Chapter 3 - State Benefits

Question 1

A contributory benefit is?

Answer 1

Only paid to individuals with sufficient National Insurance contributions (NICs)

Question 2

A means tested benefit is?

Answer 2

Only paid to individuals with income or capital below a certain level

Question 3

A taxable benefit is?

Answer 3

Paid subject to income tax

Question 4

Why should financial advisers have a base knowledge of state benefits?

Answer 4

It will allow them to identify any gaps in protection cover and what levels to recommend at

Question 5

What is the bereavement payment?

Answer 5

A tax free lump sum of £2,000 for a spouse on the death of the other. Deceased needed sufficient NICs. Must be under SPA

Question 6

What is the bereavement allowance?

Answer 6

A taxable weekly benefit for 52 weeks for a spouse on the death of the other. Need to be aged 45 or older and deceased needed sufficient NICs

Question 7

What is the widowed parents allowance?

Answer 7

A taxable weekly benefit for 52 weeks for a spouse on the death of the other. Recipient must have a child who they are claiming child benefit for or expecting to the deceased. Ceases on re-marriage or cohabiting with new partner

Question 8

What is income support?

Answer 8

A means tested, tax free benefit payable to individuals who are;
        between 16 – SPA who;
	not in full time education
	have low income
	working less than 16 hours a week
	are not receiving jobseekers or ESA

Question 9

Income related benefits are means tested and not normally available to individuals who;

Answer 9

have capital over £16,000 and are reduced by £1 for every £250 of savings over £6,000

Question 10

What is jobseekers allowance?

Answer 10

Its the main benefit for those out of work. Not eligible to students or under 16s over SPAs. Must be actively seeking work.
 Contribution based JSA – Contributory, not means tested but max 6 months claim.
 Income based JSA – move onto this if still unemployed after 6 months or do not have sufficient NICs. Means tested.
Both types of JSA are taxable

Question 11

What is Statutory Sick Pay?

Answer 11

A contributory benefit if unable to work through sickness for at least 4 days. Not means tested. Paid by employer. Taxed as earned income. Paid for 28 weeks after that move to ESA

Question 12

What is Employment and Support Allowance?

Answer 12

It replaced incapacity benefit and is for people who are unable to work through illness or disability with the aim of helping them back to work.

Question 13

What are the two types of ESA and how do they work?

Answer 13

 Contribution based ESA – not means tested, contributory and taxable
 Income based ESA – non contributory, means tested and not taxable

Question 14

What are the different phases of ESA?

Answer 14

The assessment phase and the main phase

Question 15

What are the 2 groups within the main phase of ESA?

Answer 15

Support group and work related activity group

Question 16

What is the difference between the support group and work related activity group?

Answer 16

The support group are unable to work. The work related activity group receive support and help to return to work, required to engage in mandatory work based interviews and can lose benefit if refuse.

Question 17

How long does the assessment phase of ESA last?

Answer 17

13 weeks

Question 18

What is the personal independence payment (PIP)?

Answer 18

It replaced disability living allowance for people aged 16-64. Its tax free, not means tested and non contributory. Existing DLA claimants will be reassessed for PIP and are not guaranteed to be accepted.

Question 19

What is the criteria to qualify for personal independence payment (PIP)?

Answer 19

To qualify then the claimant must be terminally ill or have difficulties with activities of daily living for at least 3 months;
	Preparing or eating food
	Washing 
	Dressing/undressing
	Communicating
	Managing their medicines
	Making financial decisions

Question 20

What is Attendance Allowance?

Answer 20

Its tax free, not means tested and non contributory. Similar to PIP for people over the age of 64 but have also been suffering from severe disability for 6 months. If the individual enters care which is paid for by the local authority the AA stops after 4 weeks.

Question 21

What is Carer’s Allowance?

Answer 21

Available to someone who spends time caring for someone in receipt of either PIP, DLA or AA. Taxable benefit and the person in receipt can not earn more than £110 per week or be in full time education

Question 22

What is Child Benefit?

Answer 22

A benefit payable to those who look after a child under 16 or under 20 in full time education. Non contributory, not means tested and tax free. Claim can be backdated up to 3 months.

Question 23

What impact could a high income have on any Child Benefit payment?

Answer 23

This benefit can be reduced or even lost for high earners it is reduced at a rate of 1% for every £100 earned over £50,000. This is a tax charge paid via self assessment

Question 24

What reduction would be applied to the Child Benefit for an individual who earns £56,500?

Answer 24

65%

£6,500 over the threshold / 100 = 65%

Question 25

Who are child tax credit and working tax credit paid by?

Answer 25

HMRC

Question 26

What is child tax credit?

Answer 26

Benefit to supplement the income where at least one member is undertaking paid work. Parent with children living with them under 16 or under 20 in FTE. Additional payments per child.
 Can not be backdated more than 1 month
 Reduced by 41p for every £1 over £16,105 (joint)

Question 27

What is working tax credit?

Answer 27

Benefit to top up to earnings for low income households
 Responsible for a child – who themselves are over 16 and work at least 16 hours
 Without children who themselves are over 25 and work at least 30 hours
 Without children who themselves are over 16 work at least 16 hours and have a disability

Question 28

What is housing benefit?

Answer 28

A means tested benefit to help those in rented accommodation to pay rent and other costs

Question 29

The amount of housing benefit received is dependant on;

Answer 29

 Age – under 35 single no children, benefit limited to the cost of renting a room in a shared house
 Location – benefit limited to the average cost of the bottom 30% of rented properties
 Rent – any rent that goes towards bills can be excluded

Question 30

What is support for mortgage interest?

Answer 30

DWP will assist people who are unable to pay their mortgage. The DWP will pay the interest at (as of May 16) 3.12%

Question 31

What is the criteria for support for mortgage interest?

Answer 31

 Means tested at £16,000. Reduced at £1 for every £250 over £6k
 Full benefit after 39 weeks
 Only the first £200k of mortgage covered
 2 year time limit if also claiming JSA
 If also claiming pension credit £100k max but no waiting times
 Only on house element (none for improvements)
 Assumes you have also taken out MPPI

Question 32

Universal Credit will encompass which benefits?

Answer 32

• Income support
• Income based JSA
• Income related ESA
• Housing benefit
• Child tax credit
• Working tax credit

Question 33

How will Universal Credit be paid?

Answer 33

Claimed online and paid by DWP.

Means tested, tax free and non contributory

Question 34

What is the benefit cap?

Answer 34

A maximum amount of benefit entitlement for a household. It is applied by the local authority as a reduction to housing benefit. £500 a week for couples and £350 for single adults.

Question 35

How many years NICs do you need to qualify for the state pension?

Answer 35

35 years

Question 36

What is the current state pension age?

Answer 36

Men = 65

Women = currently being phased from 60 to 65

Question 37

What is the pension guarantee credit?

Answer 37

A minimum level of income for those over a certain age

Question 38

To be eligible for Statutory sick pay you must?

Answer 38

Be an employee and pay class 1 NICs

Question 39

A daily living component and a mobility component are elements of what state benefit?

Answer 39

Personal independence payment (PIP)

Question 40

How long can a child benefit claim be backdated?

Answer 40

3 months

Question 41

How long can a child tax credit claim be backdated?

Answer 41

1 month