GIP as the priority benefit



Key points

GIP can provide financial protection should an employee lose their income due to illness or incapacity and safeguard an employee’s financial future by enabling employers to insure pension and National Insurance Contributions so these are still paid.

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With a whole host of added value services, such as employee assistance programmes and vocational rehabilitation, now is the time to increase the profile of this increasingly crucial protection product which many in the financial services industry would argue is a priority.

The recent introduction of Automatic Enrolment (AE) has meant that as every employee now has access to a pension, employers need to think differently in the war for talent, to both retain and gain new employees.

If we were to park the legacy of pensions and be able to start again, I wonder if GIP would be higher up the corporate purchasers’ pecking order; after all, what is a pension other than a deferred income? GIP is a benefit which can protect employees’ current finances, now that pension savings are effectively taken care of, and can be a key differentiator between employers.

The market on the face of it appears to be doing well by premium and employee growth but only 17,111 employers have this type of benefit. Clearly with so few employers operating these schemes, it could be a great benefit to set an organisation apart from their competitors.

2,106,180 employees are covered by GIP, and with around 100,000 new personal policies being sold annually it is likely that fewer than 10 per cent of individuals have any cover at all.

This means they are 100 per cent reliant on State Benefits or may still have an ill health early retirement pension if they have a defined benefit pension scheme which is becoming ever rarer.

Conversely our industry must be doing something right in the GIP world as, since 2006 we have covered 375,042 new employees (72 per cent of whom have been added since 2011) showing the value that existing, insured employers place on this benefit.

For organisations with schemes that have any form of limited eligibility, such as being closed to new entrants, or are for executives only, or for pension scheme members only, there are great reasons to expand schemes to new categories of employees.

GIP is an inexpensive benefit, with a budget option costing as little as 0.2-0.5 per cent of salary for a limited benefit payment plan. Yet it can provide invaluable financial protection should an employee find themselves unable to work due to illness or incapacity. Cost should not be a barrier when you ask yourself, “What would happen to me if I were sick?”