Learning Objective 3 Flashcards
(27 cards)
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
What are the 4 State Benefits
- Bereavement Benefits
- Unemployed + Low Income
- Disability and Sickness
- Child Benefit / Tax Credits
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)
Who is it for?
Timeframe for claiming?
Means tested?
Taxable?
Age range?
- 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
