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4.2.3 Standardised Means Test Model for Adoption and Special Guardianship and Residence Order Financial Support

This chapter is under review

Note: from April 2014, Residence Orders and Contact Orders were replaced by Child Arrangements Orders. Prior to April 2014, a Residence Order was a Court Order made under section 8 of the Children Act 1989, settling the arrangements as to the person with whom a child was to live.

SCOPE OF THIS CHAPTER

This chapter should be read in conjunction with Financial Support Guidance: Residence and Special Guardianship Orders and Financial Support: Assessment and Decision Making for Residence and Special Guardianship Orders.

AMENDMENT

This chapter was updated in December 2014 by adding a note in the Scope Box identifying the change in terminology to the Child Arrangements Order. Note however that references in the chapter continue to refer to ‘Residence Orders’ pending the outcome of the review.


Contents

  1. Introduction
  2. Guidance on using Means Test Model
  3. Projected Family Income
  4. Projected Family Expenditure
  5. Calculation


1. Introduction

The Department for Education and Skills developed a model means test for adoption and special guardianship financial support. The model has been tested with various local authorities and modifications made as a result.

It is not a statutory requirement for local authorities to use this model in place of their existing system. However, Sefton has agreed to use this model in relation to applications for Adoption, Residence Order and Special Guardianship Order allowances. This guidance should be read in conjunction with the procedural guidance on financial assistance to Residence and Special Guardianship allowances. 'Guidance: Financial Support - Residence and Special Guardianship Orders - updated July 2010' and 'Guidance on Residence Order Allowances agreed before April 2010 and still in place'.

The model proposed is intended to deliver a standard approach to arriving at adoption, Residence Order or Special Guardianship support payments (if not always a standard payment), so that adopters and other guardians are treated equitably within the context of what is affordable within existing local authority budgets.

This guidance replaces the guidance issued by DfES in 2005.

2. Guidance on using Means Test Model

General

The model is based on disposable income, and so provides a thorough analysis of the family's financial situation. Key principles of the test are set out in this section.

The regulations on adoption, residence and special guardianship support services set out that there must be no reward element in financial payments other than as a transitional provision for foster carers adopting or becoming special guardians for a child for whom they are currently caring.

The overall approach used in the test is a 'snapshot' of the family's current circumstances. A small number of Residence Order Allowances that commenced prior to 2004 are calculated on a different rate as detailed in paragraph 50. These cases are clearly identified on the finance file.

If this is a first assessment and the child is already living with the prospective adopters or carers, then the child should be included in the calculations. If the child is not yet placed with the prospective adopters/carers, then the child should not be included in the calculations.

If the application is for more than one child financial assessments should be calculated as follows:

  1. Means test calculations calculated together i.e. a sibling group of two / three should be calculated in the one assessment;
  2. Non means test calculations (clients in receipt of benefits) sibling groups should be calculated separately.

This method is used because the spreadsheet calculates the disposable income for the household. Deducting it for each child would be inaccurate and unfair.

If a family is in receipt of Income Support, they have already been financially assessed by the Department for Work and Pensions, therefore there is no need to use the spreadsheet. The figure paid to the family should not include any deductions for child benefit. Income Support or Child Tax Credits received for the child who is subject of the assessment should be deducted i.e.

Payment = FA minus IS (dependent child element) / Child Tax Credit

If a carer's only source of income is Job Seeker's Allowance or Bereavement Allowance this should be treated in the same way as Income Support

If the carer has not yet claimed benefits for the child, the calculation should be based on an estimate of what the carer will receive. Child Tax Credits can be backdated for up to 3 months. The assessment should be reviewed after 3 months to make adjustments and either increase the payment if they receive lower tax credits than expected or reduce the payment if they receive more CTC than expected.

Financial support paid to adoptive parents or special guardians under the regulations cannot duplicate (or be a substitute for) any payment to which adopters, residence order or special guardians would be entitled under the tax and benefit system. Only include benefits that are currently being paid to members of the household. If the local authority believes that there are other benefits to which the household would be entitled, an appointment should be made with Welfare Rights. A reassessment after 3 months could then be made which would capture all of the new benefits being received. This could be the case where, for example, a child has recently been placed with the prospective adopters or special guardian, and they have not yet claimed child tax credit.

Any benefits paid to the carer or a child as a result of their disability should be disregarded as these payments are made to enable the person to meet the costs of their additional needs and are not in lieu of income. This includes Disability Living Allowance (Care and Mobility components) and Disabled Child supplement of CTC.

The test is worked out on a monthly basis. If information is provided of weekly income / outgoings this figure should be multiplied by 52 (weeks) and divided by 12 (months). If information is provided annually this should be divided by 12 (months).


3. Projected Family Income

Pay

This section should include basic net monthly pay, before any deductions for savings schemes, social clubs, accommodation/food and loans. However, the income figure used should exclude any payments into pension funds.

