UK workers unaware of income protection options

More than half (51%) of respondents mistakenly assume their employer would pay full salary for at least three to six months in the event of an illness that prevents them from working, according to research by think tank Demos.

The research, Investigating how to protect financial wellbeing during times of austerity, which is supported by Unum, found that respondents were more likely to insure their mobile phone (12%) or their pet (13%) than to protect their own income (6%).

It also found that 23% of respondents admitted to having no financial safety net in place in the event they would be unable to work in the long term. More a third (35%) said they would rely on their own savings.

However, when asked the current level of savings they could access in the event of emergency, half (49%) had less than £2,000 to support themselves and their family.

The majority of over-45s surveyed would welcome help from their employer when planning for their financial protection. However, 77% of respondents said their employer either did not offer, or make them aware of, any group insurance support.

The research also found:

  • Two-thirds of respondents inaccurately underestimate the risk to themselves of being unable to work for more than six months. Less than a fifth (17%) believed that their risk was as low as one in 1,000, when the reality is around one in 10.
  • One in five respondents overestimated the level of government benefits they stand to receive in the event of long-term sickness, believing they are entitled to at least £200 a week, £50 a week more than is actually provided by a combination of employment and support allowance and disability living allowance.
  • In the event of sickness absence of more than six months, 12% of respondents said they would rely on their overdraft or a credit card to see them through, while a further 15% would turn to their families for help.    

Max Wind-Cowie, researcher at Demos and author of the report, said: “These findings show a workforce on a financial cliff edge, one misfortune away from being unable to provide financially for themselves or their family.

“That twice as many people would rather protect their iPhone or Blackberry rather than their own monthly wages shows just how unaware of the risks people are.

“Many employees lack understanding about the realities of long-term sickness, find benefits confusing, or don’t even know what is available to them. Given the fact workers seem to rely a lot on their employers, it’s no surprise that they are looking to their firms to help them better plan for their individual financial security.”

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Peter O’Donnell, chief executive of Unum, added: “One in 10 of us will be forced to take a leave of absence from work due to illness or injury during our working lives. A quarter of those who do leave work fall into poverty within 12 months.

“Workplace protection policies can benefit employees and employers alike, and are typically cheaper and more easily available than individual cover. It’s vital that concerned consumers ask their employers about the employee benefits that may be available to protect their family’s wellbeing.”