A look at the how the sums work for the main means tested benefits. We start here by looking at the bits that add up to make your Applicable amount , which will be the highest amount that you might be able to get . Added "premiums" can mean that entitlement can go higher up the income scale than you might have been thinking.
Often people ask 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. However, many key benefits are not affected by your income and savings at all. Other folk 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; 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 nor 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 of this exercise 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 - and then at the ones for specific costs such as housing and health
The good news is that it is basically the same sum for all of these benefits. And that means:
- 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
- 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 , as reports of the end of these benefits was - like the death of Mark Twain- “somewhat exaggerated". Originally, these were all - with the exception of Council Tax Support and Pension Credit - due to merge into the new Universal Credit (UC) by October 2017. However, the current target is to complete the switch to UC by December 2023.
1.1. The transition to "Full Service" Universal Credit
Over the course of 2018, the “full service” version of Universal Credit rolled out rolling area by area, with all areas having transitioned by December 2018. The switch meant Universal Credit became available to almost all potential comers and at the same time the older “legacy benefits”.
But this is far from the end of the former means tested benefits as:
- Some will continue to claim them: Anyone with more than 2 children cannot claim UC until 1.02.2019 and anyone receiving a “severe disability premium” within their legacy benefits will not be able to claim UC until invited to switch over mainly in the period November 2020 to December 2023.
- Those already receiving “legacy benefits" can continue to receive them until they switch over either by a similar invitation or because of a change of circumstances that would have required a new claim under the old “legacy system”
So at the completion of the roll out of Full Service UC to all areas, the balance stands at 1 million people getting Universal Credit to 6.5 million getting the “legacy benefits” ; with some time to go before the balance changes and eventually the “legacy benefits” are due to disappear.
1.2 Think carefully before claiming Universal Credit
During this long period of transition between “legacy benefits” and Universal Credit, you are free to claim Universal Credit instead of your legacy benefits whenever you want to – apart from if you come into those exceptions above.
You may also be incorrectly told that a change in circumstances means that you know have to claim Universal Credit when this is not the case. There is a lot of wrong information about this within the official agencies such as JobCentre Plus, HMRC and local HB teams in local councils, based on wrong messages from DWP.
Do get advice then before switching to UC whether this be of your own free will or because you have been told. While it may be that you do have no choice, often you do and you may want to work out where you stand in the different sums for “legacy benefits” v. UC and how UC works differently , to decide whether to switch and if so how make that process as smooth as possible.
2. What about the 65 and a bit 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 December 2023. 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 65 and rising, you may want to go to the Pension credit sums blog – see in the links below - 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, whether the older partner claims PC or the younger one claims a “legacy benefit” or UC. so you might want to read on 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, these benefits - and the tax credits and Universal Credit that are a sufficiently different different to really need their own blogs on another day - all work on the same basic principle of:
- 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.
- adding up your other income - with some important exceptions - to get to your “assessed income”
- and then taking one from t’other , to arrive at the amount of benefit due.
For example: 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 that £130 by means of adding another £30 a week.
And if his carer, Hermione, who lives in her own place, had an Income Support amount of £115 and an income of just £65 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:
For example: 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:
For example: 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 , as:
- 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.
For example: 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.
For example: 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 or tax credits). 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, the 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 £4,000 / £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:
- A personal allowance per adult in the benefit unit - usually a single or couple rate
- Housing Costs – formerly help with mortgage interest paid to a lender which is now a separate scheme and a few other remaining housing costs not covered by Housing Benefit
- Premiums and Components - 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 those remaining costs that apply , so again are fixed.
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 £64.30 may indeed increase your benefit by that amount. But in other cases, it might be that the premium makes the difference between having income £20 over your applicable amount and so not getting that benefit at all and being £64.30 -£20= £44.30 under and getting that amount in the benefit, as well as the other advantages of being entitled to even just 10p.
6. Premiums with an element of one or the other
6.1 ESA components
While not technically a premium, these do the same thing for those claiming Income-related ESA as the Disability Premium that they replaced in the previous Income Support (for sickness) that ESA replaced . 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 - £37.65 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.
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 get advice.
6.2 Enhanced Disability Premium
There are two routes to this extra amount of £16.40 single or £23.55 for a couple claim:
- 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.
