denotes premium content | Jan 6 2009 Feature
posted 1 Apr 1998 in Volume 3 Issue 3
Income
Related Benefits
In this article Alan Robinson focuses on the income related benefits
of crucial importance to the elderly client: income support, housing benefit and
council tax benefit.
The author is a solicitor and a leading expert on
welfare benefits, he is a director of Legal & Welfare Rights
Training.
There are six income related benefits: income support, housing benefit,
council tax benefit, jobseekers allowance, family credit, and disability working
allowance. The last three of these are intended primarily for those in the job
market and are unlikely to be of use to many pensioners. This article,
therefore, concentrates on the first three benefits.
Income related benefits operate in a
different way to the benefits discussed in earlier articles in this series.
Qualification for the non-means tested benefits such as retirement pension and
disability living allowance (DLA) is determined by the personal circumstances of
the claimant, and benefit is payable to the claimant as an individual; in
addition, if the claimant has dependants, additional benefit may be payable for
them. In ascertaining entitlement, the capital, income, and work status of those
dependants is irrelevant. For the income related benefits, however, these
factors may be relevant, so the whole procedure is turned on its head;
qualification is a process for the whole family, and benefit is payable to the
family rather than the individual members.
It might be thought that the main
distinction between income related and non-means tested benefits would be that
the latter do not involve a means test, but this is not always so. For example,
contributory jobseekers allowance is progressively withdrawn as the claimant is
paid for part-time work, and invalid care allowance is not payable where the
claimant earns more than £50 a week.
Families are treated as a single unit
for the purposes of income related benefits. This means that a man and a woman
who are married to each other, or who are living together as husband and wife,
are treated as a single unit, and either of them can make a claim. Their
dependent children also form part of the claim. We shall assume that there are
no dependent children in the claimant's family; if there are, further advice
should be sought. We shall also assume that the claimant is aged at least 60 -
for income related benefits both men and women become "pensioners" at the age of
60, irrespective of actual pension age.
Income Support
Income support provides
a top-up to all forms of low income, except for certain earnings. It is
calculated firstly by working out the amount of benefit to which the client and
his or her family are entitled, and then by working out their actual income.
Provided the income is less than the maximum amount of benefit (known as the
applicable amount), income support pays the difference.
The first question is whether the
client qualifies for income support. The following qualifying conditions apply.
The claimant:
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Must have no more than £8000 in capital or savings. If the claimant is married or living with someone as husband and wife, their partner's capital counts towards the £8000. Capital was considered in an earlier article in the series (ECA Volume 2 Issue 5). |
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Must be present in, and habitually resident in, Great Britain. |
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Must not be in remunerative work. This is work of more than 16 hours a week (irrespective of earnings). If the claimant's partner works, they must not work for more than 24 hours a week. |
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Must be aged (for our purposes) 60 or over (man or woman). |
The applicable amount will consist of three items: personal allowances for the family, premiums representing additional costs, and certain housing costs. Personal allowances are, for a couple, £79.00 a week, and for a single person, £50.35 a week.
Premiums are payable when the family includes one or more pensioners, or people who are sick or disabled, or children, or carers. The main premium for a pensioner is likely to be one of the pensioner premiums, of which there are three - the ordinary, the enhanced and the higher. The ordinary premium is applicable from age 60. If the client is one of a couple, then the premium applies when the elder reaches that age, irrespective of the age of the younger. The enhanced pensioner premium replaces the ordinary pensioner premium when the claimant (or the elder of a couple) reaches 75; and the higher pensioner premium takes effect when the first of them reaches 80.
However, where the claimant (or sometimes the claimant's partner) is disabled, the higher pensioner premium is applicable from age 60. Disability, for this purpose, is defined by a number of different situations. The first is where the claimant, or the claimant's partner if they have one, receives a qualifying benefit. These are attendance allowance (or the war pensions or industrial injuries equivalents), DLA, disability working allowance, mobility supplement, severe disablement allowance, incapacity benefit at the long term rate, and short-term incapacity benefit for those who are terminally ill. A man aged between 60 and 65 will continue to be entitled to incapacity benefit while being treated as a pensioner for income support purposes, but a woman's entitlement to incapacity benefit will cease at 60. In either case, provided the claimant or the claimant's partner continues to claim income support, they will in most cases be entitled to the higher pensioner premium when changing from incapacity benefit to retirement pension. The same applies to severe disablement allowance.
The higher pensioner premium is also applicable where the claimant or the claimant's partner is registered blind, or has an NHS trike or a private car allowance, or where attendance allowance or DLA is stopped because the claimant or partner goes into hospital. Finally, it is applicable where the claimant was getting a disability premium before age 60 and has been continuously on income support since.
The pensioner premium for a single person is £20.10, and for a couple £30.35. Note that it is not necessary for both partners to be 60 or over for the couple rate to apply. The enhanced pensioner premium is £22.35 (single) and £33.55 (couple), and the higher pensioner premium £27.20 (single) and £38.90 (higher).
The other important premium for disability is the severe disability premium. This is applicable where the claimant claims either attendance allowance, or the middle or higher care component of DLA, and where there is nobody living with the claimant who could provide necessary care, and where nobody is claiming invalid care allowance for looking after them. For this purpose, the claimant is treated as having nobody living with them, where the only person with whom they share a house is aged under 18, or is themselves getting attendance allowance or middle or higher rate care component of DLA, or is registered blind. The severe disability premium is £38.50.
