Group Income Protection Lump Sum Offer

Saorsia12

Hello All - looking for a bit of guidance please - I have been offered a lump sum of £80k by the GIP insurer via my employer.  I have been receiving gip for 22 years and have seven years left to run until I reach my retirement.  My employer is currently making widespread redundancies and I can be made redundant even when in receipt of gip.  The offer is an informal offer from the insurer via the employer and they say I don’t have to take it and my claim won’t be affected but I feel the employer is pushing this and if I refuse I will be made redundant - the payment of which will be a lot less than the £80k. The £80k works out at 28% of what I would receive if I continued to retirement with yearly increases,  also I would lose my pension payments, private medical.  Please any advice on what I should do would be really helpful as I’m totally confused.  Thank you.

QrizB

You're currently receiving about £40k pa?

So your choice is to accept £80k, or risk being made redundant and not seeing another penny.

What would your redundancy terms be? How much redundancy ould you receive?

Marcon

If you've been on GIP for 22 years, I suspect that sadly there's little chance you'll be returning to work. Absolutely nothing to lose by seeing if the offer can be increased. You wouldn't expect to see the full quarter of a million pounds plus, but £80K isn't that great. As an employee you are (as you say) getting the benefit of pension, private health cover and possibly other perks, so it might be worth your employer trying to help you get a 'better offer' - or adding something themselves to reflect the fact they will no longer be paying for your perks.

MyRealNameToo

Saorsia12 said:

Hello All - looking for a bit of guidance please - I have been offered a lump sum of £80k by the GIP insurer via my employer.  I have been receiving gip for 22 years and have seven years left to run until I reach my retirement.  My employer is currently making widespread redundancies and I can be made redundant even when in receipt of gip.  The offer is an informal offer from the insurer via the employer and they say I don’t have to take it and my claim won’t be affected but I feel the employer is pushing this and if I refuse I will be made redundant - the payment of which will be a lot less than the £80k. The £80k works out at 28% of what I would receive if I continued to retirement with yearly increases,  also I would lose my pension payments, private medical.  Please any advice on what I should do would be really helpful as I’m totally confused.  Thank you.

Presumably you current GIP payments are subject to income tax etc?

Have they clarified if the lump sum would be subject to income tax?

Saorsia12

Re income tax on lump sum - the employer said they can’t get hmrc guidance on this anymore so the liability would be on me once I receive the Lump sum.  I spoke with an accountant and he said as long as the payment is clearly made for disability then it would be treated as capital.

Saorsia12

Marcon - thank you for the guidance, when I initially spoke with the employer they said this was an insurance offer only and wouldn’t really expand on any increase they could give.

granta

Are you able to access any legal advice about this and the chances of you being made redundant?

I know someone who was in a similar situation and saw an employment solicitor. They advised her that their employer would find unlikely take the risk of dismissing/offering redundancy as it would potentially be disability discrimination if it deprived them of the income protection benefit. I can't recall all the legalities but they have been able to stay on the GIP for now.
The other option to explore is whether they would be able to put the policy in your name even if they made you redundant which some insurers offer. Obviously you would still lose out on the pension etc but might be better than accepting a sub-par offer of the lump sum.

Saorsia12

Qriz B - thank you for your reply - the redundancy would be 12 weeks pay and 5.5 weeks holiday pay I think - but at the weekly rate of my salary pre phi - so not based on current shadow salary/phi payments , so it wd be £400 a week so £4,800 and £2,200 - but redundancy was never discussed  as they want me to accept the phi and do a termination.

Saorsia12

Thank you Granta - I did speak with an employment lawyer and he too said it would be risky for them to dismiss/redundant after 22 years on gip - but my contract says they can make me redundant even whilst I am receiving phi.  I don’t know if the gip contract allows for direct payment as when I asked to see a copy I was told it was commercially sensitive as it was between the employer and the insurer only, similarly when I asked for a copy if the insurance breakdown.  I feel I’m being backed into a corner here.

Cobbler_tone

Saorsia12 said:

Qriz B - thank you for your reply - the redundancy would be 12 weeks pay and 5.5 weeks holiday pay I think - but at the weekly rate of my salary pre phi - so not based on current shadow salary/phi payments , so it wd be £400 a week so £4,800 and £2,200 - but redundancy was never discussed  as they want me to accept the phi and do a termination.

You will have to excuse my ignorance Saorsia12, as I had never heard of GIP and had to google it and read up a little.
With your potential redundancy do you not have much service? I'm probably misunderstanding the link between GIP and service as you cite 22 years. 12 weeks statutory redundancy is only 8 years service if you are over 49.
I clearly don't know the intricacies of GIP but would be surprised if it meant a business was not able to make someone redundant if the role no longer existed (i.e. compulsory redundancy, although they wouldn't be able to use your absence as a selection criteria in a pool) so I guess the £80k is a type of compromise agreement.  
Personally, I wouldn't take any pressure to take an immediate 'deal' and you can submit a FOI request for a HR1 to see what is going on (it might help to establish the likelihood of redundancy) if they are not being clear on that aspect. For me, that is the part you need to establish as you may take it when your role wasn't actually impacted.
All the best.

granta

Saorsia12 said:

Thank you Granta - I did speak with an employment lawyer and he too said it would be risky for them to dismiss/redundant after 22 years on gip - but my contract says they can make me redundant even whilst I am receiving phi.  I don’t know if the gip contract allows for direct payment as when I asked to see a copy I was told it was commercially sensitive as it was between the employer and the insurer only, similarly when I asked for a copy if the insurance breakdown.  I feel I’m being backed into a corner here.

Who is the insurance provider? You could check their website to see if this is something they offer direct payment as an option.
I guess you could just refuse the offer as there is no guarantee they will make you redundant, and if hey did offer redundancy, you could ask again about he lump sum offer.
I would have thought you were very low priority for redundancy as you are quite low costal to them.
And they would still need to show that they followed a fair process, didn't discriminate etc