- In addition tfor thioose claiming Income-related ESA only - you also qualify if you are in the ESA Support Group,
This is a handy extra and is a common reason why people on the non-means tested Contributory ESA - but without much other 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 :
- the claimant or their partner receives any rate of DLA or PIP
- the claimant only has been ill for 52 weeks or more, but mostly such claimants would be on ESA
For singles the rate is £33.55 . 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 £47.80.
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 you 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 premium kicks in. But do keep in mind that switching may at some point lead you 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 e.g. 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 this premium, worth £89.90 a week, was there for men in that awkward age – once between 60 and 65 - when they could either continue to claim “working age” benefits until they took Retirement Pension at 65 or switch (in means tested benefits at least) over to Pension Credit. The premium filled the growing gap between the frozen single rate of £73.10 and the still inflation protected Pension Credit amount of £163.00.
However, with the Retirement Pension age rising, this gap has been getting smaller and in November 2018 disappears as the common equalised Retirement Pension of 65 is reached and now starts rising towards 66.
The couple rate - of £133.95 in 2018/19 - remains important as under legacy benefits there is a choice for “mixed age” couples – as to whether the younger partner maled the jpont claim for one of the working age benefits or the older partner leads on a joint Pension Credit claim. Again the premium fills that huge and growing difference. If you really want to stick with working age benefits then you could do so without any great losses in the basic sums.
But now is the time to change your minds !! UC will :
- firstly remove the choice for new claims at some point in the future; instead the younger partner will have to lead on a joint UC claim until they too “come of age” .
- And secondly UC has no equivalent of the “pensioner premium" which will mean a potential loss of £133.95 a week for all such couples.
Again more in the UC blogs, but for now “mixed age” couples would do well to look at claiming Pension Credit while they still can.
Example: 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 up to the more generous PC couple amount of £248.80. But Mrs McG might well consider a spell to manage the finances if they swap to Pension Credit while they still can
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 £36.00 a week - 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. If you stop and think about it many people can be both at the same time:
- 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 longue looking pale and interesting is the limit. But at other times you will still make valuable contributions to family, community, work etc.
- being a carer for benefit purposes is not the often hard physical work of a full time carer employed by Social Services. 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 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, in which case you are good to claim; sometimes it may be better not to. Get advice and/or see the blogs on carers benefits for more on this “carer’s conundrum”
7.2 Severe Disability Premium
It’s a bit complicated and intentionally so as extra restrictions - criticised for added complications and lack of relevance to disability - were put in when the then Government were reluctantly forced to continue with an additional premium for the more unwell/disabled.
But by all means pop the kettle on and return to this with your favourite dunkables … That said, 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 and two Carers premiums /additions at the same time:
For example: Some time later, Mrs McGonagle pops into Maggie’s Hogwarts and the Benefits 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 any Carers Allowance to her. However, she would still be entitled to the carers premium if she claimed that CA. In this situation, then, the severe disability amount for DP for “Dear Albus…” is protected .
And because he in turn is on Retirement Pension, Dumbledore can do the same and claim a Carers Allowance that is also blocked - this time by the pension RP - and receive a carers addition without harming the SDP for “Mrs McG” as he fondly risks calling her.
So as well as 2x £64.30, a couple can also have 2x £36.00. 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 that very 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, 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 excessively so if you take it one step at a time. rocket science and is available
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.
- It's hard enough to 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 then Advisors can begin 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 are limited and cover a bill that has to be paid anyway , it’s Premiums – aka additions that can make the difference between “living and merely existing”.
I will finish off with an example of how they can build up :
“£57.90? 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 £37.65 Support Component. And that in turn will entitle you to £16.40 enhanced disability premium. So, your ESA will end up at £127.15 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 that lies ahead 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 might then qualify for an extra £64.30 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 post in the forums.
For a more individual, private and specific check to ensure you are getting all the amounts you should in any existing claims for the benefits in this blog, whether you might be in an exception that can claim or switch between them or about claiming Universal credit as the new alternative, please speak to a Benefits Advisor at your nearest Maggie’s Centre.
In the final part of this series, I will look at the other – much simpler side of the sum – your assessed income” – with some important parts of your actual income ignored. And then we will see what magic happens when we finally put them together.