What would the state do for you if illness or injury meant you couldn’t work?
Rather quietly and without much fanfare, State incapacity benefit has been replaced by the new Employment and Support Allowance (ESA) which has been designed to provide only a basic level of replacement income if you’re too ill to work.
It’s important to remember that, depending on your circumstances, you may also be eligible for other state benefits. For example, those on low incomes may be able to qualify for means tested benefits such as ‘Income Support’ and ‘Income Support for Mortgage Interest’, regardless of capacity for work. There’s also additional support in the form of Disability Living Allowance, which pays an additional benefit if your illness or incapacity is so severe that you need to pay for help around the home, or if you require help getting around.
How much money will I need?
You need to consider whether ESA alone would be enough to help you meet your usual living costs and expenses. As you will see below, for most people, there is a short answer to that !
When can I apply for the allowance?
If you’re self employed
you can apply to be assessed for the new allowance after the first four days of any illness.
If you have an employer
, you will first be eligible to receive Statutory Sick Pay after four days of illness. Employers have to provide you with a minimum of £75.40 per week for 28 weeks. However, some employers may offer more than this and possibly for a much longer period. You can apply for ESA after 28 weeks.
How will I be assessed for the new allowance?
When you apply for ESA you’ll have to undergo an assessment which takes place during the first 13 weeks of a claim. During this period, you’ll receive a weekly benefit of £60.50 (or £47.95 if you are under the age of 25). The assessment is firmly focused on your capability to work rather than the extent of your disability. So if you fail the assessment, any benefits that you have received during the assessment phase will stop, at which point you would have to apply to be considered for Income Support.
The assessment not only helps to establish whether you are entitled to receive benefit payments from the state, but will also influence how much you receive depending on which of the two categories you’re placed in.
How much could I receive after the assessment?
Category 1 - If there’s a reasonable expectation that you’ll be able to return to work again
, you’ll receive a basic allowance of £60.50 per week and a further allowance, called the Work Related Activity Component, of £24 per week. However, payment of this second amount will be conditional on whether or not you attend regular back-to-work interviews which aim to measure your progress against a back-to-work programme.
Category 2 - If you become severely incapacitated and are not expected to return to work again
, benefits are slightly more generous. Again, you’ll receive the Basic Allowance figure of £60.50 per week, but you’ll also receive an additional Support Component of £29 per week. In addition, depending on your circumstances and eligibility for other state benefits such as Disability Living Allowance, you may also qualify for an additional sum of £12.10 per week in the form of Enhanced Disability Premiums.
Whichever of the two categories successful claimants are placed in, benefits will continue to be paid for the full duration that they are unable to work which, if necessary, could be until state retirement age.
Do you think you might need more than this?
You don’t need to be a financial adviser to work out what life could be like if you were relying on the state to support you through a period of ill health or injury. Something as simple as a bad back, for instance.
Permanent Health Insurance, a financial product which pays out a pre-determined level of income should you be unable to work for a prolonged period, is likely to become a very popular product once the details of ESA become common knowledge. For more details click on the link below : http://www.independentfinancialservicesuk.co.uk/Insurance/Permanent-Health-Insurance.mspx