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Benefits Blog

by Tombenefits

news and thoughts from the world of welfare rights
08 August 2017 at 22:07

Means tested benefit sums made easy

A look at the how entitlement works for the main means tested benefits. These can go higher up the income scale than you might think and tax credits even more so :-)

Often people ask me me whether they might qualify for “means tested” or “income-related” benefits. Or tell me they think they probably have too much income for any benefits at all; but some key ones are not affected by your income and savings at all. Others are already claiming their entitlement but are mystified by the letters setting out how their payments are worked out and wonder if they are getting the correct amount..

So, in this blog, I am going to take a little peak under the bonnet and explain how your entitlement is built up and how those sums work. Now, the very word “sums” of course can send a shiver down the spine for those of us with an aversion to numbers and I am anxious not to re-awaken the childhood traumas of double maths on a Tuesday afternoon :-)

So fear not :-) - this blog does not involve any advanced algebra or quadratic equations. It’s mostly adding up one column and taking it away from t’other. I will be using some common scenarios and examples with huge apologies to JK Rowling and JRR Tolkien :-)

Besides, the main point is not getting the arithmetic precisely right, but to shine a light on the concepts behind these benefits and how they work.

In previous blogs, I went through what the main means tested benefits are and who they are for, looking first at the ones that top up income - here - and then at the ones for specific costs such as housing and health - available here .

The good news is that it is basically the same sum for all of these benefits :-) And that means:

  - a ) that you don’t have to learn a totally different way for any particular benefit to check that you are getting the right money ; and

  - b) that qualifying for one can often passport you through the financial assessment for another, so you don’t have to fill in pages or send in evidence all over again.

The similarity is not accidental as they all have their origins in the sums for Income Support. Tax credits came in later and work rather differently, so deserve a blog of their very own :-)

 

1. But isn’t this system on its way out?

Yes, it is. But not for a while yet - the end of these benefits was - like that of Mark Twain “somewhat exaggerated". Originally,  hese were all - with the exception of Council Tax Support and Pension Credit - due to merge into the new Universal Credit (UC) by October 2017. And that would have made the shelf life of this blog very short :-) However, the current target is to complete the switch to UC by April 2022.

For now, most new claims are still under the "legacy benefits" and even once new claims for these are closed off by September 2018, most people on existing claims will still be on the legacy benefits for a while after.

And for those faced with a possible choice - during these transitional years - it may be useful to know how both work and see which one leaves you better off . You can then decide whether to rush into UC’s “tough love embrace" as soon as or keep away for as long as possible. 

Always check if anyone tells you that you must switch to UC especially if you fear you may be worse off. There is a lot of incorrect information around there, both amongst the public but also among UC and HB staff. When your area goes over to Full Service UC, nothing changes for your current benefit. You can opt to switch but don't have to. If tyour circumstances change, you may sometimes have to switch to UC but often you would not. There will be plenty more to come in future blogs on UC :-)

 

2. What about the 63 & 3/4 somethings ?

Universal Credit is largely a “working age” thing, so men and women who are over the gradually increasing Pension Credit (PC) age, will continue to receive - and make new claims for- PC, even after April 2022. PC , then will survive Universal Credit’s bid to take over the benefits world :-) .

The sums - both now and in the future -  are simpler and more generous in pension age. If you are over the magical age of 63 and 3/4, you may want to go to the blog - available here - to find out more about how Pension Credit, helped with examples from the Maggie’s Magicroundabout Centre :-)

But before you go - if you have rent to pay, however older and wiser you may be - , you may be interested in Housing Benefit below. And if you are one in a “mixed age” couple , you currently have a choice so you might want to explore the current working age system as well .

Having sent a large proportion of gentle readers off to spend time with Florence and Dougal in a parallel blog :-), my thanks to the rest of you for staying. If you are below the PC age line, this is definitely the hip and happening place to be :-)

 

3 The basic principles of the sums

3.1 A simple sum

At its simplest all of these benefits - and the tax credits and Universal Credit that are a bit different to really need "another day, another blog :-)" - work on the same basic principle of:

- 1. adding up your maximum potential entitlement according to your circumstances to arrive at your “applicable amount / maximum amount” . This isn’t the amount you will get but the amount you will be topped up to.

- 2. adding up your other income - with some important exceptions - to get to your “assessed income”

- 3. and then taking one from t’other  to arrive at the amount of benefit due. 

