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    • cms72
    • By cms72 1st Nov 18, 8:27 AM
    • 7Posts
    • 0Thanks
    cms72
    Income protection and ESA
    • #1
    • 1st Nov 18, 8:27 AM
    Income protection and ESA 1st Nov 18 at 8:27 AM
    Hi I am wondering if anyone can offer any advice or is in the same position. My husband has a group income protection policy initially through his employer which he has been claiming on for over 10 years. Unfortunately he could not return to work and his employment was terminated and transferred to being paid direct from the insurance company. Apparently when this happens you lose entitlement to ESA CB even though it is not means tested (but it is really). The DWP state that this is an occupational pension, even though it is not guaranteed as he has to satisfy the medical requirements and the documentation states clearly "this is not an occupational pension". The broker who sold the policy states that the insurance company is still technically the employer as they are taking the tax off and he is therefore on their payroll and also states that it is categorically not an occupational pension. Because he was on the payroll initially he was entitled to ESA CB, if the policy had been his own initially he would not have had to pay any tax so he really is stuck in the middle with everyone using jargon to prevent him claiming what he is due. The income protection policy pays him 2/3rd of his original income and deducts ESA which he does not get back. I have taken advice over the years, (most DWP staff do not understand income protection policies) CAB did offer to help me write a letter but I am wondering if anyone has any experience or advice they can offer. He is in the support group but does not qualify for any payment.
Page 2
    • xylophone
    • By xylophone 8th Nov 18, 6:03 PM
    • 27,381 Posts
    • 16,372 Thanks
    xylophone
    Is it worth going back to the ombudsman with the ESA award letter showing that he is not receiving any ESA due to the deduction of the PHI plus writing out the legislation regarding this?
    Is that the reason?

    Is the case that having had his employment terminated he is no longer entitled to CB ESA only IR ESA and the family means preclude his receiving this?

    Otherwise, he would be entitled to the ESA but any amount over 85 would be subject to a 50% deduction?

    It appears that he is not entitled to ESA of any description but regardless of this, the policy terms permit the insurance company to deduct an amount in respect of full(?) CB ESA.

    The Ombudsman appears to have ruled that the insurer has the right to set the terms of the policy.

    How is it a DWP issue? Do you think he should be entitled to ESA of some description?
    • calcotti
    • By calcotti 8th Nov 18, 7:01 PM
    • 940 Posts
    • 651 Thanks
    calcotti
    Is the case that having had his employment terminated he is no longer entitled to CB ESA only IR ESA and the family means preclude his receiving this?

    Otherwise, he would be entitled to the ESA but any amount over 85 would be subject to a 50% deduction?

    It appears that he is not entitled to ESA of any description but regardless of this, the policy terms permit the insurance company to deduct an amount in respect of full(?) CB ESA.

    The Ombudsman appears to have ruled that the insurer has the right to set the terms of the policy.

    How is it a DWP issue? Do you think he should be entitled to ESA of some description?
    Originally posted by xylophone
    Termination of employment makes no difference to ESA entitlement. If he meets the qualifying health conditions he continues to qualify. The issue is that the payments by the insurance company are treated in the same way as pension income because the claimant did not pay the required portion of the premiums. The amount of PHI is over 306.50 which wipes out the contribution based maximum amount of 110.75.

    I don’t the OP is challenging the loss of ESA, what they are highlighting is the injustice of the insurers deducting a notional ESA entitlement from the amount the insurers pay notwithstanding that no such ESA entitlement exists precisely because of the insurance.
    Last edited by calcotti; 08-11-2018 at 7:04 PM.
    • xylophone
    • By xylophone 8th Nov 18, 8:24 PM
    • 27,381 Posts
    • 16,372 Thanks
    xylophone
    Termination of employment makes no difference to ESA entitlement. If he meets the qualifying health conditions he continues to qualify. The issue is that the payments by the insurance company are treated in the same way as pension income because the claimant did not pay the required portion of the premiums. The amount of PHI is over 306.50 which wipes out the contribution based maximum amount of 110.75.

    Then the OP continues to qualify for CB ESA but his employment having terminated, he must now claim on the PHI as an individual who did not pay 50% of the premium.

