The Government has announced with effect from 6th April 2017 that they are reducing the Employment and Support Allowance (ESA).
ESA is paid to individuals by the state if they are unable to work due to illness or injury after they have been absent for 28 weeks. There are currently three levels of benefit, paid weekly:
- Basic Benefit paid from week 29 to 41: £73.10
- Basic Benefit + Work Related Activity Component paid from week 42 for up to 39 weeks: £73.10 + £29.05 = £102.15
- Basic Benefit + Support Allowance paid from week 42 up to State Pension Age: £73.10 + £36.20 = £109.30
With effect from 6th April 2017 the Work Related Activity Component will be removed. Any employee on sick leave from late September 2016 (becoming ESA claimants 28 weeks later) will only receive the Basic Allowance or Basic Allowance plus Support Component.
There is no change to the benefit paid to people eligible for the Support Component.
This means any employee eligible for the Work Related Activity Component will receive £1,511 per annum less from the State from April 2017.
Many Group Income Protection policies insure the benefit less the State Benefits on the insured benefit. This reduces the premium cost to the employer as it is assumed all claimants will receive the full Basic Benefit and the Work Related Activity Component. If this offset position continues it means the Group Income Protection provider will be insuring an additional £1,511 per annum of benefit the State was previously providing. This additional insured benefit will need to be paid for meaning there is likely to be an increase in the premium charged for the policy.
There are options available to keep the premium cost neutral which your Wingate adviser will discuss with you at the time of your scheme’s annual review but if you would like to discuss this beforehand please contact your usual adviser on 01883 332260.
This article is not meant to be exhaustive and is based on our current understanding of legislation which can change without notice. It is not a recommendation for changing any existing arrangements and professional advice should always be sought prior to making any changes to your arrangements.