Social Benefits Overview Chapter 3
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Questions and Answers

What is the maximum amount of the family element of Child Tax Credit (CTC) available for eligible claimants in 2024/25?

  • £545 (correct)
  • £1,680
  • £4,170
  • £3,435

    • Which of the following statements regarding Child Tax Credit is true?

  • Parents with three or more children can claim CTC for all children.
  • Only children born before April 2017 can be claimed for after having a third child. (correct)
  • CTC is targeted at all children regardless of birth date.
  • Claims can be backdated indefinitely.

    • How much will the Child Tax Credit be reduced for each £1 of income over £19,995?

  • 20p
  • 50p
  • 41p (correct)
  • 30p

    • What additional payment is provided for each disabled child under the Child Tax Credit system?

    <p>£4,170</p> Signup and view all the answers

    Under what conditions might families with higher incomes still be entitled to receive tax credits?

    <p>High childcare costs.</p> Signup and view all the answers

    What must a family do to claim Child Tax Credit at this time?

    <p>Claim directly from HMRC.</p> Signup and view all the answers

    What is a contributory benefit?

    <p>A benefit only paid to those who have made certain National Insurance contributions</p> Signup and view all the answers

    Which statement about the Working Tax Credit (WTC) is true?

    <p>It provides financial support for individuals on low incomes.</p> Signup and view all the answers

    Which type of benefits are referred to as income-based benefits?

    <p>Benefits that are paid only to individuals based on their income or capital</p> Signup and view all the answers

    What is a significant concern about State benefits?

    <p>Eligibility definitions can be strict and may exclude many who expect to qualify</p> Signup and view all the answers

    What is the relationship between tax credits and Universal Credit?

    <p>Tax credits and Universal Credit cannot be claimed at the same time.</p> Signup and view all the answers

    What major change was introduced by the Welfare Reform Act 2012?

    <p>Introduction of Universal Credit and a benefits cap</p> Signup and view all the answers

    What was one major issue faced during the implementation of Universal Credit?

    <p>The rollout faced significant delays and issues</p> Signup and view all the answers

    As of January 2024, what was the number of people receiving Universal Credit?

    <p>6.4 million</p> Signup and view all the answers

    Why might private insurance and pensions be necessary in addition to State benefits?

    <p>State benefits might not provide enough for a desired lifestyle</p> Signup and view all the answers

    What is a potential limitation of social security benefits?

    <p>They may not meet everyone’s financial expectations and needs</p> Signup and view all the answers

    What is the maximum amount of mortgage borrowing for which the DWP pays interest under the new loan-based arrangement?

    <p>£200,000</p> Signup and view all the answers

    Which interest rate is used to standardize the DWP's mortgage interest payments?

    <p>Bank of England's published monthly average mortgage interest rate</p> Signup and view all the answers

    What is the waiting period for those on Universal Credit before their claim for support is accepted?

    <p>Three months</p> Signup and view all the answers

    Which of the following types of mortgage borrowing is NOT covered for SMI under Pension Credit?

    <p>Interest on arrears</p> Signup and view all the answers

    Which benefit is NOT replaced by Universal Credit?

    <p>Child Benefit</p> Signup and view all the answers

    How is Universal Credit characterized in its payment structure?

    <p>Means-tested, tax free, paid monthly</p> Signup and view all the answers

    What limit exists on the first £100,000 of mortgage borrowing for Pension Credit recipients claiming SMI?

    <p>Only interest on the house purchase is covered</p> Signup and view all the answers

    What happens to existing claimants of certain benefits as part of the transition to Universal Credit?

    <p>They are moved across to Universal Credit</p> Signup and view all the answers

    What is the State Pension age (SPA) that was equalized for both men and women in November 2018?

    <p>65</p> Signup and view all the answers

    When is the SPA scheduled to rise to 67 according to the Pensions Act 2014?

    <p>2026 to 2028</p> Signup and view all the answers

    Which scheme was introduced as a replacement for the State Earnings Related Pension Scheme (SERPS)?

    <p>State Second Pension (S2P)</p> Signup and view all the answers

    What major change regarding the SPA is confirmed to take place in 2023?

    <p>Confirmation of increase to 67</p> Signup and view all the answers

    What is the current status of the proposed increase to 68 in SPA, expected between 2044 and 2046?

    <p>May be brought forward but undecided</p> Signup and view all the answers

    What type of contributions allow employees to receive benefits from SERPS or S2P?

    <p>Class 1 NICs</p> Signup and view all the answers

    What term describes individuals who opted out of the State top-up scheme and may have received reduced benefits?

    <p>Contracted-out individuals</p> Signup and view all the answers

    What will happen every five years after the SPA reaches age 67?

