Social Benefits Overview Chapter 3

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?

£4,170 Signup and view all the answers

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

High childcare costs. Signup and view all the answers

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

Claim directly from HMRC. Signup and view all the answers

What is a contributory benefit?

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

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

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

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

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

What is a significant concern about State benefits?

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

What is the relationship between tax credits and Universal Credit?

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

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

Introduction of Universal Credit and a benefits cap Signup and view all the answers

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

The rollout faced significant delays and issues Signup and view all the answers

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

6.4 million Signup and view all the answers

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

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

What is a potential limitation of social security benefits?

They may not meet everyone’s financial expectations and needs 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?

£200,000 Signup and view all the answers

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

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

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

Three months Signup and view all the answers

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

Interest on arrears Signup and view all the answers

Which benefit is NOT replaced by Universal Credit?

Child Benefit Signup and view all the answers

How is Universal Credit characterized in its payment structure?

Means-tested, tax free, paid monthly Signup and view all the answers

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

Only interest on the house purchase is covered Signup and view all the answers

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

They are moved across to Universal Credit Signup and view all the answers

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

65 Signup and view all the answers

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

2026 to 2028 Signup and view all the answers

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

State Second Pension (S2P) Signup and view all the answers

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

Confirmation of increase to 67 Signup and view all the answers

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

May be brought forward but undecided Signup and view all the answers

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

Class 1 NICs 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?

Contracted-out individuals Signup and view all the answers

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

Reviews will take place linking SPA to longevity Signup and view all the answers

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

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

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

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

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

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

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

£17.01 Signup and view all the answers

Which statement accurately describes Savings Credit?

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

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

New claims will be for Universal Credit for the couple. Signup and view all the answers

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

40p per £1 Signup and view all the answers

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

£332.95 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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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.