To understand where protection fits in with current state benefits it’s worth a quick recap of what’s available.
As Damian O’Connor of Roxburgh Financial Management says: “It is vital that advisers are aware of changes and developments not just within protection, but also its role within the social and state benefits landscape in order to understand the impact on their clients. Having a clear picture can only help to make a more informed decision.”
Statutory Sick Pay: Payable to anyone in full time employment earning at least £113 a week. It is payable for up to 28 weeks of workplace absence and paid at the rate of £89.35 a week. This benefit is paid by employers, not the government, so is not available for the self-employed. It is also subject to income tax.
Employment and Support Allowance: This has replaced (bar around 3,000 existing recipients) Incapacity Benefit for new claimants, which is itself in the process of being replaced, for the means-tested variant, by Universal Credit. The claimant will be placed in one of two groups, depending on how ill they are. The support group is for people too ill to work and unlikely to benefit from help to get back to work. The work-related activity group is for people who are likely to be able to return to work with some help.
During the assessment phase (the first 13 weeks of a claim) individuals will get up to £73.10 a week if they are over 25. Anyone younger than this can claim a maximum of £57.90 a week. Following an assessment, claimants get up to £109.30 a week if they are too ill to work and are unlikely to benefit from help to get back in to work.
But note from April 2017, the maximum that can be paid under the work-related activity group is the same as that which a claimant would receive from Jobseeker's Allowance plus non-financial assistance to help them back to work. Jobseeker's Allowance is currently £73.10 for a single person and £114.85 for a couple.
Support for Mortgage Interest (SMI): A mortgage support element available as part of Income Support, Income-based Jobseeker's Allowance, Income-related ESA, Universal Credit or Pension Credit. This element is assessed at a standard rate, currently 2.61 per cent, up to a maximum loan size of £200,000, where the loan was for the purchase of the home or for essential repairs or maintenance.
In 2016, the government returned the waiting time needed to qualify for SMI from 16 to 39 weeks for working-age benefits. It is limited to two years for JSA claims.
From next year, SMI will be changed to a loan, meaning any benefits plus interest will have to be repaid when the claimant returns to work or when the property is sold. This will apply immediately to new and existing recipients, who will have to receive industry standard advice about the loan and agree to the terms in order to receive the help in future. A charge will be placed on the property.