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Keep covered for the rainy days

Whatever your view about the principle of providing people with social security benefits if they are ill or unemployed, it is inadvisable to try living solely on what the State provides in such circumstances. The so-called ‘safety net’ is lower than you may think.

After the recent U-turn on the Personal Independence Payment (PIP), the government has said there will be no more benefit cuts beyond those already planned. But that does not mean you or your family could comfortably rely on State support to make ends meet during periods of ill-health or unemployment.

The main benefits you could be entitled to include:

Ill Health – If you are unable to work because you are sick or disabled, you may be able to claim Statutory Sick Pay (SSP) or Employment and Support Allowance (ESA). SSP is paid at a fixed rate of £88.45 a week for the first 28 weeks of sickness if you work for an employer. Otherwise, you should claim ESA.

Personal Independence – Payments are an additional benefit for people aged 16-64 with a long-term health condition or disability who need help with everyday tasks or getting around. PIPs help with some of the extra costs inevitably incurred as a result of long term ill-health or a disability. The standard daily living component is £55.10 a week and this can increase by the addition of a standard mobility component of £21.80 a week. There are enhanced PIPs if you are not expected to live more than 6 months.

Unemployment – You will need an assessment to work out the level of help you are entitled to receive, and your rate will be regularly reassessed. If you are 25 or over but have not reached your State pension age, you will receive a maximum of £73.10 a week Jobseekers Allowance while you are actively looking for work. The rules are different in Northern Ireland.

Retirement – the full new State pension which started on 6 April is £155.65 a week. Your National Insurance record is used to calculate your entitlement, and you will usually need 10 qualifying years to qualify for any new State pension, and normally 35 years to claim the full amount.

Death – You might be able to claim Bereavement Allowance if you are widowed between 45 and State pension age. You can receive this benefit for up to 52 weeks from the date your husband, wife or civil partner died. The maximum rate is £112.55 a week if you are aged 55 or over. If you are bringing up children, you would receive Widowed Parent’s Allowance instead but the maximum weekly benefit is the same. You may be able to get a one-off £2,000 bereavement payment if you are under your State pension age when your husband, wife or civil partner has died.

This brief list of some of the main benefits is by no means exhaustive, but it should be enough to indicate that the amounts payable are probably too low for you to maintain the standard of living that you would wish for yourself and your family. A range of plans can help bolster your financial defences. They include life and health insurance cover as well as capital accumulation programmes.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.


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