid to people self employed?
Pregnant for 26 weeks
Either 90% of weekly wage or standard rate of £184.03 - whichever lowest
Self-employed paid between £27 and £184.03 dependent on class 2 NICs
Who is eligible for statutory maternity pay?
How much is paid?
Must earn at least lower earning limit £123 weekly
Must be employed by same employer for min 26 weeks
For new mothers pays 90% of average wage for 6 weeks the 33 weeks at 90% or standard rate of £184.03 - whichever lower
Who is eligible for statutory paternity pay? How much is paid?
Must have worked for same employer for 26 weeks
90% average wage or £184.03 - whichever is lowest
Is child benefit based on NICs and means tested?
Not based on NICS
Means tested on individuals with net adjusted income of £60,000+
1% charge on every £200 above, totally lost if £80,000+
Is child tax credit means tested?
Yes, means tested on income
How long is maternity allowance paid? Is it NICs contribution based?
Maximum 39 weeks
Yes
How long is statutory maternity pay paid? Is it NICs contribution based?
Maximum 39 weeks
Yes
Is statutory paternity NICs contribution based?
Yes
Which benefits relating to bringing up children are taxable/non-taxable?
Child benefit - non taxable
Child tax credit - non-taxable
Maternity allowance - non-taxable
Statutory maternity/paternity pay - taxable
What benefits relating to mortgage or rental costs exist?
Support for mortgage interest
Housing benefit
What is support for mortgage interest both currently and historically?
Prior to 6th April 2018 SMI was a state benefit
Now a loan for individuals with a mortgage unable to work
Who is eligible for support for mortgage interest?
For full support, individuals must be employed or self-employed, and property must be UK-based
After how long is support for mortgage interest paid and how?
No benefit paid for first 39 weeks, full benefit paid thereafter via loan
How much does support for mortgage interest pay and what does it exclude?
How is the interest calculated?
Maximum of £200,000 (£100,000 for pension credit recipients)
Excludes home improvements
Interest calculated using BoE published rate
What do you need to be a recipient of to get SMI?
Who is the interest paid to?
Need to be in receipt of a qualifying benefit eg, IS, JSA, ESA
Interest only paid directly to lender
What is the loan payment term for claimants of SMI?
Loan payment term now unlimited for most claimants
Limited to 2 years for those receiving JSA
When is the loan repayable for SMI? What if loan exceeds the property equity?
Loan repayable when house is sold or transferred to someone else, or you die
If loan exceeds the property equity, the portion over written off on death
What is housing benefit?
Benefit available to individuals in rented accommodation to help with rental and associated costs
How much is paid in housing benefit?
Depends on claimant’s age, the rented property location and rent amount
Does housing benefit affect entitlement to other benefits?
Can affect entitlement to other means-tested benefits such as JSA and ESA
Which benefits relating to mortgage and rental costs are taxable/ non-taxable?
Support for mortgage interest - non-taxable
Housing benefit - non-taxable
What disability benefits are available?
Disability living allowance
Personal Independence Payment
Attendance Allowance
Carer’s Allowance
What is disability living allowance? What has this been replaced by?
Paid to individuals under state pension age
Replaced by personal independence payments from 2013 for new claimants
Who is eligible for disability living allowance
Only children under 16 can apply now
Must need assistance with personal care, mobility or both for the last 3 and at least next 6 months
How much is paid for disability living allowance for each component?
Care component - lower,middle,higher rates - £28.70, £72.65, £108.55
Mobility component - L/H, £28.70, £75.75
Is disability living allowance means tested/ reliant on NICs record?
Not means-tested
Not reliant on NICs record
How long do you have to be sick to receive PIP? What age group?
individuals under state pension age that have been sick for at least 3 months
Who is eligible for personal independence payment?
16 to SPA
Individual must need assistance with activities of daily living for at least the next 9 months
What are the 2 components of personal independence payment? How much is paid for each?
Daily living component - £108.55 enhanced rate, £72.65 standard rate
Mobility component - enhanced rate £75.75 and standard rate £28.70
Is personal independence payment means tested/ reliant on NICs record?
Not means-tested
Not reliant on NICs record
What age group is attendance allowance paid to
Paid to individuals above state pension age
Who is eligible for attendance allowance?
Individual must have been suffering from a severe disability for over 6 months that means they require care
What are the 2 rates for attendance allowance? How much is paid?
Higher rate - 24 hour care required - £108.55 weekly
Lower rate - night or day care required but not both - £72.65 weekly
Is attendance allowance means-tested/ reliant on NICs record?
Not means tested
Not reliant on NICs record
What is carer’s allowance?
Paid to individuals caring for someone
Who is eligible for carer’s allowance? How much is paid?
The individual must be caring for someone in receipt of DLA, PIP or AA for a minimum of 35 hours a week
Weekly rate £81.90
Is carer’s allowance means tested
Not means tested
Which disability benefits are taxable/non-taxable?
DLA - Non-taxable
PIP - Non-taxable
AA - Non-taxable
Carer’s allowance - Taxable
What benefits in retirement are available?
Single tier state pension
Basic state pension
State Earnings Related Pension Scheme
State Second Pension
State Pension Credit
What is the single tier state pension?