So if Harry’s maximum entitlement for say Income-related ESA was £130 a week and he had £100 a week coming in from other income, then Ir-ESA would top him up to the £130 by paying £30 a week.

And if his carer, Hermione who lives in her own place, had an Income Support amount of £110 and an income of just £60 Carers Allowance, then Income Support could top her up by £50 to bring her income up to the “minimum that the law says that you need to live on”, as it will say on their respective letters.

But what if your income was more than your applicable amount? Well for those benefits that just top up your income it would simply mean that you wouldn’t get any. But that isn't the end of the story for Housing benefit or Council Tax Benefit: 

Galadriel has Contributory ESA and other income that takes her - for now - £20 over her applicable amount so she can’t get Income- related ESA.  but she can get Housing Benefit


3.2 Applying a taper

So there can be a twiddly extra step in the sums for Housing Benefit:

- anyone with income below or equal to their applicable amount, qualifies for Full Housing Benefit , the maximum amount the rules allow for help with rent. So that’s why anyone getting one of those means tested top up benefits automatically gets Full HB without having to go through it all over again.

- If income is over the applicable amount, it doesn’t mean a “Sorry you can’t get anything” letter as with the others. Rather your potential Full Housing Benefit would tapers away according to how much your income is over that applicable amount. You may well get some Partial Housing Benefit

HB would take 65% of the “excess income” and take that away from your potential Full Housing Benefit. If you hate %ages just hit x 0.65 on your calculator:

Galadriel has £20 too much to get any Income-related ESA She can still get Housing Benefit but the Full Housing Benefit will be reduced by 65% of £20 or £20 x 0.65= £13.00

So that essentially is it. Simples?

You can see that real life is going to get a bit more complicated :-( :

  - the amounts aren’t going to be quite such nice round numbers as in these examples

  - and there is the question of what makes up each person’s applicable amount.

So in the rest of this blog, I will take a look under the bonnet, so you can see what building blocks go towards make up your “applicable amount”

 

4. Other general principles for claiming means tested benefits

4.1 Who do I claim for?

You claim as a “benefits household”, so that if you have a partner you would make a joint claim. That means some allowances will be made for you and your Applicable Amount will be a little higher than for a singleton. But it also means that both your incomes count.

Gandalf is smitten by the Balrog. He gets Contributory ESA as of right without reference to most income. But Income-related ESA will take into account the Balrog’s earnings from his zero hours contract with Mordor

Under the old - and largely current - system in this blog, any dependent children or young people still at college would be claimed for separately under Child Tax Credit, regardless of whether the parents were in paid work or were unable to for now

Any other person living in the house - a lodger, elderly parent or grown up child - will be separate benefits units in their own right and would claim independently if they had an entitlement.

Merlin moves in with his childhood sweetheart Morgan. Together they would be one unit for benefits purposes. Upstairs lives Morgan’s mother Igraine who would be another unit, if she wasn’t so fabulously wealthy. However, Igraine’s great wealth will have no bearing on Morgan and Merlin’s claim. Down in the basement is believed to be Morgan’s son, Mordred, surfacing rarely to raid the fridge, who would also make his own claims.

The house then contains 3 totally separate benefit units. The only link is that sometimes the presence of other adults can affect Housing Benefit, but there is an important exception that covers many people affected by cancer.

 

4.2 Savings

There is a capital and savings limit on all of these benefits (except Pension Credit). You mustn’t have more than £16,000 to make a claim.

Your own house, possessions, car, etc are all ignored. As is money locked away towards a pension. But other wads of cash whether in the bank or under the bed do count. As do second properties (with some exceptions).

So if you have less than £16,000 you can claim. And if it’s less than £6,000 ithe savings will have no effect at all

In between £6,000 and £16,000 you can still claim but will be treated as having a tariff income from them. Any actual interest payment you receive is ignored and instead a rather higher tariff income is applied : for every £250 over the lower £6,000 limit you are treated as if you have an extra £1 a week income.

For example: Hermione has £10,000 in a very prudent safety fund only to be spent in dire emergency, need to escape or on books. The first £6,000 is ignored, but she he is treated as having £4000 / £250 = £16 a week more in income than she actually has.

 

5. How much will my Applicable amount be?

This is made up of three main parts:

  - 1. A personal allowance per adult in the benefit unit - usually a single or couple rate

  - 2 - Housing Costs - help with mortgage interest paid to the lender

  - 3 Premiums - extra amounts for age, sickness, disability and caring that may come along in time, be missing or require some action to obtain.

