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Protecting your income for an unexpected future


The COVID-19 pandemic is affecting everyone not just in terms of health. Very few people are immune, whether employed in work or the self-employed with businesses. All are likely to have been hit hard by the pandemic.

For the vast majority of people, this means reducing spending to ensure that all the bills can continue to be paid. The Homes & Property website states that around 2.5 million people in the UK have taken a mortgage holiday as one of the main solutions. However, financial hardship is still a very real prospect for many, but due to the nature of this pandemic, there is far more Government & lender support in place than if someone was unable to work due to sickness.

Think of a time in the future when there is no lock-down or social distancing and everyone is back to work. If you were off sick how would you be able to cope financially?  What help would be available from the Government and lenders? You may think this will not happen to you but the Department of Health and Social Care’s study of Health in the Workplace, in July 2019, stated that 1 in 25 people in the UK are unable to work due to serious illness or injury.

If you are off work due to accident or sickness, the first option may be help from your employer (if you are employed). However, whilst some employers offer full pay for periods of 6 months or longer, the reality for many is no employer help at all and your only entitlement is Statutory Sick Pay (SSP). This is currently £95.85 per week compared to the average UK wage in 2019 of £511 per week. Imagine, instead of having 80% of your wage, as may be the case for furloughed staff or the self-employed being able to claim support, only having less than 19% of your wage on SSP. To make matters worse lenders usually have no obligation to offer a payment holiday and there is little help available for renters. For the self employed the situation is likely to be even starker.

You might think about using your savings. The Money Advice Service recommends having the equivalent of 3 months wages in savings as a minimum and you might be in the fortunate position that you have this at least.

The next stage is to start thinking about cutbacks and reducing spending, for example, reducing shopping and cancelling subscriptions. Beyond that it could be asking for help from family or friends or you have to start building up debt. This could lead to someone returning to work far sooner than they should, simply because they can’t afford to take the time to recover properly due to the financial pressures being created.

There is, however, a way to protect yourself when you are unable to work. Income protection can be a relatively low cost option to ensure that you have significantly less to worry about should you be off work due for an extended period of time due to serious illness, accident or injury. It may be that you need to have protection from day one or it may be that you do not need cover for a period of time, say 3, 6 or 12 months. Some people, for example, may wish to be covered up to their retirement age so if they couldn’t work again they would not have to worry about making ends meet until they retire.

Another benefit of income protection can be the fact that you can still be in receipt of Government benefits alongside your protection. So rather than one or the other, your income can be helped by both.

At Armstrong Watson, we are Chartered independent financial advisers and can discuss all aspects of your protection requirements with you based on your individual circumstances. We know from experience that protection of your income can provide peace of mind at the most difficult of times. If you'd like advice on income protection or to speak with one of our financial advisers near you, please get in touch on 0808 144 5575 or email help@armstrongwatson.co.uk

If you'd like advice on income protection or to speak with one of our financial advisers near you, please get in touch with John Hunt on 01387 955900 or email john.hunt@armstrongwatson.co.uk

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