Income Protection and Contributions Based ESA

SupercarfanUK

Hi, I am hoping somebody can help me better understand or find the correct answer regarding how the DWP have worked out how much Contribution Based ESA I receive. Here is the background information:

I am receiving ESA (Contributions Based). But because I receive £280.83 per week from a permanent health insurance (PHI) that my employer provides, I do not receive the full amount of ESA, because they say the “income” I receive is more than the Government says I need to live on. By “income” they mean the permanent health insurance, also known as Income Protection. My understanding is that PHI or Income Protection should not be treated as Income. The woman I spoke to at DWP this afternoon said and I quote “the rules for Permanent Health Insurance and not treating it as Income are different for Income Related ESA, because I am on Contributions Based ESA, the rules are different and the £280.83 I receive from the PHI wipes out any money I would have received”.

Also in a letter have from the DWP is says on page 3:

Your income-related amount is £191.45 less £280.83 so you would have been entitled to £0.00

Does anyone understand this? Can anyone help me?

If what I am being told by the DWP is correct then great, I won’t persue it any further. However, because I have read things about the wrong rules being applied to PHI and them treating it as Income when they should not, I am keen to see whether or not I am receiving the correct amount.

Just to clarify things, I am still employed, although I am too unwell to do my job. I am not medically retired and am not receiving any kind of pension. The money I get paid each month comes from an insurance my employer has. The money I receive is 75% of my basic salary, minus tax and national insurance. I do not pay any premiums towards the permanent health insurance scheme. I receive Contributions Based ESA.

Thank you.

TELLIT01

The rules differ depending on whether or not you contributed to the PHI. You say you don't so the payment is certainly taken into consideration. Even on Conts based ESA I think there is a partial disregard, but that wouldn't be the full amount you receive in PHI.

SupercarfanUK

Thanks for your reply. Earlier this week I was asked whether I have made any contributions to the PHI and I said I didn’t think so. I was asked if I could get a letter from my employer and they provided me with one which confirms I am still employed with them and says that I do not pay any premiums towards the PHI scheme.

Does it sound as though what the DWP said is correct then?

calcotti

I think the rule in this situation is similar to pensions. The first £85 is ignored and then a deduction of 50% of the surplus is made.

This means that during the assessment phase a payment of £231.20 would wipe out ESA entitlement of £73.10.

However if put in Support Group and entitled to £110.75/week ESA the PHI payment would need to be £306.50/week before ESA entitlement would disappear.

SupercarfanUK wrote: »

Your income-related amount is £191.45 less £280.83 so you would have been entitled to £0.00

This means that if you had no other income etc you would be entitled to income based ESA of £191.45/week (ESA Support Group plus enhanced disability premium plus sever Disability premium). However you have income of £280.83/week which is greater than the maximum income based ESA amount so there is no ESA income based entitlement.

SupercarfanUK

Thank you for explaining that. I really appreciate your help. But they are still treating the £280.83 PHI as “Income”, which it should not. I was looking in my folder and found this booklet from DWP and it says:

But when we look at your pension income we won’t include:

- sick pay from an employer

- permanent health insurance payment arranged by an employer, when you still have a contract of employment

- mortgage protection payments

- investment income not connected with the end of your employment

So it clearly states that permanent health insurance is not taken into account as long as the person still has a contract of employment, which I do.

calcotti

SupercarfanUK wrote: »

Thank you for explaining that. I really appreciate your help. So long as I’m receiving the correct amount.

If it is contribution based I think you should be receiving a small amount if the PHI is £280.83 even if it is taken into account. The deduction would be (£280.83 - £85)/2 = £97.92/week. Your contribution based ESA entitlement in the Support Group is £110.75 so you should be getting ESA of £12.83/week.

Interesting that advice you have found. I suggest you put it to the DWP for comment.

calcotti

Found this

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/721798/dmgch51.pdf

Insurance policy providingbenefitsin connection with physical or mentalillness or disability
A payment under a permanent health insurance policy is a pension payment for the purposes of ESA( Cont). It means any periodical pay ment
1. made to a former employee and
2. which was arranged by an employer under an insurance policy and
3. which provides benefits to the former employee in connection with physical or mental illness or disability and
4. is payable on the termination of employment.

