Increase in income

adfax

Although I have only just had my annual review for this year, I wonder if someone might be able to advise on how an increase in income will be treated at my next annual review.

My wife is just about to start work - which will increase our income by about £360 per month. I have in my IVA agreement the clause that allows me to keep all of any increase in income up to 10% (which in my case is about £260 extra per month), and then I can keep 50% of anything above this. I work this out as about £50 extra per month that I have to pay into the IVA.

I also expect to get a small pay rise at some point in the next few months - I expect that I will have to pay over 50% of this too as I will already have used up the 10% which I can fully keep.

I don't have a problem with any of the above, but I do have some questions:

1. I assume that an increase in my wife's income is treated in the same way as an increase in my income, and hence the above rules apply?

2. If so, should the 10% threshold after which I pay 50% be based on the total household income, and not just on my income as it is at the moment? Obviously 10% of the household income would be higher as it would also include child benefit, child tax credits etc?

3. What will happen at my annual review – do we continue to keep this extra, or will they just base my payment on the new SOA? If it is the latter, then I can see we will lose the majority of this extra income at that stage, thus losing any benefit of my wife working!

Again, I don’t mind paying some of this extra income into my IVA, but if come my next review we lose the whole lot (less any increases in my allowances) then it really does make me wonder if there is any point of my wife working for any more than the next 6 months!

SunshineBear

I would imagine you would have to inform them before your next review. There is usually a passage which states that if your income changes they will need to be informed.

As to the specifics, I'm sure someone with greater knowledge will come along soon to answer.

adfax

Thanks for the reply. I will be informing them as soon as we receive the first payment which will be in the next couple of days (until then we won't know the exact amount).

I think I am fairly clear as to what we will have to pay up to my annual review, but what happens at that point I am a little concerned about!

I have read elsewhere that I would be allowed to keep the increase after the annual review - subject to the 10% and 50% rule - but I wonder if someone actually has some experience of this?

DrSqueeze

It's best to speak to the company or person managing the IVA for a definite answer. However, I believe a typical clause will be something like this:

"The Supervisor will conduct a review of my income and expenditure every twelve months...."

then:

"If the Supervisor considers that I have more surplus income (after taking into account any reasonable increases in my expenditure), he may increase my contributions to the Agreement by up to 50% of the increase in surplus income"

So it wouldn't allow the IVA to swallow up the whole "surplus".

(IMPORTANT NOTE: this is an example only, you need to check the exact wording of your IVA)

A key question that occurs to me is this. You refer to "my IVA" and not "our IVA". Is it only in your name?

adfax

Thanks for the reply - the IVA in mine only. My wife isn't part of it and she doesn't have one of her own.

Mrs_Arcanum

adfax wrote: »

Thanks for the reply - the IVA in mine only. My wife isn't part of it and she doesn't have one of her own.

Then I would think your wife's money is hers alone and should not have anything to do with 10% or 50% or whatever.

Unless it will reduce some of your other outgoings, then this may be the only point that will change.

DrSqueeze

adfax wrote: »

Thanks for the reply - the IVA in mine only. My wife isn't part of it and she doesn't have one of her own.

You're welcome.

I'm not certain how the IVA supervisor will treat your wife's income so please regard what follows as speculation only.

But, if one person in a household is the only one with an income at the start of the IVA then logically they have to pay ALL the household expenses.

If two people in the household have an income, then it's reasonable to assume that they would share some of the costs between them in some way. That would, in effect, reduce your own expenses.

Have a careful read through your IVA and look for any references to 'spouse' / 'partner' / 'dependants'. When you contact your Supervisor, they can give you a specific answer.

The most important piece of advice I can give is to share all the information with them. I'd recommend confirming it in writing and keeping a copy of your letter (and their reply) with your IVA.

debtinfo

what are your relative incomes, ie does she earn more or less than you, so for instance are you already paying more of the household expenses, 50:50, or the other way round

adfax

At the start of the IVA I was the sole earner although my wife does receive a small amount of Child Tax Credits and Child Benefit (we also recieive Disability Living Allowance and Carers Allowance for my son, but this is offset in the IVA with a corresponding level of expenditure relating to my son's disability).

At the moment all of our surplus income goes into the IVA.

Her income now accounts for about 25% of the household income. However, because of her working we now have additional costs - petrol, child care etc, and we lose the Carers Allowance.

We will in fact be no more than £300 a month better off. If all of this had to go into the IVA then there would be no point whatsoever in my wife working.

I assume this is why there is a strong arguement for them at least letting us keep 50% of this extra - that way they get something extra but there is also an incentive for my wife to actually work!

DrSqueeze

adfax wrote: »

I assume this is why there is a strong arguement for them at least letting us keep 50% of this extra - that way they get something extra but there is also an incentive for my wife to actually work!

I think that's the key point. I also think it's extremely unlikely that the IVA supervisor would attempt to take all of the extra money.

The idea behind the "50% rule" is to give people an incentive to get payrises, do overtime, earn bonuses etc. As you say, everyone gains from it.

Exactly how they apply that principle to a person who is not actually part of the IVA is something I'm not certain about.