This is a bit of a stretch, but if anyone can help it would be appreciated.
I recall in the early 1990s, probably about 92, to 94, there was a question raised in parliament about whether mortgage insurance policies would negate a claimants ability to claim certain benefits.
The answer was yes, unemployment benefit could not be claimed as the insurance payouts would be classed as income.
Does anyone have a link to official docs or newspaper articles please?
I have tried but cannot find anything.
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I don't think you're correct.
As I very dimly recall the statement was something like the fact that unemployment benefit *could* be claimed but that there were other benefits which could not be.
Wasn't there some kind of supplementary benefit also payable at that time? And I think it was that which would not be paid.
It's all very vague because it never applied to me and I'm just remembering something I read 30 years ago.
I might have done a better job of remembering if I hadn't been traumatised with some truly terrible jokes.
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There was an article on the Money pages in the DT last week.
A 50 year old man on a low wage was given money every month by his elderly mother. He lost his job and claimed benefits - the benefits were reduced because of the £250/ month his mother gave him every month.
The mother was still keen to help her son - instead of giving him £250 she was told to buy him presents - a few bags of groceries every month, pay money into his CC to reduce his debts, give him "generous" birthday / Xmas presents of items he would normally buy.
She could not give him money directly but paying money to his CC debt - what is the difference? There is in the yes of the DWP.
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>>
>> She could not give him money directly but paying money to his CC debt -
>> what is the difference? There is in the yes of the DWP.
Income is income. Sorry if that's a bit profound so early in the day!
Don't worry, Falkirk, if you give me £250 a month, I won't tell anyone.
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>> Income is income. Sorry if that's a bit profound so early in the day!
If only it were that simple.
The Welfare Benefits Handbook on my desk has a whole chapter on income and working age benefits, 40 pages including footnotes.
It's followed by another one on income over pension age.
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Without a more precise date or the name of the Member asking the question searching Hansard would be a needle/haystack job. Unemployment Benefit was replaced in the mid nineties by Job Seeker's Allowance.
Could the question have arisen during the debates on the Job Seekers Act 1995?
Expanding a little.....
There were two forms of Job Seeker's Allowance. One depended on meeting National Insurance Conditions, was not means tested and lasted for 6 months. It remains part of the system today as 'New Style' Job Seeker's Allowance. After it ended the claimant would have to fall back on the second version, Income Based JSA, which was means tested. IB JSA is now being replaced by Universal Credit.
In some instances, for example where there was a dependant addition or the claimant was disabled Contributory JSA could be topped up by means tested additions. Smae now with Universal Credit.
Generally speaking benefits paid based on National Insurance Contributions are not reduced for 'unearned income'. The current contributory benefits, New Style Job Seeker's Allowance and New Style Employment and Support Allowance are though reduced and eventually withdrawn where an Occupational Pension is in payment. I don't think they are affected by unemployment insurance, whether linked to a mortgage or not, but if it came up at work I'd want to check with the experts.
Under Universal Credit there are specific provisions for this in Regulation 66 of the The Universal Credit Regulations 2013:
www.legislation.gov.uk/uksi/2013/376/regulation/66/made
Hope this helps.
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>> www.legislation.gov.uk/uksi/2013/376/regulation/66/made
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>> Hope this helps.
Missed the edit but it looks as if, under Income Based JSA, mortgage protection policies are treated in similar way to above. In so far as it is used to pay mortgage and associated costs like insurance and does not overlap with benefit payments to cover mortgage interest*, mortgage protection income is disregarded.
* over the years this has become increasingly difficult to claim and it's now a loan.
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>> Wasn't there some kind of supplementary benefit also payable at that time? And I think
>> it was that which would not be paid.
Supplementary Benefit, which was replaced by Income Support c1988, was the safety net for those who didn't qualify for anything else or topped up where other benefits didn't meet needs. It was means tested so insurance that replaced income would almost certainly affect it. I also vaguely recall a lacuna that affected mortgage specific insurance getting some air time/press coverage.
By the time I moved here in 1998 access to help with mortgages in the benefit system was being made more difficult with wait times and limits on what could be paid via a standard interest calculation that meant rate was often lower than that actually in payment. Mortgagors were directed towards commercial insurance to cover the gap. If there was a lacuna that would presumably have been the time it was removed.
Our lender, Northern Rock, sold us such a policy with a company called Pinnacle for unemployment and ill-health. With hindsight it was probably miss sold as we were both public sector employees with excellent occupational sick pay schemes.
Last edited by: Bromptonaut on Sat 22 Aug 20 at 13:08
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Given that mortgage insurance policies never paid out, isnt it a moot point?
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Thanks for all your replies!
As ever, better than the interweb thingamajig.
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Zippy,
Can I ask why you want this information?
No pressure to say if you'd rather not but knowing might suggest some other leads.