Bullet point 4 is consistent with what you have found. It appears that if employment has not been terminated the payments do not meet this definition and therefore do not fall to be treated as a pension payment. They should therefore be ignored.

Definitely worth a challenge.

SupercarfanUK

Hi calcotti,
Thanks for that reply and the information you kindly provided. I'm getting so stressed about all of this. I feel like my head is going to explode with Information Overload.

I called Scope this morning and the lady I spoke with was helpful and she sited a case she found online, the link which I am not able to paste here, said:

I wanted to give an update as the DWP are still refusing to pay out full Contributory ESA to my client as they believe that a group income protection scheme (GIPS) paid like a salary, is the same as a permanent health insurance policy and therefore taken into account if over £85 per week and the client hasn’t paid over 50% of premiums. he hasn’t paid any as it is a GIPS scheme.

I have told them that this is not the same and they now want another payslip and without that refuse to refer the case to a further dispute team higher than the first dispute team! My client is now in a hospice and I fear this wont be concluded until after his death. CPAG seems very clear about this and I am at a bit of a loss as to what to keep quoting back to the DWP when they are quoting the same regulations back to me but interpreting them differently.

They have told me that because the letter from the employer states that they will pay 60% of the pensionable salary they assume it is a type of pension and comes under the PPF periodic payment rule.

I feel this is all wrong but need to take a next step that doesn’t involve the grieving family.

ESA regs 2008 define permanent health insurance Permanent health insurance….

72.—(1) For the purposes of sections 2(1)(c) and 3 of the Act (deductions from contributory allowance) pension payment is to include a permanent health insurance payment.

(2) In this regulation “permanent health insurance payment” means any periodical payment arranged by an employer under an insurance policy providing benefits in connection with physical or mental illness or disability, in relation to a former employee on the termination of that person’s employment.

The Employment and Support Allowance Regulations 2013 states that
Permanent health insurance
64. For the purposes of sections 2(1)(c) and 3(3) of the Act (deductions from an employment and support allowance) “pension payment” is to include a permanent health insurance payment.

Why doesn’t the 2013 define it and is the 2008 still relevant?

I wondered if you or anyone else could have a look at it and try to explain it to me in an easy to understand way?

From what I can see GIP (Group Income Protection) is different to PHI (Permanent Health Insurance). Now I am REALLY confused because the guy at Canada Life (the Insurance company), told me that GIP is the same as PHI. The case above seems to indicate that they are two different things and should therefore be treated differently.

I just wish I could get one clear answer and know whether or not what I am recieving is correct and whether or not I am owed any money.

Thank you

calcotti

I am not confident about this but I think the 2013 regulations apply to 'new style' ESA but the 2008 regulations still apply to legacy versions of ESA. Do you know which version of ESA you have?
If it is new style ESA rather than (old style) contribution based ESA different guidance will apply. The guidance I referred to in post 7 is for the latter.


However you need to look at the definitions in the 2013 regulations which include this:

permanent health insurance payment” means any periodical payment arranged by an employer under an insurance policy providing benefits in connection with physical or mental illness or disability, in relation to a former employee on the termination of that person’s employment; (my emphasis)

It appears to me that even under the 2013 regulations as your employment has not been terminated the payments you are receiving do not fall within this definition.

SupercarfanUK

Thank you for this. I must be on the old style ESA I think as I have been claiming it since about 2006. I used be on Incapacity Benefit and then they moved it over to ESA (Contribution Based).

calcotti

SupercarfanUK wrote: »

Thank you for this. I must be on the old style ESA I think as I have been claiming it since about 2006. I used be on Incapacity Benefit and then they moved it over to ESA (Contribution Based).

I think the 2008 Regulations still apply in that case but either way your situation does not seem to fit the definition(s) of a payment that falls to be treated as a pension payment.