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State Benefits

State Benefits. Too important to leave to chance!. Things to consider – the context. Impact on your budgeting when will my wife’s / partner’s pension become payable? what will be payable as a non means tested benefit? Basic State Pension Additional Pension (SERPS / S2P)

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State Benefits

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  1. State Benefits Too important to leave to chance!

  2. Things to consider – the context • Impact on your budgeting • when will my wife’s / partner’s pension become payable? • what will be payable as a non means tested benefit? • Basic State Pension • Additional Pension (SERPS / S2P) • Graduated Pension if you were in that scheme before 6 April 1975 • from November 2018 State Pension Age will be 65 for all • the changes to future State Pension Age • 66 by April 2020 phased in from 2018 • then planned increases to 67 and 68 might be brought forward • cannot rule out further changes • if planning ahead what impact if any will my savings / pension have on means tested Pension Credit at 60 and 65?

  3. Proposed changes for women Proposed changes for women The proposed changes to the State Pension age timetable, announced in November 2010, affect those born between 6 April 1953 and 5 April 1960. These proposed changes to the timetable are not yet law and still require the approval of Parliament.

  4. Proposed changes for women Proposed changes for men and women The proposed changes to the State Pension age timetable, announced in November 2010, affect those born between 6 April 1953 and 5 April 1960. These proposed changes to the timetable are not yet law and still require the approval of Parliament.

  5. Things to consider – the context • Impact on your budgeting • how much will be paid and when will it increase? • level of inflation protection (current and from a future date) • impact on my occupational pension benefits if they are subject to some adjustment for State benefits (State levelling or ‘claw back’) • can build up more State pension after you leave (S2P) until State Pension date? • Earning above the Lower Earnings Limit • Carer credits • Enhanced benefits for lower earners • if continue working, set up a business or become self-employed would it pay to defer State Retirement Pensions?

  6. Contributory and Non-contributory benefits

  7. Contributory benefits • State Basic Retirement Pension • Additional State Retirement Pension (SERPS, S2P, Graduated Pension) • Job Seeker’s Allowance • Employment & Support Allowance • Maternity Allowance • Bereavement benefits

  8. Non- contributory benefits • Child Benefit and Guardian’s Allowance • Job Seeker’s Allowance ‘income based’ • Industrial Injuries Benefit • Employment & Support Allowance ‘income based’ • Working Tax Credit & Child Tax Credit • Disability Living Allowance & Severe Disablement Allowance • Pension Credit • Attendance Allowance

  9. Out of work Job Seeker’s Allowance

  10. Job Seeker’s allowance (JSA) • Replaced unemployment benefit and income support for the unemployed • Two types • Contribution based • Income based • Payment authorised and paid by Jobcentre Plus • Jobseeker’s agreement • Fortnightly visits to Jobcentre Plus – activity review • Jobcentre Plus has power to stop JSA

  11. Job Seeker’s Allowance (JSA) • Payment • £ 65.45 / week (contribution based) • Paid for 6 months ( max.... 182 days) • NI credits awarded - even if JSA not payable • Occupational pension of £50 / week or more will affect amount payable, irrespective of age. May mean no JSA payable

  12. Too ill to work? Employment & Support Allowance

  13. Employment & Support Allowance • Introduced on 27th October 2008 • Replaced Incapacity Benefit for new claimants with a focus on a can do attitude not what someone cannot do • Expected to be a temporary benefit for the vast majority of individuals • Anyone already receiving Incapacity Benefit will be transferred to ESA between 2009 and 2013 after a medical assessment (Work Capability Assessment) • October 2010 Public Spending Review included announcement that the Work Related Group element of the benefit will not be paid for more than 1 year

  14. Employment & Support Allowance • Two phases:- • Assessment Phase of 13 weeks while decision made on capacity for work • Main Phase from 14 weeks when an individual will be placed into one of two categories • Work Related Group • Support Group • Some individuals will no longer be able to claim E&SA after that assessment and will transfer to the Job Seeker’s Allowance, Income Support or Pension Credit regime • Two types of E&SA • Contribution based Single person benefit (amount) • Income related Rates for couples

  15. Employment & Support Allowance If qualify for Enhanced Disability Premium or Severe Disability Premium £5.45 a week Extra support for those in Support Group £25.95 a week Work Related Activity Component £65.45 a week (single, all ages) £102.75 a week (couple all ages) Couple rate income tested only £65.45 a week (single, over 25) £102.75 a week (couple, over 25) Couple rate income tested only Basic Rate Assessment Phase Main Phase

  16. Employment & Support Allowance • Assessment Phase basic rate payment of up to:- • £65.45 a week for a single person aged over 25 or • £51.85 a week for a single person aged under 25

  17. Employment & Support Allowance • Main Phase categories • Work Related Activity Group – where an individual will be expected to engage in a personalised programme of back-to-work support – the stick element in the ‘carrot and stick approach’ • Support Group – able to voluntarily participate on the programme and will receive a guarantee of a higher basic rate than anyone currently on Incapacity Benefit – the carrot element in the ‘carrot and stick approach’

