Financial Protection & State Benefits | CeMAP 2 & 3 Deep Dive

Hi, hello and welcome back to this week's episode of the CMAP study podcast. I'm Charlotte. I'm Maria. And every kind of week almost we get together and we help you guys with your CMAP studies. If this is your first time here, welcome. Stop this episode, go back to the first one because it will make so much more sense. If you are a returning listener, welcome back. In this week's episode we are doing more financial protection stuff which is wild because it feels like that's ages but it's such an important part of CMAP 2 and 3. Yes. Like we talk about it but you can wing it in CMAP 1. You could probably guess with CMAP 1 on the protection questions and still get passed. You can't do that with CMAP 2 and 3. No, they really dial it in don't they? So we are going to hammer protection a little bit more but actually the focus of today's episode, the majority of it is on the benefit system as in state benefits. So it falls under the protection category because it is financial assistance and that's the idea with protection. It's financial assistance if you get sick, if you can't work, if something bad happens. Yeah. The difference being life insurance is something that you pay for, the benefit system is something that you might be entitled to but it's not the product that you pay for. So that's what we're going to be doing in this week's episode. Before we jump into the nitty-gritty of stuff, I just want to give you guys a quick update with my masterclass dates for this year because everybody's been asking to go on waiting lists for stuff. So as of us recording this episode, my next available masterclass date is in June. It might be that that one's gone by the time that this airs but you can check it all on the website. Now I do have waiting lists for all of my courses so if it is that you're interested in booking on a course that is full, you can drop me a message. I do have a waiting list. I don't put more than three people on the waiting list and that's because there's a bookable chance of you getting on it. So some of my waiting lists are full already but if you're interested and you want to get on a waiting list, just drop me a message because I can add you in. It is no trouble. All of my dates are now available up until the end of 2025 so my last course is running in December. There's spaces on that one if anybody's interested in a great Christmas CMAT course and if it is that you need to get CMAT qualified fast, there's no masterclass dates available, do send me a message because I can help out with that as well. I think that was all the housekeeping stuff. Is there anything else that we need to talk about? No, I don't think so. I think that's it. Cool, in that case, Maria, would you mind cue intro music? So, the benefits system. Yeah. Some heavily debated topic in the... we don't even have daily... do we still have the daily mail? Is it the sun that we don't have anymore? One of them. A few of them still definitely are surviving. All of the immigrants are coming in and taking our jobs and we're just giving them all of the benefits is the general... That's the general party line, isn't it? Yeah. That is not the case, guys. The state benefit system exists as government support to help people who are in genuine financial need. Yep. So, how does that relate to CMAT 2 and 3? Actually, you're gonna get ******* loads of questions on this. I'm thinking about it and my brain is ticking along and I'm like, okay, universal credit loads of questions. Support for mortgage interest loan or SMRI. If you've never heard of it before, you're in for a real treat. I reckon across CMAT 2 and 3, there's up to 20 questions. It is absolutely unhinged how many come up. Like, I'm not kidding and it is... it's also, they start tickling you with the scenario questions. It'll be like, Beth's out of work, what state benefit might she be entitled to? Greg has just retired, what state benefit? Like, they start feeding you what you'll be dealing with in your actual professional lives. But yeah, you need to know your state benefits. You need to know your definitions. Do you know what? You've made a really good point because a lot of people go, if I'm going to be a mortgage advisor, why do I care about the benefits that people receive? Because there is a really common misconception that people who receive benefits aren't eligible for mortgage. Which is wild. Yeah, it's not true at all. There's such a stigma around benefits. There is and we've already, I think we've already done a bit on benefits and there's a topic dedicated to it. I feel like we have. We lost track with our episodes but the specifically universal credit and the SMI are the two that we're going to focus on in this episode. Yeah. Because just those two things So if we start with universal credit. Yeah. Maria, what do you know about universal credit? It came in as an umbrella benefit basically and it absorbed a lot of other benefits. Why are you laughing at me? I've never heard the phrase umbrella benefit and it's completely accurate but it just gave me the giggles. I'm really sorry. You're right, it is. But what is an umbrella benefit? It's just other than a fun word and a great name for a band. Umbrella benefit? So it came in and it essentially absorbed a lot of other benefits. Stop it because I'm going to get the giggles. You were right. So it absorbed a load of other benefits. Under one category. Yeah. To supposedly simplify and streamline the system. Yeah. So we used to have things like child tax credits. Yeah. Working tax credits. I