Planning for the future when you may inherit a degenerative disease

22225

Hello
I'm asking for a friend.
I know someone will say this should be in the pensions or in the insurance sections but I need opinions from people like the people on here.

A friend has a 50/50 chance of inheriting a genetic disease in their fifties. They have critical illness cover of 100k which would pay out for conditions including the disease. My question is about income protection. Is it still worth having income protection when the person is paying into  defined benefit occupational pension which will pay out for ill health (there are two tiers - one is all that you have accrued so far. The other, for when you can never work again in any job, is something like all you have accrued plus goals of what you might have accrued in the future).

The problem with income protection is that apparently you cant claim it plus the pension on top. If it was a DC pension you could just leave the pension but with a defined benefits pension (ill health) you would be better to take it. But unless you are paying for a large amount of income protection, would it be worth paying for the premiums for years when your pension would wipe out most of your entitlement to it?

I suppose it would be still useful against shorter term problems like cancer.

Have I understood the situation? Is overpaying into pension plus critical illness the best way to protect oneself in this situation?

Sorry it's not quite the right arena. I have tried to find out answers through other people but maybe it's a bit niche. Please give me your opinions on future planning.
Thank you.

Keep_pedalling

Did he / she declare their family history when taking out CI cover? I would have though it would be a near impossibility to get cover of any kind if the chances of claiming for a specific illness was 50%

Nikkster

Whats your definition of short term? I've had stage 4 cancer for nearly 7 years, though that might be about to end in the relatively near future (and not in a great way!)

22225

Nikkster I'm very sorry about your predicament. 

Keep_pedalling yes you can get cover even with huntingdons in the family if you go through a broker although you may not get a wide selection of providers.

Cairnpapple

What age is your friend currently?

22225

44 years of age 

13 and a half years in final salary scheme so would normally get around £10k at 60 (part time employment therefore its calculated at 13 years otherwise it would be more. ) plus £30k lump sum.

Then also

Two years in career average with £1500 currently accrued.

Tier one ill health you just get all you have accrued so far. If you cannot work again in any occupation you would get a Total Incapacity supplement of half the years (from when you became entitle to the I'll health pension) up to your Normal Pension Age of the CARE scheme which would be 68  (but goes up with state pension).

Linton

With any life limiting possibility, or even life itself, you need to ensure that you have the resources to cover any realistic possibility.  Fortunately the worst possibility purely from a financial point of view is usually that you live too long.

In the circumstances described here could it be argued that you only need to pay for critical illness and/or income protection cover up to the point in time when the DB pension illness cover and/or any other employer cover provides a better deal?

One important factor not mentioned is whether the friend has any family/dependents either to pay for or to help pay the expenses.

22225

Thanks Linton.
That is sort of the dilemma. Does it make more sense just to do critical illness cover which does pay out without reference to a pension, and just plough any extra cash into emergency savings and then DB pension? At the moment the pension doesnt have that much in it but in ten years or so it might. 

But then there are shorter illnesses such as cancer to beware of. The personninquestion has dependents.

Cairnpapple

I'm a little bit older than your friend and I'm chronically ill. I'm currently receiving payments from an income protection policy that I have through my work, but I'm hoping I eventually improve enough to return to work.

From my point of view, building up general savings/ investments helps with a range of scenarios, not just the scenario of having to stop work early:
- return to work but on reduced and/or inconsistent hours
- go off sick again and have to wait until SSP runs out before getting income protection again (or don't qualify for income protection that time or policy has changed or I move to a job that doesn't have it)
- disability related costs (e.g. home adaptation, taxis, private physio).

So I'm putting an OK amount of money into my (DC) pension but I'm prioritising building more savings and investments outside of the pension. 

Linton

22225 said:

Thanks Linton.
That is sort of the dilemma. Does it make more sense just to do critical illness cover which does pay out without reference to a pension, and just plough any extra cash into emergency savings and then DB pension? At the moment the pension doesnt have that much in it but in ten years or so it might. 

But then there are shorter illnesses such as cancer to beware of. The personninquestion has dependents.

What is your reason for wanting critical illness cover assuming that any deal you would be likely to get would give very poor returns should the critical illness be Huntingtons?  If you are still working and have to leave work early wouldn't your employer's schemes ensure you have adaquate money to live on? If you survive until you reach your DB pension age why would there be any money problems?

The only reason I could think of is to help protect your dependents if any.

Possibly because I am not in your position I do not see how extra money would help provided you have made arrangements to ensure that you can have an acceptable standard of living were you live to extreme old age.

22225

But if they have to leave work early through illness then  the amount that they have accrued in the DB pension may not be enough to help pay for the mortgage, help pay towards kids uni costs etc. It wouldn't be the same amount they were getting when they were working. It would be a big drop. At least the critical illness pay out would pay off the mortgage?