From October 2008, the current State Incapacity Benefit will be replaced by the new Employment and Support Allowance (ESA), affecting all Group Income Protection (GIP) policyholders. This guide is designed to inform you, their advisers, about the changes Unum will be making to our policies in order to stay in line with the new legislation and respond to your clients’ needs.
Gross Pay Policies
First we take a look at the changes to Gross Pay Policies, including Capital Option, Pay Direct, Dual Benefit and Flex GIP. Areas under review include the Overall Limitation of Benefit, the Offset used to calculate the basic benefit basis, and Deferred Periods.
Overall Limitation of Benefit
Unum will be increasing the standard Overall Limitation of Benefit (OLB) on new Gross Pay Policies to 80 per cent of earnings (to include any insured employee pension fund contributions).
On request, we will also increase the OLB on existing policies at review. In the absence of any request, the OLB will remain at the current level of 75 per cent of earnings, less Notional Long Term State Incapacity Benefit (LtSIB)
Deferred Periods
Deferred Periods tend to reflect State Benefit provision, either in the form of Statutory Sick Pay (SSP) and Incapacity Benefit (26/28 weeks) or the employer’s own sick pay provision, However, following the introduction of the new Employment and Support Allowance (ESA), a new Deferred Period option of 41 weeks will be introduced, corresponding with the end of the 13-week Employment and Support Allowance Assessment Period that follows the 28 weeks of Statutory Sick Pay.
Offset
LtSIB is used as an offset in the benefit basis of most policies’, the most common being 75% of salary less LtSIB.
Unum will be offering an extended range of offsets offering employers the choice to remove or replace their current offset with one related to the new State Benefits:
ESA Basic: refers to the annual rate of the Basic Allowance, part of the Employment and Support Allowance (ESA) payable after the 13-week Assessment Period.
ESA Basic + wrac: refers to the annual rate of the Basic Allowance plus the Work-Related Activity Component at the full level
ESA Basic + support: refers to the annual rate of the Basic Allowance and Support Component, payable after the assessment phase
Notional LtSIB: refers to the annual rate of Long Term State Incapacity Benefit payable to a single person under the Social Security Incapacity Benefit provision prior to the introduction of the Employment and Support Allowance.This will be updated annually – based on published government figures where applicable.
Stated offset: a flat sum specified by the client.
None: a flat percentage of earnings with no offset.
For further information on the new legislation, or to find out more about the options for Gross Pay policyholders, please download the ‘Advisers’ Guide to the Impact of Incapacity Benefit Changes on Group Income Protection’, available in PDF format.