Many industry commentators have bemoaned that the barrier to more family income benefit sales is that the product sounds like a Government benefit – an amalgamation of child benefit and its predecessor, family allowance.
If only the product could have profited from the focus that child benefit had placed on it after the Chancellor cooked up a storm at the recent Tory conference by announcing higher-rate taxpayers would no longer be eligible. That level of profile is what the industry needs to bring the issue of protection into people’s living rooms.
In the current economic environment, FIB is a product that makes absolute sense. Buying a protection plan paid on an income basis makes perfect sense for cost-conscious consumers looking to protect their family’s future in the event of critical illness or death.
The recession has prompted many to think about how they would cope if their income stalled or stopped altogether. But with family purse strings pulled ever tighter, the job of the adviser has called for greater powers of persuasion and solutions that make sense.
Family income benefit is an inexpensive solution that helps take a load off clients’ minds that, should the worst happen, their families would have a financial coping strategy. It is the most cost-effective financial safety net a family could buy.
Having it in place to pay for childcare or allow the other parent to reduce their hours at work ultimately allows the family to carry on functioning in trying times.
The fact that family income benefit pays out a regular income rather than a lump sum from the time the claim is made also helps to sidestep the issue of where the money should be invested.
Having to deal with a potentially large sum of money during an emotionally difficult time presents an issue in itself but, in the current climate, deciding where to invest to ensure a reasonable rate of return makes the simplicity and ease of a regular income all the more appealing.
However, although an adviser sits with a client and goes through all the benefits of FIB when a policy is bought, it seems that at the point of claim this can all be undone when the client is offered the option to commute family income benefit payments to a lump sum payment.
This is an issue that has been keenly contested in the past with the two camps – those purists who consider that if income was the choice at the time then it should remain that way and those who can see the merits of clients who change their mind and opt for a lump sum.
To try to shed some light on the issue and gauge the real market sentiment, Scottish Provident surveyed advisers to see which side of the debate carries more weight. The results are conclusive. Nearly three quarters of IFAs are in favour of their clients being offered a single payout rather than being forced to take up the option of regular payments.
Communicating their options allows customers to evaluate their circumstances and make an informed decision to suit their needs.
In our experience, around two-thirds of claimants opt for a regular income. Of the remainder, 12 per cent decide that after a few income payments they would prefer to take a lump sum. This proves how flexible this product really is and surely this best serves the clients’ interests.
Jennifer Gilchrist is senior product development manager at Scottish Provident