Having assumed that our claimants have no children living with them, the only other possible premium is the carer's premium. This is payable where the claimant or the claimant's partner is getting invalid care allowance, or is treated as getting it (i.e. they are entitled to it but it is not paid because they qualify for another, higher, benefit such as retirement pension). Note that where somebody is awarded invalid care allowance (which has to be before they are 65) they are entitled to it for life, and so they will also be entitled to the carer's premium. The carer's premium is £13.65 a week where one partner is getting or entitled to invalid care allowance, and £26.70 where both are (which means they are looking after different people; ICA is not payable to more than one carer for a single disabled person).
The third component of the applicable amount is the housing costs, if any, where the claimant is an owner-occupier. These consist principally of mortgage interest, but include other payments such as ground rent. Mortgage capital repayments, or policies on an endowment mortgage, are not included. There are a number of limitations on the amount payable. The maximum loan on which benefit is paid is £100,000, and it is paid at a standard rate of interest, which may be more or less than the actual rate. For claimants under 60, there are also restrictions during the early part of the claim; these do not apply where either partner is over 60. If there is a non-dependent living in the house (for example, an adult child) there is a set deduction from the amount payable, unless the claimant or their partner is blind or receiving attendance allowance or DLA care component.
Having stated these rules, we can now look at some examples. Box 1 shows the basic calculation (without housing costs) for a pensioner couple, firstly where the elder is aged 60-74 and neither of them is disabled, and secondly where one of them is. Box 2 shows the calculation for the severe disability premium for a single person and a couple.
Any owner-occupier's housing costs are added to these figures to produce the final applicable amount.
The applicable amount is a purely notional figure which tells us how much the claimant is deemed to need to live on. The income must be deducted from this figure to tell us how much income support is payable. Normally income consists of a few predictable items - earnings, occupational pensions, benefits, maintenance, and so on. Benefits (except for attendance allowance and DLA, and housing benefit and council tax benefit) are generally taken into account, in full, as income. The exceptions are ignored entirely. Occupational pensions count in full. Earnings do not count in full; from the figure for net earnings (which consists of gross earnings less the tax and national insurance contributions actually paid, and half the contributions to an occupational pension) someone who receives the higher pensioner premium because of disability is entitled to retain £15. For others, the amount disregarded is £10 for a couple and £5 for a single person. This means that someone on income support who is working will be able to retain the first £5 (or £10, or £15) but thereafter the whole of any earnings are taken into account as income to be set against the applicable amount.
If we now take the figures in Boxes 1 and 2, and assume that the only income is, as appropriate, a (flat-rate) state retirement pension and a works pension, and attendance allowance, we can work out the level of income support (as shown in Box 3).
Housing Benefit
Housing benefit pays all or part of a person's eligible rent. For someone on income support, it is not necessary to make complex calculations of housing benefit; they are entitled to have 100% of their eligible rent met. For someone not on income support, a calculation is necessary.
Anyone who pays rent can claim benefit, even if they are not personally legally liable, provided they occupy the accommodation as their home. The capital limit for housing benefit is £16,000.
The first problem is over what constitutes eligible rent. The housing benefit scheme pays for the cost of accommodation but not for ancillary items such as food, fuel and services. Where any of these is provided and included with the rent, therefore, it must be costed and deducted. Items such as food and fuel attract fixed deductions; other items must be costed.
In addition to these calculations, the local authority can restrict the rent to a figure considered both appropriate for the premises and suitable for the tenant. Some people over 60 are in a slightly stronger position than those under 60, but pensioners are by no means immune from rent limitations. These cases are difficult and can cause considerable hardship and it is recommended that further advice be taken before attempting to deal with such a case.
The figure which remains after the deduction of the cost of ancillary items, and any rent restrictions, comprises the eligible rent. As indicated above, someone on income support will have the whole of this amount paid (with one exception - where there is a non-dependant in the house, there is a set deduction depending on the circumstances of the non-dependant).
If the claimant is not on income support, their housing benefit consists of their eligible rent calculated as above, less 65% of the amount by which their income exceeds their applicable amount. For our purposes, the applicable amount is calculated in precisely the same way as for income support (there are differences affecting some people under 60). Someone whose occupational pension, for example, takes them over the applicable amount will therefore have their benefit calculated as shown in Box 4.
Council Tax Benefit
The calculation of council tax benefit is exactly the same as for housing benefit, except that the percentage of excess income which is deducted from benefit is 20% rather than 65%. There is no need to go through the eligible rent process with council tax benefit - benefit is based on the level of council tax paid. The capital limit is £16,000.
Looking back at the example in Box Four, if we assume that the amount of weekly Council Tax is £10, and given that the excess income as shown in that calculation is £29, the amount of council tax benefit is:
£10 - (20% x £29)
= £10 - £5.80
= £4.20
Where there is a non-dependant in the house, there is a standard deduction depending on their circumstances.
Finally
This concludes this series of articles introducing the benefit system. Future articles will address aspects of the system in more detail.
Alan Robinson
