Income protection and ESA
cms72
Posts: 19 Forumite
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.
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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.
Income Protection Insurance is the old name for Permanent Health Insurance.
The Decision Maker's Guide says that where the claimant has paid 50% or more of the premium for the insurance then the income is disregarded for contribution based ESA.
Read this link
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/721798/dmgch51.pdf
Scroll down to 51811
So the question is whether your husband paid over 50% of the premium or not.
If the employer paid the premium then it seems that it is counted as income and deducted at the same rate as for private/occupational pensions.0 -
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, .
If it's treated as a pension (and I'm not saying it should be) would have to be receiving £306.50/week before it would cancel out entitlement to any ESA in the Support Group.Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.0 -
Hi, thanks for your replies. No he didn't pay 50% and yes they do treat it as a pension. He qualified for ESA until his employment was terminated, his employer said there would be no changes whatsoever. They were not aware of this rule and neither was the broker unfortunately. The broker has stated that since the insurance company are taking tax off this is effectively a payroll which would mean he qualifies for ESA. I just feel that since it states on the policy documents this is not a pension and the benefit is not means tested that they cannot go changing the goalposts. Someone on an occupational pension cannot lose it unless they die whereas he has to satisfy the requirements of the income protection. I am going to consult a solicitor as I think the DWP are just writing the rules to suit themselves and I was wondering if anyone was in the same situation. Thanks again.0
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Hi, thanks for your replies. No he didn't pay 50% and yes they do treat it as a pension. He qualified for ESA until his employment was terminated, his employer said there would be no changes whatsoever. They were not aware of this rule and neither was the broker unfortunately. The broker has stated that since the insurance company are taking tax off this is effectively a payroll which would mean he qualifies for ESA. I just feel that since it states on the policy documents this is not a pension and the benefit is not means tested that they cannot go changing the goalposts. Someone on an occupational pension cannot lose it unless they die whereas he has to satisfy the requirements of the income protection. I am going to consult a solicitor as I think the DWP are just writing the rules to suit themselves and I was wondering if anyone was in the same situation. Thanks again.
Rarely do I defend the DWP (or HMRC) as they are often wrong but in this case they aren't just writing the rules. DWP can only administer the law put in place by Parliament.
In this case the ESA Regs 2008 http://www.legislation.gov.uk/uksi/2008/794/pdfs/uksi_20080794_310818_en.pdf clearly state that for ESA purposes pension payments include permanent health insurance payments unless the 50% rule applies. See reg 72 and 75.
It doesn't matter whether it says it isn't a pension - the law clearly says that for ESA purposes PHI is treated as a pension.
So the DWP's hands are tied by the law which seems quite clear. Other than complaining to your MP or perhaps judicial review action (although not sure on what grounds) it is difficult to see what else you can do.
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In an earlier post you said that the insurance company are making a deduction from the payments as if your husband is receiving ESA. If the rules mean that he cannot receive ESA I think there is more mileage in challenging the right of the insurance company to do that - you’ll need to look at the policy terms. It’s possible the policy terms themselves are flawed.
Can you confirm whether the policy payment is more than £306.50/week as referred to in post #3. How much are the insurers deducting for the notional (non existent) ESA.Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.0 -
Hi again thanks for replies. Yes he is receiving more than £306.50. The insurance company state that they have the right to deduct ESA even though he doesn't get it back. This apparently is acceptable. His employer and broker had no idea of the complications, they presumed he would get ESA. ESA Contributions Based is not a means tested benefit but for the purposes of the Group income protection it is, therefore it is means tested. A millionaire could claim ESA CB yet my husband can't due to the policy. He could while he was still employed by his company but once it moved to the insurance company he no longer qualified. The broker has stated that since the insurance company is now paying him directly and taking tax off this is effectively a payroll and the policy does state if it's paid through a payroll ESA it is permitted. One of my grievances is that an occupational pension will pay until that person dies yet my husband has to prove disability so if they deemed him not to qualify they could take him off the benefit. Therefore it is not an occupation pension. I have already won a case with the insurance company as they tried to pay him less and did so for many years but neither the insurance company, broker or employer takes any responsibility for the fact that he cannot claim ESA yet it is deducted. The rules in recent years have changed around this with the insurance companies now not deducting the ESA.0
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Was the change from being paid by the employer to being paid directly by the insurance company something that you effectively opted into? In that case were you potentially miss-advised and thus might have someone to claim against?I think....0
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Hi thanks for your response. His employer visited and it was agreed termination of employment was the only option and the policy would continue but the only difference was the insurance company would pay him direct. They made a point of stating that there would be no changes at all as they had made sure they had "locked it down" to use there terminology. We were totally unaware of these rules regarding occupational pension as were most of the DWP when we spoke to them, the insurance company and employer. Didn't help him though as from one month to the next he lost over £400/month.0
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Apologies, I didn't answer previous question regarding how much the insurance deducts for the ESA its around £4600/year.0
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