Topic 5 Flashcards
In what two ways can state benefits affect financial planning?
1 - State benefits can affect the need for financial protection
2 - Financial circumstances can affect entitlement to benefits
Briefly describe what ‘support for mortgage interest loan (SMI)’ is
SMI will pay interest on a mortgage up to an upper threshold.
Payment is made direct to the mortgage lender at a standard mortgage rate.
The SMI loan is secured on the property by way of a second charge and is subject to interest.
The loan is repaid when the property is sold or ownership transferred.
What are the two tiers of pensions?
- The basic state pension and additional state pension (Those who reached SPA before 6th April 2016)
- New state pension (Those who reached SPA on or after 6th April 2016)
Briefly outline basic state pension and additional state pension
Basic state pension;
- 30 years NIC’s required
- For both employed and self employed
- Those who did not qualify for full basic state pension may receive a ‘category B’ pensions based on their spouse or civil partner’s pension entitlement.
Additional state pension;
- Only available to emplyed people who paid class 1 NIC’s
- Employed people had the option to ‘contract out’ of SERPS/S2P and have the NIC’s that would have been used to be reduced or redirected.
How many years of NIC’s are needed for a full new state pension?
35 years.
What is the ‘triple lock guarantee’?
Once in payment, both the basic state pension and the new state pension will increase by the higher of:
- Earnings (measured by the average weekly earnings index)
- Prices (Measured by CPI)
- 2.5%
