The co-chairman of the Income Protection Task force, Clive Waller, argues that the demand for income protection insurance (IP) is likely to rise significantly due to cuts in government welfare spending, including spending of incapacity benefits.
Cuts to Incapacity Benefit
The UK state currently provides benefits of £95.15 per week for individuals who are unable to work due to sickness or injury (classed as incapacity).
However, as a result of government spending cuts this incapacity benefit (called the Employment and Support Allowance) is becoming increasingly difficult to obtain, highlighting the increased need for personal income insurance (also known as permanent health insurance).
In fact, the government is currently rolling out plans to reassess all those currently claiming incapacity benefit with the view of taking around 500,000 people off the benefit.
Those deemed fit for work after the assessment are to be told to find work or start claiming Jobseekers’ Allowance (which provides a far lower level of weekly benefit).
Income Protection Task Force Opinion
The Income Protection Task Force (IPTF) argues that state benefits for those who are unable to work due to accident or sickness (disability) are likely to be far more restricted in the years to come.
Even if incapacity benefit can be obtained in the first place, the Task Force argues that future benefits are unlikely to provide a sufficient level of income replacement should illness or injury strike.
It is argued by the IPTF that the size of the budget deficit has forced the government to look at all potential methods of reducing welfare spending, including incapacity benefit spending (which represents a very large proportion of total welfare spending, having cost the State £135 billion over the past ten years).
The Task Force also pleads with advisers to highlight the need for income protection cover to their clients as a vital aspect of any long-term financial plan.