  18. Employment & Support Allowance • More detail • In most cases no payment for first 3 days of claim (waiting days) • Payment fortnightly in arrears • May qualify for additional Income-related E&SA • Can only receive extra money for spouse or Civil Partner if entitled to Income-related E&SA • Contribution based E&SA is ‘pension tested’ • Lose 50p week of E&SA for every £1 a week pension above £85 a week

  19. Employment & Support Allowance • More detail • Premium Benefits payable in addition • Enhanced disability • Severe disability • Pensioner • Income Tax not deducted from Income-related E&SA • Income Tax may be taken from Contribution based E&SA from week 14

  20. Employment & Support Allowance • Permitted work rules, you can work • For less than 16 hours a week on average with earnings up to £93 a week for 52 weeks • For less than 16 hours a week on average with earnings up to £93 a week if you are in the Support Group of the Main Phase of E&SA • And earn up to £20 a week at any time for as long as you are receiving E&SA • In ‘Supported Permitted Work’ and earn up to £93 a week as long as receiving E&SA provided you continue to satisfy the Supported Work criteria

  21. Income that can be taken from State Pension Age The various types of State Retirement Income

  22. Possible sources of State retirement income • Basic State pension • Graduated pension • State Second Pension (previously SERPS) • Pension Credit means tested

  23. Which camp do you fall into? Reached State Pension Age before 6 April 2010? Reach State Pension Age on or after 6 April 2010?

  24. Which camp do you fall into? More service needed to achieve maximum Basic State Pension Minimum BSP payable - 25% of full rate HRP counts till child 16 Easier to earn full Basic State Pension (30 year rule)Even modest level of BSP payable HRP counts till child 12 HRP – Home Responsibility Protection credit

  25. Pre April 2010 Minimum Qualifying Years target to achieve full Basic State Pension Men 44 years and also women with State Pension Age of 65 Women 39 years with State Pension Age of 60 In between 39 and 44 for women born between April 1950 and April 1955 From April 2010 Minimum Qualifying Years target to achieve full Basic State Pension 30 years for everyone Basic State Retirement Benefit changes 6 April 2010

  26. Pre 6 April 2010 Minimum Basic State Pension payable 25% of maximum rate Autocredits between 60 and 65 Home Responsibilities Protection credits Until youngest child is 16 Reduce the Qualifying Years target Adult Dependant Increase (ADI) pension available From 6 April 2010 Minimum Basic State Pension payable Any amount payable Autocredits being phased out Home Responsibilities Protection credits Until youngest child is 12 Treated as Qualifying Years including weeks ADI phased out from April 2010 for existing claimants Basic State Retirement Benefit changes 6 April 2010

  27. Pre 6 April 2010 Winter Fuel Allowance Payable Winter after reaching age 60 provided qualified in previous September Pension Increases until change in April 2011 Based on RPIAnnual change as reflected in September RPI index From 6 April 2010 Winter Fuel Allowance Will rise incrementally to 65 between 2010 and 2020 Pension increases from April 2011 From 2011 restored link to National Average Earnings for all in receipt of State Basic Pension as part of a triple lock mechanism for increases Basic State Retirement Benefit changes after 6 April 2010

  28. State Pension Increases • Recently State Retirement Pensions were uprated in line with changes in the RPI • For April 2010 New Labour Government only increased the Basic State Pension by 2.5% leaving frozen the Graduated and State Second Pensions • From April 2011 the Coalition Government has proposed to increase the Basic State Pension by the greater of:- • 2.5% • Increase in National Average Earnings • Inflation • For April 2011 the RPI will be used • Thereafter the CPI will be used • From April 2011 the Graduated and State Second Pensions will be uprated only by the CPI index

  29. Possible sources of State retirement income • Basic State pension • Graduated pension • State Second Pension (previously SERPS) • Pension Credit means tested

  30. State Basic Retirement Pension • Dependent upon • Qualifying Years from age 16 to State Pension Age bought by an adequate NI record • Married Woman or Widow paying Reduced Rate NI does not buy Qualifying Years • Credits awarded in given circumstances • Typical examples being ‘Education’, Home Responsibilities Protection, Unemployment or in receipt of Ill-health benefits

  31. NI Credits • Education credits for tax years when 16 / 17 / 18 • If on an approved training course • While in receipt of certain benefits • Carer’s Allowance • Job Seeker’s Allowance • Incapacity Benefit • Statutory Adoption Pay, Statutory Maternity Pay, Maternity Allowance or Working Tax Credit • While on Jury Service or for aperiod of wrongful imprisonment

  32. Carer’s credit • This new credit not a benefit is available from 6 April 2010 for Basic State Pension and State Second Pension purposes • It also protects Bereavement Benefits for spouses and civil partners • Applies where a carer does so for at least 20 hours a week and • the person cared for receives middle or upper care component of Disability Living Allowance, any level of Attendance Allowance or Constant Attendance Allowance • the person(s) have been certified by a health or social care professional as needing the level of care being provided

  33. Carer’s credit • Given automatically • if carer is on Income Support because they are substantially engaged in caring • To someone with entitlement to Carer’s Allowance for certain weeks when they cannot receive Carer’s Allowance credits • Otherwise must be claimed using form CC1 contained in the Carer’s Credit application pack

  34. State Basic and Graduated Pension- rates (maxima) • Basic (own right) - £ 97.65 / week • Married woman, man* or civil partner**(on spouse’s / partner’s record) - £58.50 / week • Graduated pension - depends upon number of units ‘earned’. Unit value 11.53p each week * From May 2010 ** From April 2015 provided spouse or civil partner was born on / after 6 April 1950.