think Job Seekers Allowance does still exist. They are phasing it out at the minute into universal credit. Yeah. We call that, where I'm from, being on the dole. I don't know if you've ever heard of that phrase before. Yeah. That might be a Northern thing. No it is, yeah. Being on the dole. But you're right, there were loads of different benefits available to loads of different categories of people and the government basically said this is a lot of fuckery. Why don't we just provide one benefit to everybody on a means tested basis and that's one of the biggest things about universal credit is it's what's called means tested. Yes. What does means tested mean Maria? It goes off income, savings, other, basically what your personal finances look like. There are non-means tested benefits as well which it doesn't matter how many millions you've got in the bank or if you're pissing into a tea kettle, you will get the ******* thing. Yeah. An example of that would be child benefit. Child benefit? Yeah, so child benefit, if you have a child, you will get it regardless of whether you earn one pound a year or one million pound a year. Is it, is it not a sliding scale? No, what they do is they'll pay you regardless but if you earn over the threshold, which I think this year, you don't need to know this for the exam, I think this year it's about £60,000. If you earn over that annually, instead of stopping paying it you, they tell you you can opt out, it doesn't work, they just give you a tax bill for what they've paid you in child benefit at the end of the year. So you get about £108 a month, they will pay you regardless and then in February they'll be like, hey here's £1,200 tax bill for the child benefit that we shouldn't have paid you and we don't let you opt out. They say that they do let you opt out but loads of people have been back and be like, yeah it doesn't work, they just pay you anyway. Wild. So universal credit is means tested which means it looks at your circumstances and goes, okay are you eligible for financial assistance? Yeah. And it's entirely dependent on your circumstances on a rolling monthly basis. So when my daughter was born and I was in an employed role, because her nursery fees were like £1,200 a month, yeah, and my income was over that but not by a huge amount, I was eligible for universal credit. Yeah. And then when I went self-employed and the business took off a little bit more, they were like, cool you're still paying £1,200 a month in nursery fees but you don't need the financial assistance anymore, you utter ******* baller, so we're going to take that off you. So no longer eligible for universal credit. And it works on a month-by-month submission basis. Okay. So every single month if you want to receive universal credit, you log into the system, you put your details in and they'll say, yeah we'll give you something or no, get the ****, you don't need anything else. So we love that universal credit notification. Key points about universal credit, number one is it's means-tested and that is a very common exam question. Number two is there is a savings limit. So if you have more than £16,000 in savings, you are not eligible for universal credit. Yeah. Which kind of makes sense because if you've got more than £16,000 in savings, if you're struggling financially, you just dip into your ******* savings, is the theory. The theory. So that's universal credit, those are really the two main key points. It then ties us into something called SMI or the Support for Mortgage Interest Loan and we'll probably spend the rest of the podcast episode on this on its own because I know you'll get at least 10 questions on just this and it's quite a lot to digest. Yeah. What do you know about SMI? Cool, okay, so I will lead then. The Support for Mortgage Interest Loan was a benefit, as in, the government introduced it, I think in 2016, but we don't need to know that for the exam, and basically said, hey, if you are struggling financially and you have a mortgage, we will help by paying the interest portion of your mortgage. Yeah. And it was a benefit, as in, you didn't have to pay it back. It might be 2016 that that changed actually, but basically, at some point, the government went, okay, we're no longer going to offer this as a benefit, whilst it still falls under the benefit system, it is a loan, which means you have to pay it back. Yeah. So if you are in receipt of universal credit, jobseeker's allowance, pension credit, and there's another one which I wrote down, but I can't see because I'm blind, income support allowance. Yeah. So if you receive any of those four benefits, you may be eligible, and you've got a mortgage, you may be eligible for the Support for Mortgage Interest Loan, which means if you are financially struggling, they will say, hey, we will pay the interest portion of your mortgage. Yeah. Now that doesn't sound like a lot, but let me pose it to you in a different way. If you are genuinely financially destitute, and you cannot afford your mortgage, your home may be repossessed. Absolutely. They will push for repossession. Yeah. A lender cannot push for repossession if you are paying the interest on your mortgage, they won't do it, the court won't sign it off. So if we put that into practice, there is no reason that anybody in the UK should ever have their home repossessed, because if they were in genuine financial difficulty, you can apply for SMI, and then your home will get repossessed. Isn't that wild? Do you know what's even crazier, is that people don't know it. People don't know it exists. Lenders