Don’t Ignore the Importance of Income Protection
With over 300,000 employees moving from work to state sickness benefits, and many employers looking to reduce sick pay within the next year, leading not-for-profit insurer PG Mutual warns UK professionals not to ignore the importance of income protection
The cost of sick pay to UK businesses has been widely reported on since the start of the recession, with the bill for long-term sickness leave within the private sector estimated at around £3.1bn per year in 2012.* With this in mind, it appears many companies have had to review their sick pay entitlement for staff, with twice as many organisations considering decreasing this over the next year as those planning to increase it.** This means that while the number of employees taking long-term sick leave seems to be increasing, the provision of sick pay from employers is set to decrease. As such, employees are running the risk of state sickness pay becoming their only source of income if they had to take long-term sick leave.
A recent survey by PG Mutual^ found that nearly 30% of people questioned had no idea what their employer would pay them if they had to take sick leave, and for how long. There appears to be an assumption by many people that if they had a serious illness or an accident and had to take an extended period of time off work, their employer would continue to pay them at their current pay rate – however, this is not always the case, and is becoming less and less likely as companies look to save money in the current climate.
The same survey found that 76% didn’t know what level of state sickness pay they would be entitled to – currently, it stands at just £86.70 per week – around £346.80 per month. The average UK household spends £484.00 per week or £1,936.00 per month on their outgoings – so this would barely be enough to cover most people’s rent or mortgage, let alone pay for fuel, food, utilities etc.
While it is estimated that the average person in the UK only has enough savings to live off for 19 days if they lost their income, the number of people with personal income protection insurance plans is still worryingly low, especially for those under the age of 25. Despite most UK adults having insurance in place for everything else, from their homes and cars to their iPhones and pets, little consideration seems to be given to how people would cover the cost of maintaining any of these things without a regular income.
Anecdotal evidence around why people don’t have income protection suggests a lack of understanding about the product and price – many people view the product with suspicion due to confusion with PPI, whereas others fear the cost to be prohibitive. In reality, all good incomeGo Back