According to the Guardian, hospitals including Birmingham, Cornwall and Liverpool have declared ‘critical incidents’ following a surge of flu cases across the UK. The plight of the NHS was brought into focus by other media reports that revealed the number of patients in hospitals in England quadrupled during December 2024.
While launching the Government’s initiative to reduce NHS waiting times at the start of 2025, Kier Starmer acknowledged that ‘millions of patients’ were now languishing on waiting lists. Worse still, many of those waiting for treatment were ‘often in pain’.
The Prime Minister’s comments raise a crucial point: if many of those waiting for treatment are in pain, then many of them may be unable to work, which could jeopardise their financial security. This is why protecting your income should always be central to your financial strategy, as it could ensure you can maintain your lifestyle if you’re unable to work due to a serious illness. Read on to discover why this is.
Employers may not pay you if you’re too ill to work
Contrary to widely held belief, employers do not have to pay you if you’re off work due to an illness. While many do, it’s often for three to six months, after which your income may drop significantly or dry up altogether.
If you’re employed you can claim Statutory Sick Pay (SSP), although this is unlikely to provide the standard of living you’re accustomed to. In 2024/25, the SSP is £116.75 a week and is paid for a maximum of 28 weeks, meaning you’ll receive up to £3,269.
While the SSP increases to £118.75 a week in 2025/26, or £3,325 over six months, this is probably not enough for you to meet your financial obligations.
Living off your savings could put your wealth at risk
As you can see, relying on the SSP might be something you regret if you’re unable to work due to a serious illness or accident. If you do, you may need to rely on your savings or investments to meet your financial commitments, which could deplete them much more quickly than you think.
This is highlighted by research carried out by Macmillan Cancer Support, according to media reports. The charity found that 80% of people with cancer were an average of £891 a month worse off because of additional living expenses or the loss of income.
Having to cope with increased expenditure with no income could create significant amounts of stress for you at a time when you’re trying to relax and recover from an operation or illness. This in turn could impede your recovery or mean you return to work before you’re fully recovered due to financial necessity.
There is good news though, as you may be able to protect your income so that you can support your lifestyle and preserve your wider wealth. Let’s look at this in more detail next.
Income protection typically pays a tax-free income
If you’re diagnosed with a serious illness and are unable to work, income protection provides you with a tax-free monthly amount. This is normally a percentage of your normal salary, such as 60%.
There is usually a deferment period before you receive the payments, which is usually three or six months. The longer you leave the deferment period for the less expensive the premiums will be.
This means that if your employer pays your full salary for three months, for example, you could set your deferred period for the same amount of time to ensure there is no break in your income.
Income protection typically pays out until:
- you return to work
- you retire
- the policy’s term ends.
Critical illness cover may cover the cost for treatment
While income protection could help you to maintain your standard of living without depleting your savings or investments, it may not provide enough money to cover the cost of private treatment. If you have critical illness cover (CIC), on the other hand, it could be used to fund private medical care so that you can return to work more quickly.
This means having CIC and income protection could allow you to receive treatment more quickly and then have financial peace of mind while you recover. As such, you will not need to rush back to work before you are fully recovered due to financial pressure.
Alternatively, the CIC cover could be used to pay for alterations to your home if needed. It should be remembered that CIC pays a lump sum on the diagnosis of specific illnesses that are named within the cover.
For this reason, it’s important to understand what’s covered and what isn’t. That said, CIC typically covers cancer, heart attack and a stroke.
It’s not only the breadwinner that may need protection
While you might think it only needs to be the main income earner that needs financial protection, there are other factors to think of. For example, if your spouse or partner looks after the children, your childcare costs may skyrocket if they’re diagnosed with a serious illness and can’t care for them.
This is why considering protection for them as well might be a shrewd financial move.
Get in touch
If you would like to discuss how we could help you to future-proof your income and wider wealth against life’s curve balls, please contact us. If you would like to discuss how you could create a financial safety net or would like to arrange a no obligation meeting with one of our advisers, please call us on 0333 010 0008 or book a meeting online and we’ll be happy to help.
Wednesday 29 January 2025