Topic 5

Question 1

What is the role of state benefits

Answer 1

the state benefits acts as a safety net for families in crisis whom cannot afford essentials such as food medicine ect when they are either disabled/ unemployed/caring for dependants.

These benefits are seen as to just cover essentials for those in need rather than wealthy families but should never be seen as a long term help but additional support to improve standard of living.

It is also essential for financial advisors to understand entitlement so they are able to correctly allocate the benefits to allow for greater stands of living to less fortunate families.

Question 2

What is protection needs as a form of financial planning

Answer 2

Protection needs is something a financial advisors will evaluate for a client as this is to assess how much support from state benefits will be needed in distress such as a death of primary income earner or illness ect…

This evaluation will assess how much private support the client will need as the gap between the state benefits they are entitled to compared to the income is taken into account.

Question 3

What is means tested benefits as a form of financial planning

Answer 3

Means tested benefits refers to universal credits and things of this nature are highly dependant of the clients income/ assets which during planning needs to be considered highly as the increase or reduction in either can see a effect of the benefits.

When planning financially the financial advisors should carefully consider any increases in assets and income to see if the net benefit is worth the action.

Question 4

What is state benefits and poverty alleviation

Answer 4

This is the thought at which state benefits are used as a good level of support however this level of support especially for low income households may not be enough to create a stable and liveable environments which is why financial advisors when planning must put emphasis on long term investments assests and increase in income with the understanding to client that benefits are not long term.

Question 5

What is the purpose of universal credit

Answer 5

Universal credit is a mean tested benefit which compared to older models of benefits does not rely of the employment status of a individual therefore they are support wether they are in work, out of work or transitioning which streamlines the benefit system to allow only one form instead of multiple allowing for more support and less time between support given to individuals.

Question 6

How is universal credit being implemented replacing legacy benefits

Answer 6

Universal credit has streamlined a lot of the legacy benefits as it has combined the majority of them such as job seekers allowance, housing benefits and child tax benefits.

Allowing for this system to slowly be introduced and transferred over it become a lot easier for everyone involved.

The application for universal credit is dependant case to case basis in order to give an accurate amount this can be based on relationship status, age, children ect and more can be given through disability, childcare, caregiving and housing. there are also caps put in place to ensure long term reliance isnt abused.

Question 6

What benefits has universal credit not replaced

Answer 6

Carer’s Allowance: For those providing substantial care for a disabled individual.

New-style JSA and ESA: Contributory benefits based on National Insurance payments, providing income support independent of means.

Disability Benefits: Such as Personal Independence Payment (PIP) and Disability Living Allowance (DLA) for mobility and care needs.

Child Benefit: A separate benefit for those responsible for children under 16 (or under 20 if in full-time education).
Sickness and Maternity Benefits: Statutory Sick Pay, Statutory Maternity Pay, and Maternity Allowance.

Attendance Allowance: For individuals over the state pension age with personal care needs.

Question 7

What is working tax credit

Answer 7

This is a type of credit for low income earners to help support those in work and also those that are self employed to make their life more stable.

There are also addition supports for disability and individuals with children. however this working tax credit has now transferred into universal credit which new claimants must be receiving child tax credits in order to be eligible for the universal credit.

Question 8

What is income support

Answer 8

This is another type of benefit for low income earners however for this benefit the individual must be working less than 16 hours a week (24 hours if the claimant has a partner) and between the ages 16 and the pension age allowing for addition support.

This benefit has now transferred over to universal credit as well with existing benefits holding still receiving payments.

Question 9

What is jobseekers allowance

Answer 9

This benefit is for individuals whom are working less than 16 hours a week or whom are actively looking for work.

there are two types of jobseekers allowance as one is not means tested meaning that it does not depend on the household income however this type of jobseekers allowance is only available for 6 months. The other type is means tested and will depend on household income but is now also replaced by universal credit.

Claimants on jobseekers allowance receive national insurance for every week they are on the allowance paying towards their pension.

Question 10

What is support for mortgage interest

Answer 10

This benefit is a loan rather than a grant and the claimant must already be on an income related benefit such as job seekers allowance, universal credit or a pension credit.

this loan only helps the claimant with their interest payments on a mortgage at a capped amount with is secured on the house payed back when sold or transfered. any other type of repayment or outstanding payments will not be covered by this.

Question 11

What are the three types of benefits for when an individual is pregnant

Answer 11

The first type is statuary maternity pay which is payed by the employer to the employee for 39 weeks of pay based on their previous payments received however they must meet the requirements of working at the company for 26 weeks.

Maternity allowance is the second type which is for individuals whom are illegible for the first type such as the self employed which is then 39 weeks of pay covered by the government.

The third type is a sure start maternity grant which is a flat rate of £500 for low income or unemployed households expecting their first born or in some cases a subsequent child, there just to cover essential costs.