Where one (or both) of the parents or special guardian is self-employed, the only income which should be considered is 'drawings' as this is the equivalent of pay from an employer. Any profit from the business sitting in a bank account (and thereby not being reinvested) should be taken into account as capital under section 1iv: other sources of income.

If one (or both) of the parents or special guardian receives overtime, fees, bonus/commission and/or gratuities on a regular basis (for example annual bonuses) should be included as part of the monthly payment (i.e. if the payments are annual, these should be divided by 12 to give a monthly amount to be included in the 'basic net monthly pay' section).

Benefits and pensions (parents)

Where the parents or special guardian receive individual benefits (i.e. those that are not calculated on a household basis) these should be included in this section. If the benefit payments are currently received weekly, please multiply by 52 and divide by 12 to give a monthly amount. Benefits to be entered in this section are:

  • Employer's sick pay (after compulsory deductions);
  • Incapacity benefit;
  • Statutory maternity, paternity and/or adoption pay and/or maternity allowance;
  • Bereavement benefit;
  • Working tax credit (if paid directly and not as part of pay and excluding any childcare element received);
  • All pension payments received;*
  • Other benefits.

* If a carer is in receipt of Guaranteed Pension Credits this should be treated in the same way as Income Support. See paragraph 10.

In relation to working tax credit, our understanding is that an employed person currently receives working tax credit within pay from his employer. If this is the case, the amount will be included in the basic net monthly pay section. All those who receive working tax credit will receive an award notice which sets out how much they will receive. This award notice will provide the information needed for this section of the test.

Where a childcare element is paid as part of the working tax credit, this should be disregarded for the income section of the test. The existence of this type of credit needs to be considered when completing the expenditure section on childcare (see below).

Any other benefits received by the parents should be recorded in the 'other benefits' section. Disability Living Allowance should be disregarded as this is an additional payment to provide for the individuals specific needs and is not regarded as income for the purposes of this test.

Benefits (Family/Children)

Where benefits are received by the family or household, as opposed to being paid directly to the parents, they should be recorded in this section. This is primarily for benefits which are calculated on the basis of household composition. Benefits to be included in this section are:

  • Income Support;
  • Jobseeker's Allowance;
  • Child tax credit per household;
  • Child benefit for each child, excluding the child/children who are the subject of this assessment application.

If a member of the household receives Income Support or Jobseeker's Allowance, the amount per household should be recorded here. Also see paragraph 10 above, where it is recommended that where the only income families receive is Income Support, the applicable maximum payment should be made to the family.

Benefits which should be included in this section are child tax credit received for each child, at the time that the test is applied. All those who received child tax credit should receive an award notice setting out how much they will receive.

Child benefit should be included for each child living in the household, excluding the child/children who are the subject of this assessment application.

Housing benefit should also be excluded from this section, as it is disregarded for the purposes of the expenditure section below.

Other Sources of Income

Where the family receive income from capital, savings and/or investments, this should be assessed in terms of net monthly interest only, as paid. This is the income that is routinely available to the family, and should be clearly shown on statements/similar. Any interest received from Government Child Trust Funds should not be included in this section.

If the family receive income from boarders/lodgers, this should be calculated on a weekly basis (then multiplied by 52 and divided by 12 to give a monthly amount if the test is being completed on a monthly basis). To calculate the weekly income, all weekly payments for board and lodging must be added together, a £20 disregard applied and then 50% of any excess over £20 for each person deducted. This is how income from boarders/lodgers is calculated for income support purposes.

Examples of the approach for income from boarders/lodgers are as follows:

  Boarder/Lodger 1    
  Weekly payment  £55  
  Deduct £20 (disregard) -£20  
    £35  
  Deduct 50% of remainder   -£17.50  
  Income from Boarder/Lodger 1 £17.50  
  Boarder/Lodger 2    
  Weekly payment  £60  
  Deduct £20 (disregard) -£20  
    £40  
  Deduct 50% of remainder -£20  
  Income from Boarder/Lodger 2  £20  

Where the family receive income from rent on an unfurnished property, this should be calculated on the following basis: monthly income received in rent after the deduction of any costs. Deductions can be made for:

  • Interest payments on the mortgage (but not mortgage capital payments);
  • Repairs;
  • Council tax (if paid by the family being assessed)
  • Agents' fees; and
  • Insurance (buildings)

If income is received from furnished properties, the same calculation applies as above for unfurnished property, but an extra 10% deduction from the monthly rent received can be made as a 'wear and tear allowance'.

The approach used in paragraphs 30 and 31 above is consistent with that used for calculating income from property for the purposes of income tax. If the person who is the subject of the assessment has completed a recent tax return, local authorities may ask to see a copy of this. The tax return should have the information needed for this section of the test.

