Chapter 3 - State Benefits Flashcards
A contributory benefit is?
Only paid to individuals with sufficient National Insurance contributions (NICs)
A means tested benefit is?
Only paid to individuals with income or capital below a certain level
A taxable benefit is?
Paid subject to income tax
Why should financial advisers have a base knowledge of state benefits?
It will allow them to identify any gaps in protection cover and what levels to recommend at
What is the bereavement payment?
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
What is the bereavement allowance?
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
What is the widowed parents allowance?
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
What is income support?
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 ESAIncome related benefits are means tested and not normally available to individuals who;
have capital over £16,000 and are reduced by £1 for every £250 of savings over £6,000
What is jobseekers allowance?
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
What is Statutory Sick Pay?
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
What is Employment and Support Allowance?
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.
What are the two types of ESA and how do they work?
Contribution based ESA – not means tested, contributory and taxable
Income based ESA – non contributory, means tested and not taxable
What are the different phases of ESA?
The assessment phase and the main phase
What are the 2 groups within the main phase of ESA?
Support group and work related activity group
What is the difference between the support group and work related activity group?
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.
How long does the assessment phase of ESA last?
13 weeks
What is the personal independence payment (PIP)?
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.
What is the criteria to qualify for personal independence payment (PIP)?
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
What is Attendance Allowance?
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.
What is Carer’s Allowance?
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
What is Child Benefit?
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.
What impact could a high income have on any Child Benefit payment?
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
What reduction would be applied to the Child Benefit for an individual who earns £56,500?
65%
£6,500 over the threshold / 100 = 65%
Who are child tax credit and working tax credit paid by?
HMRC
What is child tax credit?
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)
What is working tax credit?
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
What is housing benefit?
A means tested benefit to help those in rented accommodation to pay rent and other costs
The amount of housing benefit received is dependant on;
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
What is support for mortgage interest?
DWP will assist people who are unable to pay their mortgage. The DWP will pay the interest at (as of May 16) 3.12%
What is the criteria for support for mortgage interest?
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
Universal Credit will encompass which benefits?
- Income support
- Income based JSA
- Income related ESA
- Housing benefit
- Child tax credit
- Working tax credit
How will Universal Credit be paid?
Claimed online and paid by DWP.
Means tested, tax free and non contributory
What is the benefit cap?
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.
How many years NICs do you need to qualify for the state pension?
35 years
What is the current state pension age?
Men = 65
Women = currently being phased from 60 to 65
What is the pension guarantee credit?
A minimum level of income for those over a certain age
To be eligible for Statutory sick pay you must?
Be an employee and pay class 1 NICs
A daily living component and a mobility component are elements of what state benefit?
Personal independence payment (PIP)
How long can a child benefit claim be backdated?
3 months
How long can a child tax credit claim be backdated?
1 month
