1 Income Protection Can your clients afford not to? For advisers only. Not for use with customers. Ref: IP02/Sep15

2 Important Notice Please note that the following presentation is for professional financial adviser use only, and is not for use by or with customers. Details of any provider specific products mentioned in the presentation are taken from the Friends Life Protect+ product range only and available from your normal contact point, together with information and support. More information about Protect+ can also be found by referring to the Protect+ product literature, available from the Document Library on the Adviser site, at:

3 Protecting income – Learning Objectives  Understand why clients do not buy income protection, the causes of long term disability and the level and qualification criteria for state benefits.  How different types of protection work together, complementing each other to provide a portfolio of protection that provides a broader safety net which meets both critical and long term disability needs  To become more confident when discussing the need for income protection so that complimentary disability protection can be incorporated as a key component to client’s protection portfolios.

4 Protecting income – can your clients afford not to? Without income most things in your client’s life will need to change if they become incapacitated. Ensure all of your clients understand the true need to protect their lifestyle. Without income most things in your client’s life will need to change if they become incapacitated. Ensure all of your clients understand the true need to protect their lifestyle. Mortgage / Rent Travel Utility bills Food Credit cards Loans Clothes Car costs Charities Entertainment School costs Medicines Pension Savings Holidays Dining out Broadband Home furnishings Hobbies Rainy days Celebrations Weddings Birthdays Concerts

5 Protecting income – can your clients afford not to? Which of these do you think your clients believe are true? “I already have protection” “If I do get sick, it won’t stop me from working” “I’ll be looked after one way or another” “Income protection cover is too complicated”

6 Protecting income – It won’t stop me working What if? Will your client suffer from depression? Maybe. Depression affects people in different ways. Symptoms can range from mild to severe, and some symptoms can impact your ability to work. Will your client suffer from depression? Maybe. Depression affects people in different ways. Symptoms can range from mild to severe, and some symptoms can impact your ability to work. Will your client get injured? Maybe. In 2014/15 handling injuries, slips and trips resulted in an estimated 2.1 million working days lost The Health & Safety Executive Statistic 2014/2015

7 Income Protection – It won’t stop me working There are 6.5 million carers in the UK That’s 1 in 8 adults Every day, 6,000 people become carers Source:

8 Protecting income – It won’t stop me working What if? Many clients are able to return to work within a year or two, however many claims are much longer-term. On average Friends Life Income Protection claims are in payment for seven years. Friends Life Individual Protection Claims department

9 Protecting income – CIC and IP Critical illness cover Income protection Competing or working together?

10 Protecting income – CIC and IP £150k Car accident – serious musculoskeletal injuries – e.g. paralysis £100k £50k CIC £147,000 Mortgage Male 31 nb on a salary of £25,500 with a £100k mortgage Please note: This case study is fictional and for illustrative purposes only.

11 Protecting income – CIC and IP £150k Car accident – serious musculoskeletal injuries – e.g. paralysis £100k £50k CIC £63,560 IP - £ Per Month Monthly IP payment for 39 years Mortgage Male 31 nb on a salary of £25,500 with a £100k mortgage Please note: This case study is fictional and for illustrative purposes only.

12 Protecting income – CIC and IP £150k Serious mental illness leaves him unable to work for 18 months £100k £50k Cancels policy Diagnosed with a stroke Mortgage Male 31 nb on a salary of £25,500 with a £100k mortgage Please note: This case study is fictional and for illustrative purposes only.

13 Protecting income – CIC and IP £150k Serious mental illness leaves him unable to work for 18 months £100k £50k Monthly IP payment for 15 months IP £ pm Diagnosed with a stroke CIC £63,560 IP £ pm Monthly IP payment until retirement age Mortgage Male 31 nb on a salary of £25,500 with a £100k mortgage Please note: This case study is fictional and for illustrative purposes only.

14 IN CASE OF EMERGENCY BREAK GLASS Protecting income – can your clients afford not to? £50 per month or £1.66 per day

15 Protecting income – “I’ll be looked after” Would your client be looked after? How long could your client afford to financially support their partner / parent / friend? For how long? 1 week? 7 years? Indefinitely? For how long? 1 week? 7 years? Indefinitely? *Source: Aviva Family Finances Report January 2016 The average savings pot is just £3,150*

16 Protecting income – “I’ll be looked after” Group Income Protection Some employees may have sufficient cover from an employer’s group income protection (GIP) policy Understanding a client’s work sick pay arrangements helps them understand it Things to consider: A minority of employees have access to a GIP scheme Client’s may not have as much cover as they could get.

17 Protecting income – “I’ll be looked after” Assessment for Employment Support Allowance (ESA) Tested against a number of physical and mental activities Claimants health condition or disability is given a score rating They must score at least 15 points to claim Non contributory ESA and Universal Credit are means tested The State will help – won’t they? Income protection could impact your clients eligibility for state benefits.

