Group Income Protection Schemes
Employer Sponsored – Group Income Protection Schemes
These schemes are mainly found in the Private Sector and tend to have compulsory membership. In this case, the employer pays the cost of the plan and can write off the cost against corporation tax. Income Protection Schemes are also referred to as ‘Salary Protection Schemes’ or ‘Permanent Health Insurance Schemes’.
This is a very valuable scheme for employees as their income is their most important asset and for financial security they depend on the presence of a regular monthly income. The Income Protection Scheme provides a replacement income if an employee is unable to carry out their usual work due to any illness, injury, disability or accident.
A summary of the scheme structure:
|Income Benefit:||Up to 75% of their Salary less an entitlement to social welfare benefits|
|Retirement Age:||The income benefit will cease at the retirement age, (e.g. 60 or 65)|
|Deferred Period:||The income benefit payment is paid after a deferred period and this period is usually 13, 26 or 26 weeks|
|Escalation:||The income benefit can increase annually, (e.g. lesser of Consumer Price Index CPI or 3% p.a.)|
|Premium Protection:||The scheme can also protect pension contributions and the cost of any life cover contributions|
|Conversion Option:||The member can convert to an Individual Plan on leaving service without medical underwriting|
Voluntary – Group Income Protection Schemes
These very successful schemes are mainly established by Public Sector Bodies, their Unions and/or Associations for the benefit of their employees/members. They have very competitive rates and the member’s contributions receive income tax relief at their marginal rate under the ‘net pay procedure’.
It is important to note the Group Income Protection Scheme is designed to fit the structure of the Public Sector sick pay arrangement. When a member’s income is reduced to half pay or Temporary Rehabilitation Remuneration the Scheme will provide an income of 75% of Salary less any entitlement to other income, (i.e. Half Pay, Temporary Rehabilitation Remuneration, Ill Health Early Retirement Entitlement, State Illness Benefit).
The Public Sector sick pay arrangement provides for:
- A maximum of 3 months (92 days) sick leave on full pay in 1 year
- Followed by a maximum of 3 months (91 days) sick leave on half pay
- Subject to a maximum of 6 months (183 days) paid sick leave in a rolling 4 year period
Once you exceed the 6 months (183 days) sick leave you may receive Temporary Rehabilitation Remuneration, (previously called Pension Rate of Pay) or may be entitled to an ill health Early Retirement Pension and/or State Illness Benefit, however it is very likely your income will be dramatically reduced.
If you are deemed under Critical Illness Protocol to have a critical illness or a serious physical illness you may be entitled to a maximum of 6 months (183 days) sick leave on full pay in 1 year, followed by a maximum of 6 months (182 days) sick leave on half pay, subject to a maximum of 12 months (365 days) paid sick leave in a rolling 4 year period.