Well maybe it is time for a rethink. What is a pension other than a deferred income? Why aren’t employers and employees protecting their incomes whilst they are at work? What about the potential impact upon retirement income?
By covering pension contributions under a group income protection scheme both the pension scheme and employee can have a waiver of contributions in order to continue to provide employees with a decent income in retirement, as well as in their working life.
Why do organisations and individuals pay, for example, 10 per cent or 15 per cent of salary for a pension that could benefit them in, for example 26 years rather than 0.5 per cent (limited benefit payment plan) to 1.5 per cent for something that could benefit them in 13 or 26 weeks? This seems crackers financial planning.
Well of course the perception of both employers and employees is that ill health or disability will never happen to them, but, bad news as 2.7 million people claim state health benefits as they cannot work, and, of these 1.23 million have been claiming for more than five years – at a reported cost of £24bn to taxpayers in 2009/10.
If the worst should happen surely the state will look after me? Well let us forget the potentially massive reduction in income that state benefits provide vs. earned income and net pay and focus on the chances of getting that benefit under the new state benefit testing regime. Did you know that of the 195,500 new claimants applying for benefit between October 2008 and February 2009 that of those audited 36 per cent were found fit for work and therefore not eligible and 38 per cent ceased claiming before the assessment was completed? Furthermore 11 per cent were eligible and perhaps could work in the future, 5 per cent would most likely not and 10 per cent were under assessment. So, what would happen to you if you were off sick?
How odd a populace are we that we quibble over our car and/or home insurance premium(s) but seem loath to pay a similar amount to protect the very income that pays for that insurance, the mortgage, the social life, the investments etc?
So in summary please forget about pensions, mortgages and investments until you have protected the income that funds them. State benefits can provide relatively little, are difficult to get and without adequate income protection provision you can forget about life as you know it.
Paul Avis is sales and marketing director at Canada Life Group Insurance.