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Income protection — some ideas for the new government…

Those of you who have read any of the political manifestos over the previous weeks may have noticed one glaring omission from all the publications: the subject of welfare reform and the role that income protection could (and probably should) play in this process.

For those not immediately familiar with this topic, this link will take readers to a blog last year that outlines the very real financial dangers that most working households are exposed to should an income earner be forced into a prolonged period of absence from work through illness or injury. The statistics speak for themselves, and are rather chastening.

So it is a real shame that no political party formally recognised this as a problem worthy of inclusion in their electoral promises. However, this may change over the term of the next administration, and the Association of British Insurers (ABI) is working to accelerate this debate.

The ABI has set out the priorities that the next government should look at here:

  • Clear expectations: to ensure that working households know how much support they can expect from the state if they become too ill to work
  • Simple income protection/welfare interaction: so that private and state support works to produce a net benefit for those with this protection
  • The employer role: incentivising or mandating a role for employers in the provision of income protection for employees
  • Personal responsibility: motivate and facilitate personal responsibility for adequate income safety nets

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Well, the cricket season is here, and England and Australia are stepping up to the wicket. Although we compete with each other in the sporting world, when it comes to pensions, Australia’s pension programme is held up as a model for our auto-enrolment initiative. Auto-enrolment was introduced because people weren’t saving enough into their pensions, and it is still early days but signs are positive. However, in Australia, saving into a pension is compulsory, and in fact employers are the ones who have to pay in. Employees in Australia can make additional contributions into their pensions, but they don’t have to. Should the onus be on the employer or employee to save? Well in the UK we think it’s both, but to get ‘adequate’ savings for retirement it’s the employee who has to pay more in.

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