Coventry Law Centre

Welfare benefits advice

Download this leaflet

Word icon44KB Word file
PDF icon58KB PDF file

Return to index arrowReturn to welfare benefits information leaflets index

Introduction to the social security system

The Social Security system is very complex. However, the benefits can all be divided into two types.

Means tested benefits do not depend on paying National Insurance contributions. Claimants can only receive these benefits when rules regarding income and capital are satisfied.

Examples of means tested benefits are:

Tax Credits

These are paid by the Inland Revenue and not now considered as benefits. They are means tested. There are two types of credits:

Contributory and non-contributory benefits

These benefits are not means tested. Each has their own rules based on Acts of Parliament and Regulations so that decisions can be made by Adjudication Officers and Secretary of State.

Contributory benefits

These benefits are paid out of the National Insurance fund. They can be paid to any claimant who has made sufficient contributions into the fund at the appointed times according to Regulations.

Note well – There are no residence conditions for contributory benefits.

Non-contributory benefits

These benefits are paid out of general taxation (except guardian's allowance). There are residence conditions that prevent these benefits being paid. Although no National Insurance benefits need to be paid, each benefit has regulations, which should provide for any relevant eventuality.

Severe disablement allowance was abolished for new claims from April 2001. Instead, people who claim before they reach 20 (or in some circumstances before 25) will be eligible for incapacity benefit without needing National Insurance contributions.

Contribution based job seekers allowance

There are two main contribution conditions:

1) You must actually have paid Class 1 National Insurance contributions with an earnings factor of at least 25 times the lower earnings level in one of the two relevant contribution years.

Class 1 National Insurance contributions are only paid by somebody working for an employer (not self-employed).

Earnings factor of at least 25 times the lower earnings level means that, for example, in 2003/04 you must have paid 25 x £77 = £1,925.

Relevant contribution year runs from April to April in the two years prior to the date of claim. The benefit year runs from the first Sunday in January to the end of the first Saturday in the following January.

2) The second contribution condition is that in each of the relevant contribution years you must have either paid or been credited with Class 1 contributions with an earnings factor of at least 50 times the lower earnings limit for that year.

In 2003/04 this was 50 x £77, which is £3,850.

Even if the contribution conditions are satisfied, contribution based job seekers allowance may not be paid at the start of or during the claim for several reasons:

This benefit is only paid for a maximum six-month period.

It is possible to appeal against a refusal of benefit because of a decision relating to contributions or credits. In practice, the matter will be referred to the Inland Revenue for an investigation and the decision may be revised.

Incapacity benefit

The two contribution conditions for incapacity benefit are similar to job seekers allowance.

The first contribution condition is slightly more generous. The two differences are:

1) The 25 paid contributions must have been paid in one of the last three tax years before the benefit year in which your claim is made.

A Claimant will be exempt from this condition if:

i) they were getting Invalid Care Allowance or would have been but for an overlapping benefit

ii) they had been working for two or more years immediately before becoming incapable of work and getting Disabled Persons Tax Credit throughout

iii) they had received incapacity benefit in the tax year before the benefit year in which they claim

The contributions may be either Class 1 or Class 2. This means that self-employed workers can claim incapacity benefit.

2) The second contribution condition is the same as for job seekers allowance (see above).

Maternity allowance

If it is not possible to claim statutory maternity pay because a claimant has changed her job during pregnancy or is self-employed, it may be possible to claim maternity allowance.

The conditions of entitlement are:

Bereavement payment

There is only one contribution condition for bereavement payment.

The claimant’s deceased husband or wife had paid class 1, 2, or 3 contributions in any one tax year worth 25 times that year’s lower earnings limit. In 2003/04 this was £1,925 25 x £77

Widowed parent's allowance, bereavement

Pension and category A and B retirement pension

The National Insurance contributors for the above benefits are:

The first condition

The contributor must actually have paid in any one tax year before death or pensionable age, contributions with an earnings factor of 52 times that year’s lower earnings limit.

E.g. £4,004 in 2003/04, 52 x £77

The second condition

The contributor must have paid or been credited with contributions with an earnings factor of at least 52 times that year’s lower earnings limit for each of the requisite number of years.

The requisite number of years depends on the length of your working life. This is defined as from the tax year when the age of 16 is reached up to pensionable age or the date of death.

The requisite number of years is calculated as below.

Length of Working Life
Requisite number of years
1-10 years Length of working life minus 1
11-20 years Length of working life minus 2
21-30 years Length of working life minus 3
31-40 years Length of working life minus 4
41-50 years Length of working life minus 5

Note – Looking after a child or disabled person does not count as a year of working life.

Insufficient contributions

A reduced rate of pension is paid on a percentage basis as long as there are at least 25% of the requisite number of years paid.

Category D retirement pension

You qualify for this if you are:

Back to top arrowBack To Top