Unum calls on government to make Income Protection a back-up plan for UK employees
Industry-leading manifesto recommends four key steps to financially protect the nation
A manifesto released today by Unum, the financial protection specialist, urges government to help UK employees create their own back-up plan in the form of Income Protection. The manifesto draws on research from organisations including Demos and Charles River Associates, which reveals that employees, employers and taxpayers would all benefit from more widespread Income Protection cover. It sets out four key steps to begin building a back-up plan for the UK.
1. Introduce temporary tax relief for SME employers who offer all employees Income Protection.
Income Protection saves taxpayers’ money by reducing welfare payments when people are unable to work and cutting the length of time people need to be off sick. To recognise these savings and incentivise greater take up of Income Protection, the government should introduce temporary tax relief for employers who provide Income Protection for all their staff.
2. All relevant Government-backed advice services should explain how to prepare in case you are unable to work because of ill health.
People in the UK greatly underestimate the risk of being off work long-term and also overestimate the level of financial support they will receive from their employers and the state. This means they are unprepared when something does go wrong, but if they were better informed they could make smarter decisions about their back-up plan.
All relevant government advice services, such as the Money Advice Service, should include advice on how to prepare in advance of injury or ill health. This should include all sources of advice on: retirement planning, the Health and Work Service, Age Positive, long-term physical and mental health conditions, welfare, healthy workplaces and being a good employer.
3. The Government should carry out regular economic evaluations of sickness absence, how to minimise it and how to help people manage financially when ill.
There has been some evidence that the government is doing this, for example the recent Fuller Working Lives report, which summarised how people leaving the workforce early impacted on their health, pensions, income, carers and on the public finances. Another example is the Frost/Black Review which provided invaluable insights in to the impact of sickness absence on the UK and led to important reforms.
However, there needs to be a systematic programme of research and action. To minimise sickness absence, it is vital that we have strong evidence about the effects of sickness absence and the best value solutions to help people return to work.
4. Create an interdepartmental Government study to explore whether auto-enrolment can be used to improve access to other financial products
Pension auto-enrolment proved an innovative way to encourage personal and employer responsibility for financial planning that should benefit both parties and the taxpayer.
Between the election and 2018, as auto-enrolment beds in and minimum pension contributions step up to 8 per cent, the incoming government should begin interdepartmental work to understand the costs and benefits of using the auto-enrolment model to mitigate other financial risks that people are overexposed to.
John Letizia, Head of Public Affairs at Unum said: "Whatever the result of the next General Election, the new Government will face a number of significant social policy challenges. Group Income Protection is central to the debates on employment, health and wellbeing, and disability. The insurance sector is uniquely placed to provide innovative and affordable proposals based on expertise in this area. That is why we are setting out our key policy recommendations in this manifesto, based on the extensive research we’ve undertaken, to help the UK develop a robust back-up plan."
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