will tell people about this, and anywhere like Citizens Advice, Step Change Debt Charity, they will all rave about this, but the problem that we see is when people are in debt, and I can say this speaking from my own experience, you don't want to speak to company. You can't help your ostrich, you put your head in the sand, and you're like, if I can't see it, it's not ******* happening. And that is where people miss out on this. The other thing is, sometimes people can be actually be quite financially savvy and have their home repossessed, because it's actually in their best interest for whatever reason to have their home repossessed. And I've had a few students on my course that have been like, not financial advisors, but maybe investment managers, portfolio managers, and they'll be like, yeah, I had a home repossessed, it was just the right moment in time. It's crazy, isn't it? You reach a point where you are so in the system, it's not necessarily gaming the system, but it's like all of these things that we're told are so terrifying, like getting your home repossessed, taking a loan to pay your interest or your mortgage because you can't pay your mortgage, et cetera, et cetera. But it's actually like, these are the smart moves, that if you have the knowledge, you can make the system work in your favor. So actually, having a massive property portfolio and being like, yeah, I've had a home repossessed. For most people, that's the sign of failure. That's a, oh my God, I have my home repossessed. I've failed. But actually, you've got 60 houses and you're like, yeah, it was just the right move to get rid of it. Financial education is important. So SMI, what we know so far, if you are in receipt of those four types of benefits, you may be eligible. We know that you've got less than £16,000 in savings in that instance, because you're already receiving universal credit. It will pay the interest part of your loan. It will pay directly to your lender, so it doesn't pay it out to you. And it will also not pay the exact, potentially not pay the exact rate on your mortgage. So everybody's interest rate on their mortgage will be slightly different depending on the type of product that you're tied into and when you're tied into it. So you might have a 1% interest rate mortgage, in which case, congratulations. The SMI products, when they pay it, they will just look at whatever the Bank of England base rate is and they will have a calculation based off of that. That's what they will then pay. So it might be that they overpay on your mortgage every month. It might be that they underpay slightly, but at least you are still contributing something. Because it's a loan, it does have to be paid back. And you can just opt to do it at any point, but you don't have to. Most people will settle the debt either when they sell the house or when ownership is transferred. So it might be that you decide to sell the move, you would use the equity in your house when you sell it to settle the debt for the SMI loan. If you die and that house transfers to your children as inheritance, they will then expect that debt to be settled out of the estate because it's a transfer of ownership. So those are the instances, it has to be paid back. There's so many exam questions in just that. So exam question potential number one is which benefits do you need to be eligible for to receive SMI? Question number two is who does it pay out to? And it goes directly to the lender. Question three is does it pay your exact interest rate? And it's no, because it's based off a calculation. Question four is when is it repaid? Lots of questions on SMI. Yeah, so make sure you know your share. Yeah, two and three. Some things that people have been flagging more recently are to do with kind of quirkier rules. And it took me a little bit of time to get my head around this, so I'm going to take it slow. There's something called a 52-week linking rule. Right. And I would like you to imagine, so we just got back from a ski holiday together, which was delightful, and Maria decided that she absolutely would like to be a ski bum or at least work in a bar where all the ski bums go to drink. Absolutely. Shout out to Benson, the beautiful bartender. Oh yeah, Benson's bar. In moving back, I want you to imagine that you work a ski season, but you have a house in this country. Got it. So the scenario is you are a homeowner in this country. Yes. When you are in this country, you are short on work, so you can't pay your mortgage, so you're going to claim for SMI. Yes. But when the ski season kicks in, you're going to go abroad, you're going to be making loads of money, you can pay your mortgage off of that. You can start paying your mortgage at that point, which means you are technically no longer eligible for SMI. Yeah. There is a 52-week linking rule that basically says, if within 52 weeks, which is a year, right? A year. So let's say you go to the ski season, you start working the ski season, you stop receiving it. If within 52 weeks from the date you stopped receiving it, you need to make another claim because the ski season has ended, it only lasted four months because of global warming, and now you're back and you'd skint again. Yeah. You don't go on the waiting list for a reapplication. It literally just resets and starts paying out again. That's the 52-week linking rule. The other example I always give is if somebody was a Disney princess at Disneyland, but only worked for summers, so they could afford to pay while they were working at Disney, but not when they came back home. Yeah. As long as they