Income Protection and working till 70

Iris13

Hi, I know there's a few posts about income protection but can't find the specific query I have. 

I'm 41 and have just bough my first home with a pretty hefty mortgage that will in theory take me to 73. I'm obviously going to try and reduce this but my salary is just above average so can't guarantee this.

As I'm on my own and I'll need to depend on good health into old age I thought it would be a good idea to take out income protection. 

Given that I'll probably need to work until I'm 70, I only was really able to start saving for a pension properly at the age of 35, should I take out income protection to 70 or should I just take it to 66, the state pension age? The difference in cost is about £4 a month but obviously over the rest of my working life that'll add up. 

I work for the NHS so it's a pretty secure job but as I don't have a high enough salary to save much or a big pension pot so income protection seems like the best option for me. 

I'd appreciate any thoughts you have. 

DullGreyGuy

Are you getting ASU or PHI? How long will the policy pay out for if you are ill? Ultimately you need to go your sums on if you think you could afford the mortgage if you were too ill to work after 66 but had state pension etc. 

daddycraig

I'm not sure whether this is helpful to you or not. However, I am also going to be working in to my 70s but the cost of income protection up to that age just did not seem worthwhile. Instead I am paying for a policy that covers income protection for up to 12 months. I have so far had to use this policy 2 times in the past 8 years ( 2 redundancies) and has been invaluable.

However, being in the NHS is much more secure and some would say is a job for life.

DullGreyGuy

daddycraig said:

I'm not sure whether this is helpful to you or not. However, I am also going to be working in to my 70s but the cost of income protection up to that age just did not seem worthwhile. Instead I am paying for a policy that covers income protection for up to 12 months. I have so far had to use this policy 2 times in the past 8 years ( 2 redundancies) and has been invaluable.

However, being in the NHS is much more secure and some would say is a job for life.

So you have an ASU policy which means:

1) You can only claim for 12 months so what happens if you have a stroke at 50 and arent fit to work again? You get 1 year from the ASU and then what for the next 19 years?

2) Your premiums are reviewed each year so if they bump it to £500 a month when you're 60 can you afford that? Can you afford the mortgage with no income at all if you cancel it? 

PHI doesn't cover redundancy as standard, though some its an optional extra but the full fat version pays out until the end of the policy. So in scenario 1 they'd pay out for 20 years. 

Secondly, the premium is set at inception so doesn't change, it won't become unaffordable because of insurer increases. During Covid PHI policyholders just paid their normal premiums, ASU policyholders frequently found their insurers didnt renew their policies or prices increased as much as five fold. 

Iris13

Thank for the replies. It would be PHI insurance. As I'm with the NHS I'd have short term cover but as I couldn't cover my mortgage without my salary I'm more concerned with long term sickness as I get older. I have an ex colleague who developed heart issues in his late fifties and could only afford to take a long period of time off because of income protection.

I can't really say if I could afford the remainder of my mortgage on the state pension and my private pension after 66 as I don't know how much my final private pension would be or if the state pension age will be moved again, but I should hope I can.

I know some people may think it's money wasted if I'm in the NHS, but I'd only be covered for a year and I've just seen too many people face chronic illnesses in old age before retirement which isn't as bad if you don't have a mortgage to pay but otherwise I don't know what other option there would be. 

Weighty1

It sounds to me like the extra £4/month would give you quite a lot of peace of mind in know that you are financially secure for those extra 4-years.

So, if you take the cover to age 66 instead what else can you spend that £4 each month on?  A large cappuccino from Costa, 2/3 of a gallon of fuel which will enable you to drive 30-40miles (at a push), a portion of chips with a small sausage?  Let's face it, £4/month in this day and age is nothing but having the peace of mind in knowing your income is protected for as long as possible is invaluable. 

It's also no good considering the £4/month x12-months x35-years is a lot of money scenario because you might claim on it next month and never work again.  Do you consider that paying for Netflix from now until age 70 will cost you a hell of a lot of money, NO, you just consider what it is costing this month so I'd suggest you do the same in this instance as well.

Iris13

Hey, sorry, it's actually a saving of £14 a month, so that is quite a difference.

Thank you for your replies. I think when you get above the state retirement age the premiums jump up a fair amount. 

XRS200

Is 66 your state pension age?

Iris13

XRS200 said:

Is 66 your state pension age?

Well I presume it will be unless that changes by the time I reach my 60s like it did for a lot of woman of my mum's generation. However, I do intend to work for as long as my health will allow as I didn't start earning enough to save into a pension until about five years ago, but I reckon that might be quite a common issue for people of my age now. 

TheSpectator

Iris13 said:

XRS200 said:

Is 66 your state pension age?

Well I presume it will be unless that changes by the time I reach my 60s like it did for a lot of woman of my mum's generation. However, I do intend to work for as long as my health will allow as I didn't start earning enough to save into a pension until about five years ago, but I reckon that might be quite a common issue for people of my age now. 

If you are 41 now I think your state pension age will be 68....as things stand. It may increase by then.