    <p>Reviews will take place linking SPA to longevity</p> Signup and view all the answers

    What happens to an individual's entitlement to SERPS or S2P if they are contracted out?

    <p>They do not build up entitlement to SERPS or S2P.</p> Signup and view all the answers

    When reaching State Pension Age (SPA), how is the new State Pension calculated?

    <p>It includes a 'protected payment' for any previous S2P or SERPS entitlement.</p> Signup and view all the answers

    What is the purpose of the Guarantee Credit in State Pension Credit?

    <p>It aims to ensure a minimum level of income for eligible pensioners.</p> Signup and view all the answers

    What is the maximum weekly amount for Savings Credit for a single claimant in 2024/25?

    <p>£17.01</p> Signup and view all the answers

    Which statement accurately describes Savings Credit?

    <p>It is a legacy benefit available only to those who turned 65 before 6 April 2016.</p> Signup and view all the answers

    What happens if one partner in a couple is below the qualifying age for State Pension Credit?

    <p>New claims will be for Universal Credit for the couple.</p> Signup and view all the answers

    What is the Savings Credit withdrawal rate for income exceeding set limits?

    <p>40p per £1</p> Signup and view all the answers

    What is the combined amount for Guarantee Credit for a couple in 2024/25?

    <p>£332.95</p> Signup and view all the answers

    Study Notes

    Benefits Overview

    • State benefits can be classified as contributory (dependent on National Insurance contributions) or non-contributory (not reliant on contributions).
    • Means-tested benefits are provided only to individuals whose income or capital falls below a specified threshold, referred to as income-based benefits.

    Understanding Benefits Interactions

    • Advisers must comprehend the interplay between state benefits and products like income protection.
    • Social security benefits may not suffice to maintain a desired lifestyle, necessitating private insurance and pension plans.

    Welfare Reform and Universal Credit

    • The Welfare Reform Act 2012 introduced a benefits cap and transitioned multiple benefits to a single Universal Credit.
    • Universal Credit's rollout faced significant delays and challenges, completing for new claimants by late 2018 and transitioning legacy claimants through 2022-2026.
    • As of January 2024, 6.4 million people received Universal Credit, a rise of 500,000 from January 2023.

    Child Tax Credit (CTC)

    • Parents with children under 16 or aged 16-19 in full-time education can claim CTC, with family element worth up to £545 (2024/25).
    • Eligible parents may claim £3,435 for each child and additional payments for disabled or severely disabled children.
    • CTC elements focus on the first two children born after April 2017, restricting claims for third or subsequent children unless exceptions apply.
    • CTC is claimed from HMRC and cannot be backdated beyond one month; income exceeding £19,995 reduces the credit by 41p for every £1.

    Working Tax Credit (WTC)

    • WTC supplements earnings for low-income workers, including those without children.
    • Transitioned from previous benefits to a loan-based arrangement for those previously receiving benefit.
    • DWP assists with interest on mortgages up to £200,000 but excludes capital payments, with a standardized interest rate tied to the Bank of England rate (3.16% as of March 2024).

    Universal Credit & Benefits Cap

    • Universal Credit integrates several legacy benefits, making it means-tested and tax-free, with monthly payments.
    • Both pre-existing benefits and Universal Credit are subject to an overall benefits cap that restricts the maximum weekly amount claimable.

    State Pension Age (SPA) Changes

    • SPA was equalized at 65 in November 2018, raising it to 66 starting October 2020, with further increases slated from 66 to 67 between 2026-2028.
    • A 2023 government review confirmed that the increase to 67 will proceed as planned, with future reviews to revisit SPA adjustments.

    Legacy Schemes

    • Prior State Pension schemes, including the Basic State Pension and SERPS/S2P, provided ‘top-up’ benefits based on contributions from employees.
    • Individuals contracted out of SERPS/S2P retain Basic State Pension eligibility but may see their new State Pension reduced.

    State Pension Credit

    • State Pension Credit provides pensioners with income support, varying by age, income, and savings.
    • It includes Guarantee Credit (minimum income assurance) and Savings Credit (legacy benefit) for those over 65 before April 2016.
    • Guarantee Credit for 2024/25 is set at £218.15 for singles and £332.95 for couples, with potential additional payments for disabilities or caregiving.
    • Savings Credit is available up to a certain income, with specific withdrawal rates, providing potential benefits for prior claimants.

    Note on Eligibility

    • New claims for Universal Credit will be necessary when one partner in a couple is below the qualifying age for State Pension Credit, while the other is not.

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    Related Documents

    Chapter 3: State Benefits PDF

    Description

    This quiz covers the distinctions between contributory and non-contributory benefits. It also delves into means-tested benefits and what qualifies individuals for financial support based on their income or capital. Test your understanding of these essential concepts.

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