The first two are fixed and you can’t do much about them - the only way to increase your personal allowance is by becoming one of a couple or turning 25. Housing Costs are based on a standard interest rate and there are restrictions on taking out loans while on benefit.

But it’s premiums, - often connected with PIP claims - that can make a real difference and produce an income that while not extensive can make the difference between “living and merely existing”

Some will get added on reasonably reliably as circumstances change, others require careful checking or some action to get added in.

Premiums though, are not separate benefits in themselves, but extra amounts that get added into your applicable amount when working out how much of a means tested benefit you will get.; you apply for that benefit not the premiums. But the higher your applicable amount, the greater the amount that you will be entitled to after your income is taken away.

So adding a premium worth £62.45 may indeed increase your benefit by that amount. But in other cases, it might be that it makes the difference between having income £20 over your applicable amount and not getting benefit and being £62.45 -£20= £42.45 under and getting that amount and the other benefits of being entitled.

 

6. Premiums with an element of one or the other

6.1 ESA components

Not technicall a premium but these do the same thing for those claiming Income-related ESA as the Disability Premium they replaced in Income Support (for sickness). The ESA assessment process will allocate you to one of two groups, each with an additional component that usually kicks in after 13 week “assessment period.

These are:

  - a Support Component - £36.55 a week; or

  - a Work Related Activity Component - either £29.05 a week, but cut to nothing for new claims after 3rd April 2017 (with some exceptions)

Couples only get one component between them  even if they would both qualify individually and there is no higher couple rate.gets paid - and there is no extra couple rate.

Many who are “awaiting, receiving or recovering from cancer treatments” such as chemo or radiotherapy. would normally bypass most of the test and get Support Component from week 14 Those with more advanced and life-limiting cancers may get this from the start of their claim.

The Work Related Activity Group tends to come in for those too unwell to actively work or jobseeker perhaps in a “watch and wait” treatment plan, or some while into recovery from major treatments when over the immediate side effects but having a rough time with late effects.

They will have to undergo the full Work Capability Assessment which will determine: which group you come under or even whether you are sufficiently unwell to remain on ESA

If you have worries about an assessment or get a decision you feel may be wrong, do message me.

 

6.2 Enhanced Disability Premium

There are two routes to this extra amount of £15.90 single or £22.85 for a couple claim:

  - 1. for all of these means tested benefits - if a claimant or their partner gets the enhanced rate of PIP Daily Living or DLA Care at the highest rate.

  - 2. for Income-related ESA claimants only - if you are in the Support Group,

This is a handy extra and is a common reason why people on the non means tested Contributory ESA - but without much income might get a top up from Income-related ESA. The basic rates and components are identical, between the two types of ESA . But only Income-related ESA includes this EDP - and other premiums too.

The EDP often goes missing on award letters, so do check that it has been included in your sums ; it is often listed as Disability Income Guarantee.

 

6.3 Disability Premium (all except Income related ESA)

This was the one that ESA components replaced,but it remains for those on income Support or Income-based JSA.

The condition for getting the disability premium are a bit more straightforward . Either :

  - 1. the claimant or their partner receives any rate DLA or PIP

  - 2- the claimant only has been ill for 52 weeks or more, but mostly such claimants would be on ESA

For singles the rate is £32.55 . Although, as with ESA components, is only is included for a couple whether only one or both would qualify, there is a higher couple rate, at £46.40.

Sometimes there is a choice as to which benefit to claim and so which to go for : ESA component v disability premium.  It's not just the respective rates though as the extra of a disability premium could be outweighed if yo could get an EDP under ESA but not under Income Support.

It may be that switching from one to the other helps if eg an ESA component is taken away or a qualifying benefit for a disability premiu. But do keep in mind that switching may at some point lead tou into UC instead. If in doubt get advice.

 

6.4 Pensioner Premium

The simplest and the biggest of the premiums. If applicable, this effectively replaces any combination of the above eg you would get a pensioner premium instead of an ESA component/disability premium with and/or edp.

The condition is simply;
 - either you or a partner are over Pension Credit age.

The single rate - of £ 86.25 applies to men only - as only they can claim it in that “awkward age” between 63 3/4 and 65, if they choose to carry on with ESA or JSA claims. Women would switch to Retirement Pension and Pension Credit.

The couple rate - of £128.40 - applies to both men and women across all the benefits.