Question 12

What are the two types of child benefits for raising a child

Answer 12

The first type is child benefits this is for any parent or guardian whom is raising a child under 16 or under 20 if in full time education, however if the family earns more than £50,000 then this can be reduced or eliminated by the government.

the second type being child tax credit, this is for low income households to cover any child related expenses but is slowly being replaced by universal credit also.

Question 13

What is the benefit cap

Answer 13

This is a cap on the amount a household can receive off benefits which will align with the average wage therefore individuals will not benefit more off the credits.

Question 14

Which areas are subject to the cap

Answer 14

o Employment and Support Allowance (ESA)
o Income Support
o Jobseeker’s Allowance (JSA)
o Housing Benefit
o Maternity Allowance
o Child Benefit and Child Tax Credit
o Bereavement Allowance
o Incapacity Benefit
o Severe Disablement Allowance
o Universal Credit (unless deemed unfit for work)
o Widowed Parent’s Allowance

Question 15

What is statuary sick pay

Answer 15

This type of benefit is paid by the employer to employees whom have fallen sick or injured for four consecutive days making them entitled to the sick pay from employers which can extend up to a max of 28 weeks.

If the illness/ injury is linked and is reoccurring within less than 8 weeks then the pay will continue up to the limit to ensure benefits all of this income is taxable considering notional insurance and income tax contribution are regular from the individual.

Question 16

What is employment and support allowance

Answer 16

This benefit is for individuals whom are struggling to find work or are unable to work in whatever capacity as there are assessments done to individuals that will then categorise them into two groups, one which are expected for future employment and to participate in activities and those whom cannot work which will receive full support.

There are two types of support one which is means tested and one which is not means tested. The one which is not means tested by income is taxable while the other is taxable however the means tested support is slowly moving over to universal credit.

Question 16

What is attendance allowance

Answer 16

Attendance allowance is a benefit suited for those over the state pension age in need of financial support or personal care. this benefit is universal and is accessable by anyone in need over the state pension age meaning their national insurance credits do not effect the amount given therefore it is not means tested.

There is a lower and upper tier of support for the individual which depends on if the support is needed for either day or night for the lower tier whereas the higher tier is for those in need day and night.

This benefit can also enhance benefits that the individual receives such as housing benefits, pension credit and council tax reduction.

Question 17

What is the disability living allowance/ personal independence payment

Answer 17

This type of benefit is for those who struggle to do day to day tasks and are in need of assistance, while those born on 8 april 1948 can have disability living allowance it is slowly being moved over to personal independence payment for everyone between the ages of 16 and state pension age. for those over the limit will have to apply for attendance allowance.

This benefit is for those who are assessed and see to struggle with cooking, cleaning/washing themselves and using the toilet while also looking at mobility such as equipment neede to assist walking and those who cannot walk at all.

Question 18

what is carers allowance

Answer 18

This benefit is for those whom care for a individual meeting critiras at a rate of 35+ hours a week and they do not need to be related to the person needing the care.

qualifying for this benefit means that the carer cannot receive over a certain limit from another source of income as well as this the allowance is taxable. This benefit could impact other benefits recieved for both carer and the individual who is being looked after for example some disability allowance could be altered for the individual being cared for.

Question 19

What happens to benefits if hospitalised or entering a care home

Answer 19

If an individual is in hospital then some benefits can be reduced or stopped normally after 4 weeks of stay and especially if the stay in long term as the NHS will cover areas that are benefitted.

If an individual enters a nursing/care home then the benefits could also be reduced or stopped but this would have to be seen on a case basis as the rules are complex while also considering the duration of the stay.

Question 20

What are the types of state pensions

Answer 20

basic state pension- this is a state pension which is at a basic fixed rate for those who have 30+ years of national insurance credits to recieve the full amount. For those with insufficient credits they will be able to recieve a ‘catagory B’ pension based on their spouse/ civil partners record.

Additional state pension- This pension is paid upon the basic pension which is only avaliable for the employed class 1 national insurance credits, however this pension could be opted out of and put in to a private pension however this would reduce the national insurance credits and eliminate other additional state pensions.

New state pension- this pension is applied from those who reach the pension age after april 2016 which is simplified and requires 35 years of national insurance credits those with less than 10 years receive no pension. Carers can have national insurance credits received even when not working.

Question 21

What is pension credit

Answer 21

Pension credit is a small benefit for those in retirement and is means tested so that those with low income have extra support.

It is split into two of guaranteed credit which is a small weekly income for all and saving credits which is for individuals who reached the state pension age before the 6th of april 2016. This benefit is not taxable.

Question 22

What is the triple lock system

Answer 22

The triple lock system is for pensions to guarantee that the pension will increase every year allowing cope with increases in inflation and other costs of living.

It works by cpi inflation rate which will mean that the pensions rate will increase with this percentage as well as the average earning this will be matched by the pension making sure that pensioners are keeping up with the working average. fianlly even if the inflation and working wage are low then the pension every year is guarenteed to increase by 2.5%.

There is debate around this triple lock system as some individuals are for this as it helps former workers and pensioners while others say that this is too costly for taxpayers and a double lock system is good enough.