The Truth about ISA Mortgages

PFSHB

Would anyone be entitled to State Benefits ?

Possibly NOT

As Peter is over 60, he would have to use his Pension Fund to support himself.

If William’s ISA is worth more than £16,000 it is classed as Savings so he is not entitled to State Benefits. If he were to use the funds from his PEP/ISA to pay off part of his mortgage he would have purposely deprived himself of his Savings to claim benefit (even though he had taken the PEP/ISA for that purpose) So he would not be eligible for State Benefits.

Gordon’s Endowment Policy is not counted as Savings as it has Life Insurance, but if his ISA is worth more than £16,000 the same rules would apply to him as William.

It is not the fact that these rules exist that I am concerned about, it is the fact that they do not appear to be publicly available which is why I started a Prime Ministers Petition.

PFSHB

Paul_Herring wrote: »

You can get 6 months contribution based JSA regardless of your savings, but that's about it I think

Are you sure of this ? it may be worth a telephone call to the Jobcentre or DWP to get a definitive answer.

PFSHB

Telephoned Jobcentre 5 times, 1 person said JSA is would be allowed irrespective of “Savings”
4 people said “Savings” would be assessed, 1 person directed me to :-

http://www.dwp.gov.uk/housingbenefit/training/3/3_3a.asp#c

Capital Limits

3.5 There are several levels of capital to be aware of:

• £nil to £3000.00 - No effect on claims for HB, CTB, IS/JSA (IB), or WFTC/DPTC.
• £3000.01 to £6000 - Tariff Income taken into account for HB, CTB, IS/JSA(IB) and WFTC/DPTC for claimants aged under 60. If the capital of any child/young person is over £3000.00 there is no child allowance or disabled child premium included in the applicable amount.
• £6000.01+ - Tariff Income now applied to claimants who are 60 and over and taken into account for HB, CTB and IS/JSA (IB).
• £8000.01+ - No entitlement to IS/JSA (IB) or WFTC/DPTC for claimants under 60.
• £12,000.01+ - No entitlement to IS/JSA (IB) for claimants 60 and over.
• £16,000.01+ - No entitlement to HB/CTB for any claimant.

• Any interest actually received from the invested capital is disregarded.
• Even if the capital does not generate income, tariff income is still used.

Paul_Herring

PFSHB wrote: »

Are you sure of this ? it may be worth a telephone call to the Jobcentre or DWP to get a definitive answer.

Positive, (well at least as of last November.)

I had savings in excess of £18K which I think is the limit for income based JSA, which made me ineligable for that, but because I'd been employed for the past 9 years (I think they only look back a year or 2) I was eligable for contributions based JSA.


Your copy/paste appears to address Income Based (IB) JSA - it doesn't mention contributions based.

It may be worth ringing them up again, and being a bit more specific (i.e. ask if CB JSA is affected by savings, rather than just 'JSA')

Rabiddog_2

My understanding of this complex subject.. is that everyone (even John Terry would get this) gets contributions based JSA, for the first six months, up to age 65, regardless of other income (dependent on sufficient contributions).. thats about £60pw.. all the other benefits are means-tested anyway. I am very surprised that (in your example) someone would be expected to use their pension pot at age 60, as that would obviously reduce the amount available later, and the fact the official retiring age is 65 (moving up to 68?). eg someone might want to claim benefit up to age 65 rather than diluting their pension..

(Quadrily....there are 10 blah blah and those who mistake it for trinary.. ........I bet you run linux)

EdInvestor

Endowments are not left off the means test because they are linked to mortgages. They are left off because they contain life assurance. Even single premium investment bonds are left off the means test.

These are the real anomalies: an endowment is in fact just as easily cashed in as an ISA, and the life cover is often pretty spurious as most endowments are not for large sums, being obsolete products.

As for investment bonds, they contain virtually no life cover at all. It's ludicous they should be exempt from the capital means test on tis basis - it just encourages people to invest in a high cost fashion to benefnit the insurance industry at the expense of more competitive providers and their own retirement income.

BTW the income from an IB (typically 5%) is taken into account under the means test.

PFSHB

Paul_Herring wrote: »

Positive, (well at least as of last November.)

I had savings in excess of £18K which I think is the limit for income based JSA, which made me ineligable for that, but because I'd been employed for the past 9 years (I think they only look back a year or 2) I was eligable for contributions based JSA.


Your copy/paste appears to address Income Based (IB) JSA - it doesn't mention contributions based.

It may be worth ringing them up again, and being a bit more specific (i.e. ask if CB JSA is affected by savings, rather than just 'JSA')

Trying to get information from these departments is unbelievably difficult.

You are right, you can get Contributions Based JSA for 6 months irrespective of the amount of “Savings” you have. But, there appear to be a few provisos :

Self Employed cannot get Contributions Based JSA only Income Based JSA. Contributions Based JSA cannot be used to pay a Mortgage, so if you have a Mortgage you need to claim Income Based JSA as well.

Income Based JSA is means tested.

Which brings it back to the hypothetical question of Peter, Gordon & William and can they get any help :- Possibly not

PFSHB

Tiddler wrote: »

I may be a bit naive here but don't ISA's used to support a mortgage require a regular payment in the same way that endowment policies do? If so - how do they expect to maintain the payments to the ISA if they have no other significant savings, and are living on income support.

So there would be a high probability that their investments would not be sufficient to repay their mortgage anyway. If they expected to be unemployed for the remainder of their working lives, then wouldn't they be aswell to pay the value of their investment off their mortgage, then they have NO savings and if they have an amount of mortgage left over they may receive some payments towards that.

I'd also like to know where William got his Isa/PEP from in 1986!!

As far as I am aware, unlike an Endowment there are no penalties if you do not keep up regular payments into an ISA.

From the replies and quotes in this thread, the general opinion appears to be that the value of the PEP/ISA can be used to reduce the Mortgage

Whereas in reality the DWP class this as purposely disposing of Savings to obtain benefit.

For example : if you had an ISA worth £20,000 and you cashed it to pay the £20,000 off your mortgage, the DWP would still asses you and your family as having the £20,000 available.

Also, if you have a pension and you are over 60 you are expected to use your pension fund to support yourself.

Most people are not aware of these rules.

This is not a sly way of demeaning Mortgage Brokers or IFA’s as the Insurance Companies and Financial Institutions providing Mortgage Funds do not appear to know much about it either.

I started the Prime Ministers petition mentioned at the start of this thread in an attempt to get the information public so that an informed decision could be made at outset.

I am not saying that people should not have to use their savings to support themselves, what I am saying is that if you have saved for 20 years in a PEP/ISA or Pension to pay off your mortgage and find yourself in a situation like Peter, Gordon & William it is a bit late to find out the facts.