The figure is rising in real terms as the gap between “working age” and “pension age” claimants. The premium effectively  loses the gap between the impossible bare subsistence rates of " working age" benefits and the more sustainable long term rates aimed at abolishing pensioner poverty. 

So if you could qualify for Pension Credit but chose to stick with working age benefits you mostly won't lose out financially.

Crucially there is no choice - you will have to go with working age benefits - and with no pensioner element to make up the difference - under Universal Credit.

Dumbledore and Mrs McGonagle have finally plighted their troth. Although Albus is over PC age, the couple opt to claim Income Support instead, because Dumbledore can be a bit absent minded with the finances. Their couple Pensioner Premium brings their joint “applicable amount of £114.85 to the the more generous PC couple amount of £243.25

 

7. Premiums always paid on top: carers and severe disability:

There is a bit of an either/ or around the premiums above:

  - it' s a straight either/or between disability premiums , ESA components or pensioner premium .

  - And while you can have an EDP on top of the first two, you can’t have it with a pensioner premium.

However, the following two important premiums for many people affected by cancer can be included on top of any of the previous one. They also feature under Pension Credit where they are called “additions”

 

7.1 Carer’s premium

The condition for this premium - worth £34.90- is that:

  - either you receive Carers Allowance (CA); or

  - you would have received it, but for another of the non-means tested "earnings replacement benefits" -  eg Contributory ESA or Retirement Pension - getting in the way. You still retain an "underlying entitlement" to CA

Where both partners qualify, you can have one each added in to the joint applicable amount.

Under these legacy benefits,  common sense and a respect for the principles of the Equalities Act, overcomes the initial first sight apparent contradiction between being “disabled” and a carer at the same time. But remember:

  - a) being disabled does not mean passively sitting in a corner with a rug over your knees. Living with cancer brings real difficulties and moments when reclining on a chaise long looking pale and interesting is the limit. But other times you will still make valuable contributions to family, community, work etc.

  - b) being a carer for benefit purposes is not the often hard physical work of a full time home carer. For the small amounts of carers allowance or premium you may just be around, giving verbal encouragement and talking things through or being there to call for help.

But a word of warning: there are times though when if you stand to actually be paid the Carers Allowance,  you might adversely affect the entitlement to the the severe disability premium for the person you support. So then you need to weigh up any gains or losses. Sometimes though they can't get an SDP anyway so you are good to claim; sometimes it may be better not to.

 

7.2 Severe Disability Premium

It’s a bit complicated and intentionally so :-)

The Government of the day were forced into retaining an extra top up for the more disabled by the House of Lords and so added extra conditions to limit entitlement. Now you may wish for something simpler, but be careful what you wish for. The Government have dropped ideas of a simpler disability scheme in UC in favour of no adult disability premiums at all under UC .

But by all means pop the kettle on and return to this with your favourite dunkables :-) It’s fiddly rather than rocket science…

The conditions for an SDP are:

- 1. you must be getting one of the qualifying “disability benefits” - Attendance Allowance, DLA Care or PIP Daily Living. Any rate of AA or PIP Daily Living but with DLA it has to be middle or highest rates. So far so “severe disability”; and

- 2. you must “count as living alone” - simples if you actually do - just tick a box, but if there are others they may be ignored if they are on a list devised for a totally different purpose under Housing Benefit !!! Erm…eh???…you may say, as did the Courts.; and

- 3. no-one must be actually receiving Carer’s Allowance for looking after you - but it’s Ok if you claim the CA and get the sorry we can’t pay you letter and to get the Carers Premium,

So for example:

Harry has the right level of PIP but lives with his Uncle Vernon and Aunt Petunia so he can’t “count as living alone” so he cannot get an SDP.

Ron has a similar rate of PIP too, but lives in his own place and so can get one

Norbert lives separately from his friend and carer Hagrid - as a fire precaution:-) - and gets the right levels of disability benefit. But because Hagrid, actually “receives Carers Allowance”, Norbert cannot get an SDP

Albus Dumbledore is getting Attendance Allowance, but now lives with Mrs McGonagle so her presence stops them him getting an SDP. However, she receives a cancer diagnosis and is helped to claim PIP in her own right. As a result, each of them is ignored for the purposes of the others SDP and so they each count as living alone. The couple are now eligible for two SDPs whereas before they could have none!

