News › Income Protection plans save UK taxpayers around £460 million a year and contribute to NHS savings
With over 93% of UK workers¹ having no income protection cover in place, there is still a considerable potential for increasing business in this marketplace. A recent survey has been carried out by the Association of Financial Mutuals (AFM) and OAC, a leading actuarial and financial services consultancy. It suggests that income protection plans are already believed to save UK taxpayers around £460 million every yearᵌ; money that can go back into the economy and help reduce the pressure on the NHS.
It is believed that people are four times more likely to have pet insurance than Income Protection Insurance¹ and that 2 in 5 people had no more than £1,000 in cash savings to fall back on, should they face an extended absence from work due to illness or injury¹.
A 2016 survey showed that 1 in 5 workers need to take over three months off work due to illness or injury during their working life².
With financial pressures on the NHS causing greater concern year on year, the AFM and OAC study has indicated that income protection plans, provided by the mutual sector, help reduce welfare state pay-outs and save UK taxpayers a considerable sum that also helps ease the growing pressure on the NHS.
Before the introduction of the NHS and the welfare state, mutuals such as the Shepherds Friendly Society were often the only way a working person could expect to receive help in their old age or if they suffered ill health.
It’s a fact that life expectancy has increased dramatically in recent decades; however so too has the prevalence of illness, meaning that the cost of delivering healthcare is escalating at a worrying pace. In addition, when people are off work due to sickness or accident, the cost of welfare provided by the state also increases, and national productivity levels fall.
The role played by income protection plans provided by mutuals was the subject of the AFM and OAC study and highlighted a number of ways in which such plans help reduce state pay-outs, save money which can go back into the welfare state and support people in getting back to work sooner.
The total cash payments to holders of income protection plans provided by mutuals reached £54.1 millionᵌ in 2016. This is an invaluable injection of cash to help replace lost wages at a time when people are away from work due to illness or injury.
The survey also indicated that those holding an income protection plan received more in benefits from their planᵌ than they might have expected to receive from either their employer or the welfare state. This would suggest that investing in income protection makes a good deal of sense for most working people.
Who can open an Income Protection plan?
Anyone from age 16 who is a UK resident and has been registered with a UK medical practice for at least three years can apply for a Shepherds Friendly Income Protection Plan. They can enquire no matter what their profession and whether they are employed or self-employed. Cover can start from as little as £5 a month* and needs to last for at least five years (our minimum term).
If they are employed, they can choose to cover up to a maximum of 70% of their regular gross income. If they are self-employed, they can cover up to 70% of their net profit.
A concern some workers seem to have with income protection is over how confident they can be about receiving benefits when they come to make a claim. In the case of Shepherds Friendly, our claim payment rate is over 97% so that they can choose us with confidence!
So, it is well worth taking a closer look to see how you can grab a share of this potential major growth market, safe in the knowledge that every new piece of business could be saving tax payers money and contributing to savings in the cost of the NHS.
*18-year-old with a waiting period of one day, £376 of cover, premium of £5.00 a month.
All references to taxation are to UK taxation and are based on Shepherds Friendly Society’s understanding of current legislation and H M Revenue and Customs practice which may change in the future. Investment growth is by means of bonuses, the amount of which cannot be guaranteed throughout the term of the contract. Please ensure that you read the full terms and conditions of this plan which are available from your financial adviser or by contacting us directly.
Sources
- Wealth and Protection Survey from Drewberry Insurance
- Personal Finance Survey from Drewberry Insurance
- Association of Financial Mutuals – The mutual sector’s contribution to savings in the NHS, the Welfare State, and to employers and individuals
