Learning Objective 3 Flashcards
Who administers the UK welfare system?
Department of work and pensions (DWP)
* Benefits can be contribution based
* Benefits are means-tested on wealth and income
* Benefit cap due to location and family income levels
Bereavement Benefit:
* When established?
* Who is it for?
* How is it paid (2 levels)
* Taxable?
* Does it affect other benefits?
- Established in 2017 to replace 3 allowances
- For spouse or civil partner of deceased under State retirement age
- Lump sum payment and then 18 monthly installments
- Tax free
- Does not affect other benefit entitlements or benefit cap
Standard level (Death without dependents) - £2500 lump sum & £100pm x18
Higher level (Death with dependents) - £3500 lump sum & £350pm x18
Unemployment/Low income benefit:
* Capital level?
* Tapering level?
* Means tested?
- Anyone with capital below £16,000
- Tapered for savings between £6,000-£16,000 (£1pw for every £250 savings)
- Means tested - Looks at income and spouses income if live together
Income Support:
* Who is it for?
* How many hours do they have to be working?
* Taxable?
- Between 16 & SPA, Not in full time study
- Low income, working less than 16 hours pw
- Not on JSA / ESA
- Payable to single parents with children >5
- Generally not taxable
Job Seekers Allowance (JSA):
* Who is it for?
* Taxable?
* Difference between contribution and income based?
- Unemployed actively seeking employment
- Aged 16-SPA
- Taxable benefit
- Contribution based - first 6 months, dependent on NIC record, Not means tested
- Income based - After 6 months or straight away if no NIC record, income means tested, being added to universal credit
Statutory Sick Pay (SSP):
- Who is it for?
- When does it activate?
- Max timeframe?
- Who pays for this?
- Taxable?
- Employees only (currently SE as well due to COVID19), Must be earning enough to pay class 1 NIC’s, so NIC based
- Off work for 4 days in a row
- Max 28 weeks, then it transfers to ESA
- Paid for by employer
- taxable
Employment and support allowance (ESA):
* Who is it for & why?
* Contribution based vs income based
- People unable to work between 16-SPA, with the aim to return to work
- Contributions based - Not means tested, Depends on NIC, Taxable
- Income based - Means tested, if you have insufficient NIC, Not taxable
- Assessment phase - after SSP ceases: 28 weeks (employed) or 3 days (SE) - 13 week assessment period (benefits reduced) with series of tests. If proven unable to work benefits are increased
Personal Independence Payment (PIP)
- Claimant must have difficulty doing basic living tasks for last 3 months, with it likely to continue over at least 9 months
- Not means tested or NIC dependent
- Tax free
- 16-SPA
Attendance Allowance
- Replaces PIP after you reach retirement age
- Suffering severe disability for over 6 months
- Not means tested
- Not taxable
- 24 hour care = higher amount paid
- Day or night care = lower amount
- Stops after 4 weeks in a care home
Carers allowance
- When caring for someone who is receiving PIP,DLA or AA
- Income means tested - Net earnings less than £128pw or be in full time education
Child benefit
- Payable if responsible for children u16, or u20 if they are in full time education
- Flat rate, higher for 1st child
- Non contributory
- Not means tested
- Tax free
- Income tested - Higher charge for higher income households
High income child benefit charge
- Tapered when at least one person earns over £60k (net) p.a.
- Applied to the highest earner in the family
- 1% charge on every £100 over £60k
- Benefit is essentially removed above 80k due to the charge
- Can request benefit not to be paid to avoid having to pay back through Self-Assessment
Ex.
Client earns 67k p.a - 7k over threshold
1% charge for every £100 so 7000 / 100 = 70% to be returned at self-assessment
Tax credits
- To supplement income of households when one member undertakes paid work
- Payable by HMRC
- Administered by DWP
- Income tested
- Not available on Universal Credit
Child tax credit
- With children u16 or u19 in full time education
- Family element - Tapered with income excess of threshold (£7,955)
- Child Element - Max 2 children
- Extra element for disabled children
- Aimed at low income working families
Working tax credit
- Earnings to top up low income
- With or without children
- Must be working in excess of 16 hour pw.
Universal Credit
- Means tested
- Tax free
- Standard allowance + potential for further top ups
Help with housing costs
- Assistance in rental accom
Depends on:
* Age
* Dependants
* Location of property
* Rent level
There are restrictions in place (such as the bedroom tax)
Support for mortgage interest
- Benefits are a loan, to be repaid on sale, transfer or death
- DWP will pay the mortgage interest up to £200k, £100k if claimant is on pension credit
- 39 week waiting time (no waiting time if on pension credit)
- Can simply be avoided by taking out mortgage protection
New State Pension
- Retired after 05/04/2016
- Not means tested
- Dependent on NIC record
- Increased by ‘Triple lock’ each year
State pension ‘Triple lock’
The higher of:
* National average earnings index (Average salary)
* Consumer Price Index (CPI) - Official measure of inflation
* 2.5%
To ensure the SP retains spending power
New State Pension Qualifying amounts
Single Tier Pension -
* Credits start after 10 years of NIC’s
* 35 qualifying years = full SP
* Each NIC year provides 1/35th of full SP
So if you only had 25 years of NIC’s, you would receive 25/35th level of State pension at retirement age
State Pension Foundation Amount
- Calculated for everyone below SPA on 06/04/2016
- Added any entitled top ups to the BSP
- If entitled to more than under the new SP, receive a protected payment so not worse off under the new scheme
Pension Credits
- Means Tested
- Provide minimum amount of income in retirement
- Tax free
- Not NIC dependent
Pension Credit - Guaranteed Credit
- Must have reached SPA
- Tops up SPA to a minimum level
Pension Credit - Savings Credit
- Only available when reached SPA before 06/04/2016 and was receving Savings Credit at that point
- Rewards people who have saved for their own retirement in different ways than just the SP
Pensions Credit - Death benefits
Spouse can inherit up to 50% of protected payment on death
