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What financial advisers need to know about Universal Credit

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Deven Ghelani, Director and founder of Policy in Practice, joined Justin Harper, Head of Protection Marketing & External Affairs, LV, to deliver this talk for iPipeline titled What financial advisers need to know about Universal Credit.

Deven gave an introduction to Universal Credit and the welfare system, and discussed complex cases and caveats. Justin then talked about the welfare system and financial services. Finally, Deven ended by talking about practical software tools that can help financial advisors.

For more information visit www.policyinpractice.co.uk, email hello@policyinpractice.co.uk or call 0330 088 9242.

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What financial advisers need to know about Universal Credit

  1. 1. Agenda www.policyinpractice.co.uk ● Introductions and objectives ● An introduction to Universal Credit and the welfare system ● Complex cases and caveats ● Welfare system and financial services ● Practical tools that can help financial advisors ● Questions and answers
  2. 2. Chantel McGill, My Story www.policyinpractice.co.uk I am the Senior Trainer at iPipeline UK and have worked here for the past 11 years; when my relationship broke down with my children’s father 4 years ago, I had to seek financial assistance from the benefit system as a single parent of 2 children under 5 years old at that time. I have had to claim Tax Credits previously and had to go through their appeals process to claim and also had to use the tribunal process to appeal a Housing Benefit decision. I moved over to Universal Credit in February 2019 and although I have had to deal with mandatory reconsiderations as part of my claim the whole process with Universal Credit has been much smoother than the previous benefit systems.
  3. 3. Square headshot goes here Square headshot goes here Square headshot goes here www.policyinpractice.co.uk Today’s speakers Chantel McGill Trainer iPipeline Deven Ghelani Director and Founder Policy in Practice Justin Harper Head of Protection Marketing & External Affairs LV
  4. 4. Deven Ghelani Policy in Practice What financial advisers need to know about Universal Credit
  5. 5. www.policyinpractice.co.uk I became interested in social security and benefits after being made unemployed in 2008. I saw how the welfare system works in this country. It’s complicated, confusing and changing all the time, with complex interactions with other part of the system. I was part of the team that developed Universal Credit, and left the policy world because, while you need legislation to change people’s lives, how you communicate it that matters to people. Deven Ghelani, my story
  6. 6. analytics policy software www.policyinpractice.co.uk Give the best support you can to help people on their way
  7. 7. www.policyinpractice.co.uk Some clients we work with
  8. 8. www.policyinpractice.co.uk Poll: How would you rate your knowledge of the welfare system now?
  9. 9. www.policyinpractice.co.uk We all need the welfare system At any one time over half of all families receive income from at least one benefit in the welfare system, including child benefit when young, and the state pension when retired. Our lives are ever changing. Disability sickness, separation and unemployment can affect any of us, and we need a strong safety net when it does.
  10. 10. www.policyinpractice.co.uk A climate of change and uncertainty In the 6 weeks to 12 April 2020 DWP received over 1.8 million declarations to Universal Credit. This is almost 5 times higher than declarations received from people in the same period last year. Claims rose to 2.7 million by July. By August 9.6 million people were on furlough 2.6 million people claimed SEIS, worth £7.5bn Since April 750,000 people have lost their job (OBR) This is likely to rise to 960,000 people by October (10% of furloughed people)
  11. 11. www.policyinpractice.co.uk Support and help is available 1. Job Support Scheme (Replacement of furlough / CJRS) 2. Self employment scheme 3. Social security system
  12. 12. www.policyinpractice.co.ukwww.policyinpractice.co.uk/coronavirus
  13. 13. www.policyinpractice.co.uk 1. Job support scheme Announced 24 September. Starts 1 November 2020 for 6 months ● Employers can claim from December 2020 and paid on a monthly basis. ● Employee must be on PAYE payroll on or before 23 September 2020. ● Employee must work at least 33% of their usual hours but not same hours each month ● For every hour not worked by the employee, the Government and employer will pay a third each of usual hourly wage. Government contribution capped at £697.92 a month. ● Employees earn a minimum of 77% of their normal wages (except where the Government contribution has been capped)
  14. 14. www.policyinpractice.co.uk 2. Self-employed Income Support scheme ● Similar scheme for self-employed - Government paying 20% of monthly profits as a grant. This used to pay 80% of monthly profits, with self-employed trading profits < £50,000 in 2018/19 and self-employment is > 50% of taxable income, often excluding those that too payment as dividends.
  15. 15. www.policyinpractice.co.uk The likely impact There are some concerns: ● Employers contribution is higher - how will employers react? Will they just retain fewer full time workers? ● How is viability determined? ● Those on PAYE after 23 September cannot be supported ● Self-employed see a significant reduction in support ● Will suspension of MIF continue alongside these measures? ● The number requiring support through benefits is likely to increase 960,000 additional people unemployed by November (10% of furloughed people)