18 Protecting income – “I’ll be looked after” Contributory Employment Support Allowance (ESA) Assessment phase (first 13 weeks)How much? Under age 25Up to £57.90 a week Over age 25Up to £73.10 a week Then...How much? Work-related Activity GroupUp to £ a week Support GroupUp to £ a week The State will help – Won’t they? Income protection could impact your clients eligibility for state benefits.

19 Protecting income – “I’ll be looked after” The State will help – won’t they? We recommend you also consider whether your client is able to claim state benefits, other than Contributory ESA, to help supplement their income if they are unable to work. Most of these are means tested. Having children could increase the level of state benefit your client is entitled to. But, personal circumstances such as those below could reduce any means tested benefit available: Partner’s income/hours worked Savings Pension income Income protection could impact your clients eligibility for means tested state benefits.

20 Protecting income - Universal Credit Universal Credit brings together the following benefits: Housing benefit Working tax credits Child tax credits Employment and support allowance (Non NI contributions) Income support Job seekers allowance The benefit is administered online with claimants having their own accounts A core benefit is paid with additional components being paid based on household needs Means testing criteria is similar to the current benefit system

21 Protecting income - Claimant commitments Universal Credit - designed to support and promote financial independence from the State and encourage individuals back into the workplace Improved incentives for returning to work, including tapering of benefit eligibility as earnings increase Use of claimant commitment to support and sanction Sanctions involve the reduction of benefit payments, these can be applied for up to three years Only the sickest claimants, full time carers and mothers with a child under one years old are not expected to look for or prepare for work Payments of means tested benefits relate to work rather than career

22 Protecting income - Case studies One person is too sick to work. Their partner earns £22,000 a year. They have 2 children, a mortgage and has £7,000 of savings. Tax credits: £4, Child benefit: 1, Total: £6, a year One person is too sick to work. Their partner earns £22,000 a year. They have 2 children, a mortgage and has £7,000 of savings. Tax credits: £4, Child benefit: 1, Total: £6, a year One person is too sick to work, their partner is not working. They have 5 children, rent from the council and have no savings. Tax credits: £14, ESA: £6, Council tax support: £1, Housing benefit: £ Child benefit: £3, Total: £32, Total after cap - £27, a year (Council tax support is paid in addition to the benefit cap) One person is too sick to work, their partner is not working. They have 5 children, rent from the council and have no savings. Tax credits: £14, ESA: £6, Council tax support: £1, Housing benefit: £ Child benefit: £3, Total: £32, Total after cap - £27, a year (Council tax support is paid in addition to the benefit cap) Single person is an ESA claimant, rents privately and has no savings. Tax credits: £3, Council tax support: £ Housing benefit: £6, Total: £10, a year Single person is an ESA claimant, rents privately and has no savings. Tax credits: £3, Council tax support: £ Housing benefit: £6, Total: £10, a year What can a client get from the Government under the current regime? For illustrative purposes only, as multiple variables can impact on each outcome

23 Protecting income - Government changes to benefits ScenarioApproximate Universal Credit paid a year Single person, ESA claimant, private renter, no savings£10, One person too sick to work, their partner earns £22,000 a year with £2,400 pension contributions, they have a mortgage, 2 children and £7,000 of savings £4, One person too sick to work, one partner not working, 5 children, renting from council, no savings £22, Working age benefits are affected by regular change: This slide is for illustrative purposes only. All figures are taken from entitled2.co.uk and relate to entitlements for 2015/2016. Figure in red indicates outcome lower than for the same scenario on the previous slide.

24 Protecting income – help with state benefits Full details can be found at And will summarise the state benefits clients are entitled to receive Income protection could impact your clients eligibility for state benefits.

25 Protecting income – “I’ll be looked after” Income protection With income protection your client will receive a payout if they are not fit to do their occupation Income protection With income protection your client will receive a payout if they are not fit to do their occupation The State will help – won’t they? State benefits Payout depends on circumstances State benefits Payout depends on circumstances Income protection could impact your clients eligibility for state benefits.

26 Protecting income – “Too complicated” Too complicated for your client? If they have a need, they need you to make sense of it Too complicated for your client? If they have a need, they need you to make sense of it

27 Protecting income – can your clients afford not to? “Protection covers do very different things” “Sickness could stop them from working” “Their employer and the state might not provide as much support as they think” “You are there to make income protection accessible” Ensure your clients understand...

28 Protecting income – Learning Objectives  Understand why clients do not buy income protection, the causes of long term disability and the level and qualification criteria for state benefits.  How different types of protection work together, complementing each other to provide a portfolio of protection that provides a broader safety net which meets both critical and long term disability needs  To become more confident when discussing the need for income protection so that complimentary disability protection can be incorporated as a key component to client’s protection portfolios.

29 Friends Life and Pensions Limited An incorporated company limited by shares and registered in England and Wales, number Registered office: Pixham End, Dorking, Surrey RH4 1QA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Telephone – calls may be recorded. Friends Life is a registered trade mark of the Friends Life group.