Income Protection

What happens to your income if you are unable to work due to a long-term illness or disability?

No one I have spoken to has ever welcomed a long-term illness or disability. At the same time no one plans to run out of money to pay all the essential bills you have each month, no one plans to fail, but it can happen where you are unable to work through no fault of your own.

Statutory Sick Pay (SSP)

Statutory Sick Pay is the minimum you must legally be paid if you’re off sick from work. It is paid to employees of companies who are off sick for at least four days in a row. 

While you’re on sick leave, the standard weekly rate for SSP is £94.25 a week. Statutory sick pay can be paid for up to 28 weeks.

It’s treated as taxable income and paid by your employer but, if your employer goes bust, HMRC will pay your SSP instead. (Source Which Money). Payment of Statutory Sick payments is not available to the self-employed.

The government then step in after the 28 weeks and, following an assessment, you could be eligible for Personal Independence Payments (PIP’s). These are paid based on your circumstances and the good part is that these payments are paid tax free, but they can be reduced or stopped if your circumstances or needs change following assessment by the DWP.

PIP payments are made up of two parts, first the daily living part of PIP is a maximum payment of £87.65 weekly, there is also a Mobility Part to PIP and this is £61.20 – so if you do qualify then the maximum combined payment award is £148.85 weekly. This is a total annual payment of £7,740 gross. It is subject to reviews and could go down or stop. (Source Gov.UK)

So, the State pays?

But, if you are renting or have a mortgage, the maximum PIP payment is unlikely to cover it let alone all the other bills and the added stress this would cause. The reality is that you would need financial help of some kind.

It is highly relevant where an annual maximum PIP payment is £7,740 each year, compared to the national average salary; as advised by The Office of National Statistics, the UK Average Salary 2019 for a full-time salary was £36,611. If you are earning the average wage it would mean a gross annual income shortfall of £28,871.

Remember the PIP payments can reduce or be removed.

Financial solutions are available to you

Longer term solutions can help protect a percentage of your current income and would be paid in the event of a long-term illness or disability. They could start payment after as little as 4 weeks, and to age 70 if needed. Income payments during a qualifying claim, and when taken up by an individual, under current rules are paid tax free. 

To get help talk to your adviser, or contact Temple Wealth for help where we will always be pleased to help solve a financial problem, after all it is what we do for all our clients.