reclaim for it within 52 weeks, it is not a new application. You just reopen your old application. Got it. So you have basically a calendar year. Yeah. That's another really common exam question, as is, I'm not sure what the exact question is, but quite a few people have been like, Charlotte, I got this thing and I didn't understand it, and it was something to do with, the phrasing that I get is, it was something to do with SMI, and when can they start receiving it? And that's not enough information, guys, for me to be able to find the answer. Yeah. But what I think it's referring to is the fact that you have to have been claiming on one of those previously for three months before you can apply for SMI. So you couldn't apply for universal credit tomorrow, and then, or today, and then SMI tomorrow. You have to have been claiming one of those benefits for a minimum three months before you become eligible for SMI. Yeah. Right. Got it. Okay. That's another exam question, as is, when would you stop receiving SMI? So the scenario would be, you've gone to the ski season, you know, making a wedge. Yeah. Working in Benson's bar. Yeah. Loads of tips, happy days. When would your SMI payment stop? And most people go for immediately, because they think, well, you're ******* earning a wedge now, you don't need it anymore. What you've forgotten is, you have to declare your earnings every four weeks. So technically, you'd stop receiving it within four weeks. It's a shit question, because it's designed to trip you up. It's meant to trip you up, but just remember the four week rule. Yeah, so if you receive benefits, you will be asked to declare your income every four weeks. Yeah. And then, just to recap, wow, that was a week. That was a week, yeah. Clearly. Seem not to study podcast will make you fall asleep. Some people do message to say that they listen to it in bed, which, always weird, I'm not sure whether to be weirded out or feel a small amount of pride. And just to recap, with SMI there, so there's potentially loads of exam questions that come up across CMAP 2 and 3. Yeah. The ones that we've just most recently spoken about is the 52-week blinking rule. Yes. The four-week rule for your affordability and declaring it for when you stop receiving it. Yeah. And then you have to be eligible to receive it, you have to have been claiming one of the benefits for three months. Yeah. There are case studies in the CMAP 3 exam specifically to do with, for example, people in debt, people who've separated, they've missed a couple of mortgage payments, they're looking to remortgage, but what are the big red flags? And because they've missed mortgage payments, that's a big red flag on their credit file. One of the questions is, what's the thing that they can do that will stop their home from being repossessed? And the answer might be, apply for a support for mortgage interest loan, but that would be dependent on whether or not they're receiving other benefits. Yeah. And whether they are eligible, which I can't give you the answer to because believe it or not, I don't know everything that is in the CMAP exam. What? Remember guys, this is not a comprehensive study guide. I think we forgot to say it in the last episode, but you cannot just listen to this podcast and think, oh, I sit my CMAP exam now and I'll definitely absolutely pass. Has it been done? Yes. Would I recommend it? No. Because re-sit fees are expensive. They're like 180 quid. Yeah. They're not ******* around. And that's the bulk of universal credit and SMI. The rest of this topic talks about, or it does a recap of life insurance as in the difference between term insurance and whole of life. But we've done that in previous episodes. We've done it to death. We might even do a little bit more. In fact, we've got at least one more episode where we're going to do it. Oh. And then income protection versus critical illness cover, which we've kind of, again, done to death. Done to death. So I think that was a lot of information and we did it there for this week's episode. I think we've done pretty well. Guys, remember, if you are struggling with your CMAP studies, there are so many places that you can go to get help. Loads. futureinfinance.co.uk is the first place that I would recommend. You can get over 12 hours worth of free study material, which I would link in the show notes for you. There is a WhatsApp community that you can join as well, which is free. And it's over 500 other students that are looking to get CMAP qualified. And they ask questions and they put really useful bits of information in there. So definitely join that. You can find that at futureinfinance.co.uk. There is a YouTube channel. There is a TikTok page. There is an Instagram page. All of that is geared towards helping you get CMAP qualified. So please don't feel like you have to go through this alone because you really, really don't. Thank you so much for tuning in. Make sure you leave us a review and subscribe. Don't leave us a review because it's not going to be five stars. There was a guy that commented on the YouTube channel yesterday that called it five minutes of utter driddle. That guy subscribes to a homemade cheesemaking podcast. Yeah, it was a good job Charlotte got that before I did because I would have asked for full spider monkey on him. So if you're going to leave mean comments, at least try harder. Yeah, do better. But leave us a five star review while you're doing it. Thank you so much for tuning in and we will catch you next week. Cue outro music. You've been so good. Are you okay? Okay fab. Podcast episodes.