Other income to take into consideration includes maintenance payments received for any child in the household and existing adoption or special guardian allowances (including enhancements for special needs) paid for any child. This latter may be paid where the family have adopted or become a special guardian for a child with a different local authority and therefore receive a separate allowance. Income for other children who receive financial support from Sefton should not be included.

Income Relating to the Child/Children being Adopted or Becoming a Special Guardian Child

This section relates to the child/children being assessed only. Any regular interest on capital and/or income in which the child/children has a legal interest and entitlement should be included here. This could be, for example, a savings account, trust fund, property or other legacy.

Payments from Criminal Injuries Compensation Awards should not be included. Any interest received from Government Child Trust Funds should not be included in this section.

Please also consider any other income to which the child/children might be entitled. This section does not record child benefit for the child being assessed, which will be deducted from the final payment resulting from this means test.

Income Calculation

The means test spreadsheet will automatically calculate the household monthly income, and will also apply a 20% disregard to this income figure.


4. Projected Family Expenditure

Home Expenditure

This section should include mortgage payments, made up of capital and interest, and also including any endowment payments linked to the mortgage. If the family pays rent, the monthly amount actually paid should be recorded here, after any deductions made for housing benefit. The only other outgoing which should be included in this section is council tax and water rates paid; this should be the amount paid after the deduction of any council tax benefit received by the household or discount for single adult households or second homes.

Other Outgoings

Where the family pay regular monthly repayments on loans for housing improvement (e.g. extensions/new kitchens) or transport costs (e.g. new car), we suggest that these are included in this section. Other loans may be included at the discretion of the Service Manager. Some loans may have been taken out by the adoptive or special guardian family to meet a new need incurred as a result of the adoption or special guardianship order (e.g. buying a larger car).

Other payments which can be included in this section include maintenance payments, payments relating to court orders, private pension contributions and national insurance if self-employed or not working.

The section for 'reasonable' child care costs will need to be determined depending on (a) the circumstances of the family in question (e.g. how many hours the parents work); and (b) local costs for child care services. Costs recorded in this section should be those paid after any childcare element paid as part of the parents' working tax credit. All those who receive working tax credit will receive an award notice which sets out how much they will receive.

Core Regular Family Expenditure

General household expenditure on items such as food, transport, clothes, recreation should be calculated using the Income Support allowance rates, but increased by 25%.

In completing the means test, local authorities will need to calculate the appropriate figure for the family being assessed. For example, for a household with a couple (parents) and 2 dependent children the core regular family expenditure should be made up of couple's allowance of and 2 allowances for dependent children.


5. Calculation

The spreadsheet will calculate the household's monthly disposable income.

Enter the appropriate Fostering Allowance for the child being assessed dependant on their age.

After the local authority maximum payment has been entered manually, the box marked 'amount of payment to adopters or special guardian' will show the payment that the test has calculated for adopters or the special guardian. This amount is calculated on the following basis:

  • Where the family's disposable income is less than £0, the spreadsheet will show the local authority's maximum payment. This is because the adopters or special guardian have provided evidence via the disposable income calculation that shows they do not have the means to accommodate any further expenditure;
  • Where the family's disposable income is higher than £0, the spreadsheet will calculate a figure that is a percentage of the maximum payment. As the disposable income figure rises above zero, the percentage of the maximum payment that the adopters or special guardian be tapered at a set rate of 50%. This rate means that for every pound of monthly disposable income a family is found to have, they will have 50 pence deducted from the monthly maximum payment.

Payments to adopters or special guardians are based on the allowances paid to foster carers. Child benefit must be deducted from the final amount. This is to reflect that child benefit can be claimed by adopters and special guardians but not foster carers. The appropriate amount of child benefit for the child/children who are the subject of the test should be entered into the spreadsheet. Please note that the maximum payment used to calculate the payment to adopters should not take into account any child benefit the adopters might receive (i.e. should not deduct it) as the spreadsheet allows the child benefit to be deducted after the payment has been calculated.

The final payment shown will be the calculation of the means test minus child benefit entered by the local authority.

To calculate the weekly payment, multiply the figure by 12 (months) and divide by 52 (weeks).

A small number of Residence Order Allowances that commenced prior to 2004 are calculated on a different rate. These should be calculated as follows:

Non Means Tested i.e. Income Support, Guaranteed Pension Credits
  • 2004 / 2005 FC boarding out rate but for the child's CURRENT age;
  • Less 2004 / 2005 child element of income support @ £42.27 per week;
  • Less 2004 / 2005 child benefit @ £16.50 eldest / only child and £11.05 for subsequent children.
Means Tested - DfES Model
  • 2004 / 2005 FC boarding out rate but for the child's CURRENT age;
  • Less 2004 / 2005 child benefit @ £16.50 eldest / only child and £11.05 for subsequent children;
  • Less CURRENT years personal allowances.

End