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WHY IP? You may be wondering why Mason Scott are having a focus on Income Protection this year? Well, just over 1 million people have individual Income Protection cover and a further 2 million are being covered by employer-funded schemes. In a workforce of 30 million this means there is are a massive 27 million employed people with no income protection cover in place. Over 100,000 new Income Protection sales are made each year in the UK, however those sales represent less than 1% of the total workforce requirements. When you consider that Mason Scott has access to Whole of Market policies it gives you the customer, a much greater opportunity to protect your income at an affordable price. Both long term and short term cover is available at great prices. Let's start by looking at why people need Income protection.
Household Savings and State Benefits
Most people understand that unless you have an income that is not dependent on your ability to work, during your working life even a temporary break in working can cause long lasting financial damage. Accrued savings can be rapidly depleted. We may not feel we are vulnerable to a long term permanent medical condition or accident. Consider the effect of a 6-12 month loss of income. Consider we are 3 times more likely to suffer incapacity than we perceive and 26 times more likely to be incapacitated for 6 months than die before the age of 65.
Can the mortgage be paid?
Utility bills, food, transport, children’s living costs… How quickly will any savings be depleted just maintaining these essential costs? The Money Advice Service – Financial Capability Survey in 2015 found that a third of middle class families would have to borrow to meet an unexpected bill of £500. But many are lulled into a false sense of security by thinking that state benefits will fill the gap.
State Benefits – The safety net is low and weakening
- The average net take home pay is around £415 per week for a median earner.
- If they do not have any employer-funded sickness benefits. In the event of a long term incapacity all they would be entitled to is £88.45 per week
- Statutory Sick Pay is £88.45 per week
- Income would fall £325 per week on average.
- Over the full 28 week period that is a £9000 shortfall in just 7 months.
- This would clearly place a lot of stress on the household both financially and emotionally. Stress would not assist in a speedy recovery and a healthy return to work.
The Work Related Activity Component that may be received will be removed effective from April 2017. This is a £30 per week reduction in state support.
Mortgage Interest & Support Benefit
Currently, under Universal Credit, owner-occupiers with a mortgage must wait for a qualifying period of 9 months before they are entitled to any support for their mortgage payments. Additionally, no help is available if you (or your partner) have any earned income.
After the qualifying period, support is available towards mortgage interest payment with a cap of £200,000 for the mortgage. Payments are calculated at a set rate (currently 3.13%) an paid monthly. In the 2015 budget, the government announced that from April 2018 payment towards mortgage interest will be turned into a loan from the government. The loan will be repaid either when the house is sold or on return to work.
Get in touch with a Mason Scott consultant today and let us see what we can do for you.
Trust us to save you time, money and stress. Give our friendly team, all based in our offices in the North West, a call today. Freephone: 0800 138 8200 Telephone: 01942 238 214