One single level of state pension payment introduced from 6th April 2016
Who is eligible for single tier state pension? Minimum and maximum? How much is paid weekly
Paid at state pension age
Maximum pension after NICs payment/credits of 35 years
Minimum 10 years required to earn any single tier state pension
Full pension £221.20 weekly
Is the single tier state pension means tested/ NICs contribution based?
How does this increase?
Not means tested
NICs contribution based
Increased in line with either CPI, 2.5%, and average earnings, whichever is higher
What is the basic state pension?
Old style state pension payable to almost individual in the UK
Who is eligible for basic state pension? Maximum/minimum
Historically paid at state pension age
Maximum pension after NICs payment/credits of 30 years
Minimum one-year requirement
Was the basic state pension means tested/ NICs contribution based?
Not means tested
NICs contributions based
What is the state earnings related pension scheme?
Top up state pension for employees only between 1978-2002
How much could be paid for the state earnings related pension scheme?
Maximum 25% of middle band earnings for best 20 years
Reduced to 20% of lifetime average middle band earnings
Was the state earnings related pension scheme means-tested/ NICs based?
Not means-tested
NICs contributions based
What was the state second pension?
Replacement for SERPS and targeted at low earners, carers and employees from 2002-2016
What were the 2 bands for the state second pension? How much was paid?
Band 1 - Flat rate accrual at £93.90 annually
Band 2 - 10% accrual on earnings between lower earnings threshold and upper accrual point
Was the state second pension means-tested/ NICs contributions based?
Not means tested
NICs contributions based
What is the state pension credit?
Guarantees a minimum income for individuals at state pension age
What are the 2 types of state pension credit? How much is paid?
Guaranteed credit - ensures a minimum income guarantee. Single person £218.15 couple £332.95
Savings credit - abolished in 2016. £16,000+ not paid historically
Is state pension credit means tested/ NICs contributions based?
Income and capital means-tested
First £10,000 of capital ignored, benefit reduced by £1 for every 500 above
Not reliant on NICs
Which benefits in retirement are taxable/non-taxable?
Single tier state pension, basic state pension, SERPS, state second pension - Taxable but not taxed at source
State pension credit - Non-taxable
Which benefit on death of spouse or civil partner are available?
Bereavement pay
Bereavement allowance
Widowed Parent’s Allowance
Bereavement support Payment
SERPS/S2P inheritance
What is bereavement payment?
£2000 lump sum paid to spouse or registered civil partner on death of other
if spouse or civil partner died before 6th April 2017
What is bereavement allowance?
Weekly benefit paid to spouse or RCP on death of the other if spouse or civil partner died before 6th April 2017
What is Widowed Parent’s Allowance?
Weekly benefit paid to spouse or RCP on death of the other if spouse or civil partner died before 6th April 2017
What is bereavement support payment?
Both a lump sum and monthly payments for up to 18 months if spouse or civil partner died before 6th April 2017
What is SERPS/S2P inheritance?
Weekly state pension benefit paid to a spouse/RCP on death
Who is eligible for bereavement payment?
Recipient must be under SPA or the deceased was not entitled to state pension at death
Who is eligible for bereavement allowance? How long is it paid and when does it cease?
Claimed by an individual aged 45-SPA with no children
Paid for maximum 52 week period
Benefit ceases if individual co-habits, remarries or forms a civil partnership
Who is eligible for Widowed Parent’s Allowance? How long is it paid for and when does it cease?
Claimant must be under state pension age and have a child they are claiming child benefit on behalf of
Paid for maximum 52 week period
Benefit ceases if individual co-habits, remarries or forms a civil partnership
Who is eligible for bereavement support payment? How much is paid?
Individuals under state pension age with dependent children receive a lump sum of £3500 plus £350 in 18 monthly payments
Without dependant children £2500 lump £100 18 monthly payments
What is SERPS/S2P inheritance?
An individual could historically inherit up to 50% of the deceased’s earnings-related state pension entitlement
Are bereavement support, bereavement allowance and widowed parent’s allowance means tested / NICs based?
Not means tested
NICs contributions based by the deceased, or the death was caused by their job
Is bereavement support payment means tested / NICs based?
Not means tested
NICs contributions based by the deceased, or the death was caused by their job
Is SERPS/S2P inheritance means tested/ NICs based?
Not means tested
NICs contributions based
Which benefits on the death of a spouse or civil partner are taxable/ non-taxable?
Bereavement payment - non-taxable
Bereavement allowance - taxable
Widowed parent’s allowance - Taxable
Bereavement support payment - Tax-free
SERPS/S2P inheritance - taxable but not taxed at source
What are the key aims that influence changes to state benefits? Name 3
Simplifying system
Ensuring no-one is better off on benefits than working
Reducing cost to public purse
Encouraging individuals back into employment
What was is the purpose of the April 2013 benefit cap?
Cap introduced on the total amount of benefit working aged people can receive
So families that do not work should not be able to get more than those that do
What is universal credit, what is the cap
Universal credit introduced in 2013 to simplify the system
London cap - £486.98 couples and single parents with child living with them, £326.29 per week for single adults with out children or children that live far away
£423.46/ £283.71 in rest of country
Which individuals are exempt from the benefit cap?
Individuals receiving guardians allowance, carers allowance, carers element of UC
What is an element to universal credit? What are the 5 additional elements?
An element is an extra amount above the standard allowance for difficult circumstances
Children
Childcare
Carer
Housing
Reduced work capacity
