Welfare Reform & Pensions Act 1999

- changes coming into force - 6 April 2001

Severe disablement allowance

  • abolished, for new claimants - ie no new claims from that date.
  • in future young people aged 16-19, without NI, who are incapable of work long-term and pass the other relevant tests will be able to claim incapacity benefit without contributions - see below
  • existing SDA claimants at 6 April 2001 will go onto IB long term rate (after 1 year – ie 2002)

Who loses?

16,000 pa - mostly (10,000) married and cohabiting women who will be denied any alternative, especially income support, because their partners work full-time. Also many long-term disabled people who previously got SDA or IB, but who break their link – eg through trying out work or study. Hansard16.11.98. col 397w

What you can do?

Maximise take up of SDA now. Particularly for –

  • married women
  • people with broken NI records
  • young disabled people already aged 20 or over

Note: must have been both incapable and disabled for 196 days by/ before last date (5 April 2001).

NI contribution rules for incapacity benefit

These drastically change, so that claimants must have actually worked and paid a minimum amount of NI in the3 tax yearsprior to their IB claim. Previously you could meet the paid rule for any tax year (ie via any past work).

The previous rules were –

Rule 1worked and paid Class 1 or Class 11 NI Contributions in any tax/ on at least 25 times Lower Earnings Limit contribution year

and

Rule 2have paid and/ or credited Class I or Class 11 on 50 times the Lower Earnings Limit in each of the two tax / contribution years, before the benefit year in which you are claiming.

New Rule 1 have worked and paid Class 1 or Class 11 NI Contributions on

(from 6 April 2001)25 times Lower Earnings Limit in one of the 3 complete tax / contribution years prior to the benefit year of claim

For example -

If claiming in 2001…must have worked and paid enough NI over tax year 1999/ 2000; or 1998/99; or 1997/98

If claiming in 2002…must have worked and paid enough NI over tax year 2000/1; or 1999/2000; or 1998/99

Exceptions to new Rule 1 (ie any tax year used) –
  • people already on IB;
  • people already on SDA (on 6 April 2001) – will transfer onto the long term rate of IB on 6 April 2002
  • people reclaiming IB after a permitted link period (8, or 52 weeks, or 2 yrs);
  • people getting DWA or DPTC and working for 2 years + immediately before illness;
  • people getting invalid care allowance in the tax year before the benefit year of their IB claim;
  • people on IB over whole tax year before the benefit year of claim
Also exception to allow IB to people incapacitated by 20, if –
  • aged 16 – 19 inclusive, and
  • incapable of work x 196 days (before 20), and
  • resident in Britain, and
  • not subject to immigration control, and
  • have been present in Britain for 26 weeks for the 52 weeks prior to claim, and
  • not in ‘full- time relevant’ education if aged 16,17,18, (21 hours pw)

Such claimants, “incapacitated in youth”, will start on the short-term lower rate of IB and progress onto the long-term rate after 52 weeks incapacity. Note the difference this will make to IS and other means-tested benefits.

Further exception to allow entitlement to young disabled people aged 20 to 25 –

  • who have been on a course of full time secondary education, or advanced education; or vocational or work-based training;
  • which began at least 3 months before 20th birthday; and
  • ended on the later of -
  • the day before this claim for incapacity benefit, or
  • within the last 2 complete tax years before the benefit year of claim

Further rule to allow re-entitlement to people now over 20 (or 25 if applicable), who were previously entitled to IB through the under 20/25 route -

  • if never found fit for work/ failed PCA; and
  • left IB to work or train, and
  • since last getting IB/ when in work earned less than the lower earnings limit

In addition exception allows re-entitlement for young people who break a claim by going abroad –

  • they can become re-entitled after serving another 196 day waiting period, but must reclaim the IB within 197 days of returning to Britain (presume these can be concurrent).

Who loses?

  • people with lengthy periods of unemployment before claiming IB, or who fall ill during a period of unemployment;
  • people claiming JSA / signing on although incapable of work and not advised adequately about entitlement to IB.
  • those with a chequered work and/ or NI history
  • those on low earnings

Occupational & private pension offset from IB – for new claims from 6 April 2001

New incapacity benefit claimants from 6 April 2001 can find their weekly IB reduced if they have an occupational pension over £85pw. The reduction is 50p per £1 for any amount over £85. So if the occupational pension is £90pw you would lose £2.50pw; if £95 the loss would be £5pw and so on.

Here occupational pension means periodic payments under –
  • a personal pension scheme; or
  • an occupational pension scheme at the end of employment; or
  • a public service pension scheme; or
  • permanent health insurance if arranged by the employer to provide payments in relation to illness or disability on termination of employment
Occupational pension does not include –
  • health insurance arranged by yourself - ie not your employer as above;
  • those arranged by employer, but the employee pays 51% or more;
  • a pension payment paid to/ inherited by a survivor on the death of the pension scheme member;
  • any shortfall in expected payment because of a deficit in a pension scheme

NB - People already on IB by 5 April 2001 and those protected through linked claims are not affected.

Who loses?

  • “middle- earners”, who have been lucky enough to work somewhere with an occupational pension scheme, but who are not wealthy enough to do without their IB. Most likely not entitled to IS either and possibly older so unlikely to be re-employed.

Berni Graham

lasa advice and training team

march 2001