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>> Zippy,
>>
>> Can I ask why you want this information?
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>> No pressure to say if you'd rather not but knowing might suggest some other leads.
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An older relative had their PPI claim rejected for a mortgage policy in the 1990s.
The policy, as I understand, was cancelled after about 2 years because of an announcement in parliament that such policies would be counted as income and prevent benefits being paid.
The relative called the insurance company and they confirmed that was true - the policy was worthless.
Now, after changing hands many times they have no record of the call and deny the policy was worthless.
They want to take the claim to the ombudsman and I thought that being able to quote the Parliamentary comment would be helpful.
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Bromp,
Thanks, if you can recall or point to something that would be a great help to them.
TIA.
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What about the BBC Radio 4 Money Box programme? Paul Lewis has been presenting it since God was a boy; might be something in the corporate memory.
Maybe an email to the programme's office?
Last edited by: Bromptonaut on Sat 22 Aug 20 at 16:20
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>> www.yourmoney.com/insurance/relief-homeowners-private-insurance-wont-impact-state-benefits/
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>> I haven't read all this but it looks relevant.
I'd turned up that link too and a few others in similar terms. They seem to be recent and generated by the 2018 amendment where Support for Mortgage Interest (SMI) changed from a benefit to a secured loan.
Thinking aloud.....
Reading them together there seem to have been a range of products offered to borrowers. Some paid mortgage costs directly to the lender while others gave a (tax free) replacement for lost income directly to the policyholder. Surmising, there may have been differences in how they were treated for benefit purposes. Money paid to the lender disregarded, that paid to the policyholder treated as unearned income. Manatee's link suggests a belated move to a situation where money paid to the policyholder but earmarked for and used to discharge a mortgage can be disregarded.
Looking back, the definitive answer would be in successive regulations for Supp Ben>Income Support/means tested JSA/ESA>Universal Credit. A statement to the House or answer to a question, even if it was not an accurate summation of the rules, but which was extensively reported and adopted by insurers could be persuasive to the Ombo.
What does NoFM think?
Last edited by: Bromptonaut on Sat 22 Aug 20 at 22:21
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>>What does NoFM think?
NoFM thinks that we're in a subject where you know massively more than I, of which I have no personal or professional experience and over which I am trying to wrack my brains on something I heard about a gazillion years ago. I know where I was working at the time which places it in my mind. So please bear with me, I am not setting myself up as any level of knowledgable expert here.
We're dealing with my memory not my knowledge, so I might remember quite inaccurately.
If it is when I think, then it was a time of change in industry as there were a lot of restructuring going on. This was resulting in redundancies with failing mortgages and relocations with new mortgages, and I think I was involved in a large reorg/relo, which is perhaps how it came to my attention.
As I recall unemployment benefit was not impacted because it was paid to all unemployed people, just because they were unemployed. I seem to recall there was the occasional ruckus at around that time because people deemed to be too wealthy or protected were still getting paid it. Though I'm not absolutely convinced about your timeframe.
I think the 'surprise' was around those policies where the money was paid directly to the lender. I think people who knew that they had unemployment protection which paid them a sum of money were fine with the idea that was income.
But there was a type of policy around at that time which paid the lender directly. I think if you did not have the protection then you could get the DHSS to pay your mortgage interest for you and get a full set of support benefits. Whereas if you had insurance protection then not only could you not claim for your mortgage interest (obviously) but there was some other associated benefit(s) which you also did not get, and that was related to the fact teat the policy paid more than the benefits to which you were entitled - again back to full mortgage payment versus interest only..
Thus you were seen to unfairly lose out because you had protected yourself and the lender was seen to unfairly gain because they got paid full payment from your insurance as opposed to interest only had it been from the DHSS. The individual seemed to be regarding the mortgage payment as a lifelong cost, not loan repayments resulting in a house full and clear at the end.
People were angry because they felt it was unfair. It was, however, entirely logical and sensible. There was some discussion not over the policies themselves but whether or not they had been explained fully. However I think it ended up going nowhere because the insurance policy was still cleary bringing a benefit, the lack of understanding lay in the benefits.
I seem to recall the Government took a kicking in the Sun rather than the Insurance providers as it as seen to be a benefits failing..
I know that doesn't quite add up, but it was something like that.
Sorry for my fuzzy brain. If I'd realised it would ever be of use to me I would have paid more attention. There's probably a lesson there. However, unless someone or something jogs my memory that's all I've got.
Last edited by: No FM2R on Sat 22 Aug 20 at 23:27
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The perennial problem of the welfare state, the deadweight cost of universal benefits vs. the fairness argument that people who are prudent/solvent lose out on their 'entitlements' and can even end up relatively worse off.
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Thanks for everyone that replied, I have passed the details on and it is all very much appreciated.
Thanks again!
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Hansard or similar -comments re Mortgage Insurance - No FM2R
