MPPI & MSI query

RG1889

Q1 I have had my JSA stopped because I haven't completed a mortgage M12 form, then tell me two weeks afterwards !

I told the Agency I had MPPI which runs out in 8 weeks and they said that if it covered more than my mortgage payment my benefit would be clawed back/reduced to compensate.

I thought the whole idea of MPPI was an INSURANCE not an income. What do I do?

Q2 They then told me MSI was 1% so that means my mortgage interest will be under paid by £2-300 per month. Great ! On this site it says it is still 6.??% until June 31 (sic) Is that true? If so why are the Benefits agency lying?

I have worked over umpteen years to get a good credit score and now following redundancy last year the Benefits Agency are likely to see me out on the streets. Thanks Mr Brown.

Advice gratefully received.

NASA_2

If you have MPP and it is more than your mortgage repayments then yes, it can be taken into account on JSA(IB), because it is providing you with an income.

The rate of SMI is 6.08% - I doubt they are lying but either poorly trained or just lazy.

tr82

Blame Mrs Thatcher and Mr Major, they're the ones who brought in Income Support and these rules.

To determine your correct entitlement you need to complete form MI12 and the MPPI questionnaire DLJA122. Assuming the MPPI is paid to you, they can ignore certain parts of your MPPI income such as your buildings insurance, the MPPI premium itself, interest not met in the calculation, capital not met and any endowment policy. But as you can see, they can only calculate the "disregards" on the MPPI policy if you do actually arrange for an MI12 form to be completed. Because without the MI12 they don't know how much the allowable mortgage balance is and they can't calculate anything.

As to the SMI rate, it's 6.08%. Quite where they got 1% from I don't know.

They don't just stop your benefit because you've failed to return one MI12. Stopping your benefit is your "prompt" when you've failed to return numerous MI12's, they only suspend benefit as a last resort.

RG1889

Thanks. So if your MPPI was greater than your mortgage do they reclaim the difference back dated then and leave you no money for months? Or worse have you up for fraud?

I used the excess amount to reduce my balance transfer only credit cards (nearly there) and build up to pay buildings and contents cover. Its not much about £40 per week but on the original application form thats what it is used for and was sold for - MPPI and credit card payment insurance. Never gave it a second thought that insurance was counted as income so what's the point of having that.

I have no money to pay for this extra heating, no winter fuel payments here - it sounds incredibly vindictive but hey ho.

tr82

In a way you still benefit from having an MPPI policy. Because they'll allow you to spend some of that money on your buildings insurance, endowment policy etc etc (see list above) ... that's all disregarded ... only the balance remaining will they factor into the final calculation.

By doing so they ensure your whole mortgage is paid, not just the interest, that's an awful lot better than some folk on the SMI scheme right now.

I'll give you a quick example of how it works. Let's use some made up figures, tweak it about to suit yourself.

Allowable mortgage balance - £150,000
Buildings Insurance - £40 pcm or £9.24 pw
MPPI premium - £50 pcm or £11.54 pw
Endowment Policy - None
Lenders interest rate - 2.5%
DWP interest rate - 6.08%
Lender's monthly payment required - £550 pcm (of which £312 is interest, £238 for capital)
MPPI payment to you each month - £600 pcm


There's two sides to this calculation.


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DWP side

Mortgage Interest due = £150000 x 6.08% = £9120 p.a. or £175.39 p.w.
Personal Allowance Due (single guy) = £64.30

Applicable Amount=£175.39+£64.30=£239.69 p.w.

*****************************************

From that £239.69 they have to take into account part of the MPPI payments that you receive. How do they do that ? As follows.

MPPI Payment = £600 pcm or £138.46 pw.
less Buildings Insurance - £9.24 pw
less interest not met - NIL (DWP are meeting the interest)
less capital not met - £238 pcm or £54.93 pw
less MPPI premium - £11.54 pw

MPPI to be "taken into account" = £62.75 pw

*********************************************

SO !

Applicable Amount = £239.69 pw
less MPPI - £62.75
Balance (due to you) = £176.94 pw

But here's the variables.

Most MPPI policies have a waiting period, let's assume 30 days.
So for the first 30 days there's no MPPI income to take into account. But there's every chance the MPPI payments were delayed and didn't kick in on time, in which case the DWP can't take the MPPI into account until the week in which you received the first payment.

DWP's help generally only kicks in from week 13. So you may find yourself overpaid from week 5 to week 13 ... DWP didn't take your MPPI into account and paid you the £64.30 without deducting the £62.75 payment off.

But you may also find yourself underpaid from week 13 onwards too, because DWP haven't factored the mortgage interest into their calculation.

Now you'd think they'd offset the overpayment against the underpayment, huh ? No, they can't do that. They're for two entirely separate periods, so they'll pay you any arrears due then send you a bill for the overpayment (then deduct a small amount off your benefit each week to repay that).

So.

I hope you can now see why it's so vital to get that MI12 form returned. Because there's every chance you're losing money, money which could be going towards your extra heating bills !

I hope you can also see why benefits administration is in the shambles it is. Try gathering the evidence together to work that out, try calculating it all while the phones are ringing off the hook etc etc. And try explaining that calculation.

It's the stuff of nightmares.