  16. 16. www.policyinpractice.co.uk 3. Social Security System ● Jobseekers Allowance (JSA) ● Employment and Support Allowance (ESA) ● Income Support (IS) ● Housing Benefit ● Child Tax Credit ● Working Tax Credit and Childcare Tax Credit Legacy system ● Universal Credit Universal Credit ● Contributory JSA / ESA ● New style JSA / ESA ● Council Tax Reduction ● Free School Meals ● Social Tariffs ● Council Tax Reduction ● Free School Meals ● Social Tariffs
  17. 17. www.policyinpractice.co.uk From April basic allowance in Universal Credit and Tax Credits increased by £20/week ● To help private renters the cap on rental costs, the Local Housing Allowance (the LHA), was increased to align with the 30th percentile of local rents ● To support the self-employed, Universal Credit awards are based on actual income rather than a notional income (the Minimum Income Floor) ● Tax Credit hours and self-employed rules are suspended until end Oct 2020 Means tested benefit changes
  18. 18. www.policyinpractice.co.uk How the schemes differ
  19. 19. www.policyinpractice.co.uk About Universal Credit ● What can you claim? (slide 17) ● How do you claim? (-->) ● Who can claim? ● How much do you get and when? ● What if you get tax credits? ● What if you can’t claim Universal Credit? www.gov.uk/how-to-claim-universal-credit
  20. 20. www.policyinpractice.co.uk How much you might receive
  21. 21. www.policyinpractice.co.uk Groups who need personal advice ● People with savings or assets above £16,000 ● People with a partner in work ● People in receipt of tax credits or legacy ESA ● Households where someone is self-employed ● Non-UK nationals, NRPF
  22. 22. www.policyinpractice.co.uk Over to Justin for: ● The financial sector and its interaction with the benefits system ● How to better understand financial resilience eg income protection and mortgages
  23. 23. The State we’re in Welfare system and private provision “State benefits don’t, and won’t, matter to my clients”
  24. 24. Universal Credit Reaches further than you might think
  25. 25. Universal Credit And interaction with protection insurance UC was designed for those out of work (and on benefits) and those on low incomes to encourage them into work (and off benefits) But… what about those who fall out of work? Returning to work and group protection ● Considered earned income and subject to the taper (reduced by 63p for every £1 earned) Private Protection provision ● Capital benefits used to pay off debt/reasonable expenditure disregarded ● Individual IP (IIP) benefits considered to be unearned income*… ● which means any IIP benefits a person receives when making an IIP claim will reduce their UC entitlement £1 for £1 * Under the legacy system treatment of IP same for income replacement benefits, but taper for housing benefit and child tax credits disregarded
  26. 26. Breaking news … from July 2018 Remember this? DWP statement linked to changes to Support for Mortgage Interest Loans Two provisos: ● Paid direct to the lender ● Policy payout is taken into account if applying for a Support for Mortgage Interest Loan A positive step. Yet … ● People who choose to protect their mortgage payments with an appropriate insurance policy can do so without fear that their payouts will lead to their benefits being cut. Or can they? ● How should advisers alert to the impact of state benefit changes, when advising on appropriate protection? ● Is it right to design new products specifically to cover mortgages and state benefit interaction? ● What about existing IIP policyholders/clients? ‘… any income received from an insurance policy which is specifically intended and used to cover mortgage payments will be totally disregarded when entitlement to means-tested benefits is assessed. This applied to both legacy benefits and UC.’
  27. 27. A reality check Peace of mind principle – what are we providing with protection?
  28. 28. Disclose, determine and document Peace of mind principle – what are we providing with protection? “State benefits might matter to my clients” 1. Get up to speed on Universal Credit 2. Determine the peace of mind principle 3. Signal that Income protection and critical illness cover is intended to repay the mortgage 4. Document … or die And ● Consider a market leading IP provider and their solution …
  29. 29. www.policyinpractice.co.uk Software that can help: a demo of Percy the Protection Calculator
  30. 30. www.policyinpractice.co.uk Take a look at your situation
  31. 31. www.policyinpractice.co.uk Look out for other support
  32. 32. www.policyinpractice.co.uk Practical steps you can take For you: 1. Request our Introduction Benefits e-book 2. Add our free Covid-19 support page to your website 3. Ask for a demo of the Benefit and Budgeting Calculator (Percy the Protection Calculator) For your customers: 1. Signpost your customers to the free calculator 2. Signpost your customers to our free Covid-19 support page www.policyinpractice.co.uk/coronavirus
  33. 33. Thank you www.policyinpractice.co.uk Deven Ghelani Policy in Practice deven@policyinpractice.co.uk Justin Harper LV justin.harper@lv.com hello@policyinpractice.co.uk 0330 088 9242

Deven Ghelani, Director and founder of Policy in Practice, joined Justin Harper, Head of Protection Marketing & External Affairs, LV, to deliver this talk for iPipeline titled What financial advisers need to know about Universal Credit. Deven gave an introduction to Universal Credit and the welfare system, and discussed complex cases and caveats. Justin then talked about the welfare system and financial services. Finally, Deven ended by talking about practical software tools that can help financial advisors. For more information visit www.policyinpractice.co.uk, email hello@policyinpractice.co.uk or call 0330 088 9242.

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