Couples can get both two Severe disability premiums /additions DPs and two Carers premiums /additions  at the same time:

Some time later, Mrs McGonagle pops into Maggie’s Hogwarts and the adviser suggests they could also claim Carers Allowance for looking after each other. Now if either of them actually received the Carers Allowance that would mean goodbye to one or both SDPs.

But by dint of having paid enough National Wizarding Insurance contributions, Mrs McGonagle is getting Contributory ESA that would block the actual payment of Carers Allowance However she would still be entitled to the carers premium. The SDP for “Dear Albus…” is protected .

And because he in turn is is on Retirement Pension, Dumbledore can do the same and claim a Carers Allowance that is also blocked - this time by RP - and receive a carers addition without harming the SDP for “Mrs McG” as he fondly risks calling her :-).

So as well as 2x £62.45 a couple can also have 2x £34.90. And that is quite right, when you stop and think about it.  many couples work as a team compensating for different difficulties and playing to their strengths. Both need and receive support but also both give it, well and truly earning their carers premiums and saving the public purse a small fortune in care costs. 

But as we will see , UC is having none of this. The key impact UC will have on people on current benefits is that if their carer is on UC, even just an underlying entitlement to UC carers element will spell the end of their SDP. Meanwhile if their carer also has health problems - often brought on by long term caring they cannot get the equivalent of both an ESA component and a carers premium as they can under ESA.

And in weighing up a switch to UC people have to remember that there is no SDP - or any other adult disability premium in UC. 

A mixed age couple like Mrs McG and Albus would if forced - under future rules- to claim UC rather than Pension Credit will stand to lose some £250 a week, compared to Pension Credit - no pensioner premium, no SDPs and just one carers element.

Anyway back in the present, SDP is a bit complicated,  but hopefully not rocket science and is available and worth getting if you can.

But so many people who are entitled miss out:

  - you do need to know that you are entitled and it can feel rather counter intuitive

  - you do need to get hold of the short form required and many DWP staff are a bit hazy about it. There is no publicity to tell you or them.

  - And while hard enough to realise you should have an extra in a benefit that you are currently getting it can be much harder to work out that you may only now be entitled to claim that benefit in the first place, especially if you were previously correctly turned down for too much income and have only just had an increase.

SDP then is perhaps "the premium that dares not speak its name :-)"  And perhaps it needs an SDP Pride week or two to celebrate it. Once, in kinder days, the DWP did do a trawl to look for unpaid SDPs and found thousands unpaid. They have refused to run that again.

As advisors, we often come across people who have been missing out, perhaps for years and in two ticks and a signature sort out a real increase now - and thousands in arrears. And we get to feel like real wizards :-)

 

 

Enough already…

A nice lie down in a darkened room may now be called for after that run through of the Premiums :-)

But while personal allowances are stuck at something less than 1960s basic subsistence rates and housing costs - though invaluable - go straight to your mortgage lender, it’s premiums that can make the difference between “living and merely existing”.


I will finish off with an example of how they can build up :

£57.80? and that’s for a whole week” said Ron rather dejectedly

“Told you it was a waste of time”, said Dougal sarcastically . "I’m off to the garden"

“Shouldn’t you be in another blog?” said Ron dangerously “Like the one here ….”

“ Ah, but that’s only for now, “ said Bilbo the Benefits Advisor . “That allowance will go up to the adult rate of £73.10 from week 14 of your ESA claim plus an extra £36.55 Support Component. And that in turn will entitle you to £15.75 enhanced disability premium. So your ESA will end up at £ a week.
“And we are also going to have a go at PIP. It’s not as definite as ESA because you aren’t guaranteed to get it because of your chemo ahead, but it may well be that you qualify and that will be extra.”
“And if you do get a positive answer from PIP, do let me know as you would then qualify for an extra £62.45 in your ESA”

“Great Goblets of Fire!!” , said Ron, enthusiastically

“I’ll come back with you” said Dougal, doggedly “Money or not, they do some ace sugar lumps in this Maggie’s…”

If you have any comments or queries about any of the premiums or other issues raised in this blog please join the Conversation here.

And as ever for a purely private chat and to check your potential entitlements for means tested help, just message me. And similarly for any other benefitsissues or concerns

Next time,  I will look at the much simpler other side of the balance sheet or pan in the scales - your "assessed income and see what magic happens when we put the two together :-)

I hope then the threat of sums hasn't been too terrifying and my thanks, gentle readers,  for bearing with me :-)

Best wishes,

Tom



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