  35. Married women Reduced Rate Election – 2010-11 • No longer available to newly married women • Need to hold a Certificate of Election to pay reduced rate Class 1 NI or pay no Class 3 Self-Employed NI • Class 1 Reduced Rate NI • 4.85% compared to 11% rate if earns more than £110 a week and up to £844 a week • On earnings above £844 a week pay 1% • While Election in force creates gaps in NI record for contributory benefits including State Basic Retirement Pension and bereavement benefits

  36. Married women Reduced Rate Election • Changes in status • If widowed do not automatically lose the right and may be able to retain that right for a certain period after the husband’s death • ‘Election’ ends if • Divorced or if marriage annulled • If for 2 consecutive tax years • have no earnings on which Class 1 NI is payable or ‘treated as paid’ • have not been self-employed NI Enquiries Helpline Tel: 0845 302 1497

  37. Options ( before State Pension Age) to make up a shortfall • Further employment / self employment • Unemployment ( Job Seeker’s Allowance) • Illness (Employment & Support Allowance / Incapacity Benefit) • Caring role • Voluntary Class 3 NI contribution - £12.05 a week (2010-11)

  38. Voluntary NI contributionsClass 3 • Normally within a ‘window’ of 6 years of the end of the ‘deficient’ tax year • If payment made more than 2 years after the end of the relevant tax year the amount payable is increased • Special dispensation for tax years • 1996-97 to 2001-02 • 1993-94 to 2007-08 with incorrect credit awards if unemployed, sick or on an approved training course • Additional ‘6 year window’ for Class 3

  39. Deadline dates for Class 3 NI

  40. Special dispensation for Class 2 or Class 3 NI • Tax year 2005-06 • Can pay Class 2 or Class 3 NI for this tax year at the original rate of £7.35 a week provided • Reach State Pension Age on / or after 6 April 2010 • Make the payment(s) before 5 April 2012

  41. Special dispensation for Class 2 or Class 3 NI • Tax year 2006-07 • Can pay Class 2 or Class 3 NI for this tax year at the original rate of £7.55 a week provided • Reach State Pension Age on / after 6 April 2010 • Entitled to Home Responsibilities Protection • Make the payment(s) by 5 April 2013

  42. Special dispensation for Class 2 or Class 3 NI • Tax years 1993-94 to 2007-08 • Can pay Class 2 or Class 3 NI for these tax years at the original rates provided • Wrongly awarded NI credits when unemployed, sick or on an approved training course • Make the payment(s) by 5 April 2014

  43. Home Responsibilities Protection credits • Potentially available only from 6 April 1978 for complete tax years up to 5 April 2010 and from 6 April 2010 can be awarded for weeks • Protects record for:- • main child benefit payees ( child under 12*) • those looking after someone receiving specified benefits ( 35 + hours) • those receiving income support while looking after a sick /disabled person at home

  44. Home Responsibilities Protection • Cannot reduce qualifying years for full Basic State pension below 20*‘old terms’ • Cannot be given for years covered by reduced rate NI contribution election • From April 2002 ‘carers’ and people receiving child benefit for a child under 6 can build up State Second Pension too

  45. Home Responsibilities Protection • State Second Pension • Until 5 April 2010 • If you receive Child Benefit for a child under 6 you automatically build up an entitlement to State Second Pension • If you receive Child Benefit for a child aged 6 or over with a long-term illness or disability you can build up an entitlement to State Second Pension but must claim using form CF411 • From 6 April 2010 • If you receive Child Benefit for a child under 12 you automatically build up an entitlement to State Second Pension

  46. Divorced people • Can use ex-spouse’s contribution record if it produces a higher Basic State pension • Cannot use if re-marriage occurs before State Pension Age

  47. Widows / widowers / civil partners • Entitlement to pension protected in a similar way to that of divorced people

  48. State Graduated Pension • Graduated pension - depends upon number of units ‘earned’. Unit value 11.53p each week 2010-11

  49. State Pensions - rates (maxima) ‘earnings related’ • State Earnings Related Pension - 25% of revalued Upper Band Earnings before 2000 then falling away to 20% • April 2002 State Second Pension replaced SERPS • From 6 April 2009 Upper Earnings Limit applies to NI calculation and a lower ceiling set (Upper Accruals Point) for calculation of State Second Pension - a ‘stealth tax’ of 11% for those earning between £770 and £844 a week in 2009-10 • Pensions Act 2007 changes coming into effect in tax year 2010-11 will see further reduction in accrual rateSubject to any deductions for periods of ‘contracted-out’ employment

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