(Tax Year 2008/2009)*
Could you manage on what the State provides?
If you were unable to work because of a long-term illness or injury, how would you survive financially? Most people are surprised when they find out just how little the State provides. With the average UK household spending around £450 a week, are you confident that you could manage on State benefits alone? Even if you have a partner who also works, could they cope without your salary?
Currently, 2.7 million people are reliant on Long Term State Incapacity Benefit – one in every 15 workers. So it’s no surprise that the Government wants to get more people back to work by revising the current benefits system. This is why, from October 2008, the existing State Incapacity Benefit will be replaced by the new Employment and Support Allowance. But what are the differences between the two welfare systems, and what impact could these changes have on you?
Out with the Old:
State Incapacity Benefit
Individuals who are forced to stop work due to sickness or injury will receive 'Statutory Sick Pay' of just £75.40 per week from their employer for the first 28 weeks they are absent, although some employers may be prepared to pay more than this amount. This will not change under the new system.
However, from October 2008, anyone who is already on benefits or who is self-employed will only receive a basic weekly allowance of £60.50 (or just £47.45 for 18-24 year olds) rather than the £75.40 they were entitled to before.
After 28 weeks, if an individual is already receiving statutory sick pay and these payments end before October, they will still be able to apply for the Higher Rate Short Term Incapacity Benefit. This is a meagre £75.40 a week, with an additional £39.40 if the person claiming has an adult dependant, such as a wife or husband.
After 52 weeks, if an individual is already receiving Short Term Incapacity Benefit and payments end before October, claimants may qualify for Long Term State Incapacity Benefit (LtSIB), which works out at a mere £84.50 a week (£4,394 a year). If the individual has a partner to support, they will receive just £135.05 a week (£7,022.60 a year). An individual may also qualify for an additional weekly benefit of £8.90 - £17.75 depending on age. Unfortunately, Incapacity Benefit is taxable after the first six months of claiming.
In with the new:
Employment and Support Allowance
However, the chances are that if you fall ill this year and are forced to stop work, you’ll be looking to claim the new Employment and Support Allowance (ESA) when your period of statutory sick pay comes to an end.
Unfortunately, under this new system, benefits for dependants together with extra payments based on your age have been cut, so you are likely to receive less money than you might otherwise have expected.
After statutory sick pay ends, there’s a 13-week assessment period, during which individuals looking to claim benefit will undergo a Work Capability Assessment (WCA) that is designed to determine the extent of their incapacity and the likelihood of their rejoining the workforce. The assessment will be rigorous, and benefits will only continue if the individual’s condition is judged severe enough. Payments during this time will be a mere £60.50 a week, or £47.95 for those aged 24 or under.
If an applicant’s claim is successful, after the standard 13-week assessment period they will receive Basic Allowance of £60.50 and, depending on the severity of their condition, will qualify for one of two extra payment types.
If it’s decided that an individual may be able to return to work after rehabilitation, they will receive the Work Related Activity Component (WRAC) – an extra £24 a week, or £35.45 for couples. However, they will only receive these payments once they have agreed to attend work-focused interviews to help them back into employment (this could mean any type of work, not just their former profession). Any individual who does not attend could ultimately see the value of their benefits cut to £60.50 a week with the removal of this extra amount.
The most severely incapacitated – with little chance of getting a job – will receive the Support Component on top of the Basic Allowance, consisting of an additional £29 a week, with a further £12.60 for those on an Enhanced Disability Premium.
* The information given on this page is that published by the UK Government's Department of Work and Pensions for the 2008/2009 tax year. In the event of it being out of date when you read this page the information published by the DWP at that time will prevail. These figures do not apply to the Channel Islands and the Isle of Man.