Welfare Reform Act prompts review of group income protection

The majority of employers are expected to review their group income protection (GIP) plans as a result of the new Welfare Reform Act.

Research from Watson Wyatt has revealed that 87% of employers said the Act, which comes into force in October next year, will force them to review their current GIP plans.

The Welfare Reform Act is designed to reduce the number of individuals in the UK not working and claiming incapacity benefits.

Kevin Newman, a senior healthcare and risk consultant at Watson Wyatt, said: “The Act potentially implies a greater level of responsibility for employers around rehabilitation and enabling employees back into the workplace.

The overall value of state benefits will be lower for the vast majority of new claimants, although precise figures are not yet known. The Department for Work and Pensions has also indicated that half of all applicants will fail to receive full benefits in the new system.”

The survey results indicate that employers will look to reduce the current level of GIP provision with six out of ten employers considering a move to limited term benefit payment and three out of ten considering the application of a more restrictive definition of disability. In addition, 40% of respondents would consider ignoring state benefit provision when redesigning their scheme.