    This means that under the law, the payment must be treated as a pension by the DWP - there is no option.

    In his case the payment is so high as to wipe out entitlement to ESA.

    The terms of the policy (which according to the ombudsman the insurer is entitled to set) state that an amount equal to ESA will be deducted from any payment whether or not the individual actually receives it.

    The ombudsman was incorrect in saying that the issue lies with the DWP?

    The issue lies with the terms of the policy and therefore with the insurer?
    • calcotti
    • By calcotti 8th Nov 18, 8:43 PM
    • 940 Posts
    • 651 Thanks
    calcotti
    This means that under the law, the payment must be treated as a pension by the DWP - there is no option.
    In his case the payment is so high as to wipe out entitlement to ESA.
    Originally posted by xylophone
    In complete agreement about this as set out in my post.

    The issue lies with the terms of the policy and therefore with the insurer?
    Originally posted by xylophone
    Which brings us back to whether the terms are fair and reasonable. Unfortunately the ombudsman appears to have not seen that as an issue.
    • cms72
    • By cms72 8th Nov 18, 10:42 PM
    • 7 Posts
    • 0 Thanks
    cms72
    Hi

    This is the information that is stated in the technical guide

    Fixed deductions for state benefits
    This is where the basic income benefit is specified as a percentage (up to a maximum of 75%) of a members gross pre-incapacity earnings less a deduction in respect of state benefits.

    The state benefits deductions will normally be fixed at the commencement of incapacity and will apply irrespective of whether the state benefits are received by the member or not. The deductions may be specified as:

    The gross basic long terms state incapacity benefits (LTIB)

    The gross employment and support allowance exclusive of any work related activity component, support component and any extra premium (the 'basic ESA')

    The basic ESA plus the work related activity component

    The basic ESA plus the support component

    The basic ESA, work related activity and support components will be based on the amounts that would be due in respect of a successful application at the end of the assessment phase(usually the period of 13 weeks immediately following the period of 28 weeks during which the member would normally be entitle to SSP).

    It also states towards the end of the policy document:-

    Payments from the Group Income Protection Scheme may affect a members entitlement to means tested state benefits. However, claims made through your payroll system will not be offset against the LTIB or the ESA.

    The continuation of benefit document clearly states 'IP Benefit is not a pension'. My issue is that we were never informed that he would lose ESA, the broker, insurer and employer do not fully understand the issues regarding ESA (hence the fact insurers are now not removing the ESA from policies), ESA is not means tested (but it is for the purposes of these policies) which means it is means tested. I did talk to CAB a while ago and they were in agreeance that there does appear to be some flaws in the terminology. They advised possibly approaching the DWP with a mandatory reconsideration which I did mention to my husband's union but to be honest they were struggling to understand the issue. I do appreciate everyone's comments, I was hoping someone was in a similar situation and had maybe had a breakthrough but did think it was a long shot. I may at some point consult a solicitor to see if they can shed any light, I think there could be a case regarding the terms and conditions being ambiguous but I am aware that it is a very grey area. Thanks again to everyone for their comments it is truly appreciated.
    • calcotti
    • By calcotti 9th Nov 18, 7:10 AM
    • 940 Posts
    • 651 Thanks
    calcotti
    I can see no point in approaching DWP. They have applied the rules correctly.
    From what you have posted the insurers have also behaved in accordance with the terms of the policy.
    Still seems wrong to have a deduction for a benefit which cannot be claimed.
    • Icequeen99
    • By Icequeen99 9th Nov 18, 9:21 AM
    • 3,588 Posts
    • 2,421 Thanks
    Icequeen99
    I can see no point in approaching DWP. They have applied the rules correctly.
    From what you have posted the insurers have also behaved in accordance with the terms of the policy.
    Still seems wrong to have a deduction for a benefit which cannot be claimed.
    Originally posted by calcotti
    I agree. The whole issue of whether it is a pension or not is really irrelevant.

    The point is that DWP have seemingly applied their rules correctly and so have the insurers.

    The unfairness here, as you say, is that the policy deducts a benefit whether or not it is paid.

    IQ
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