ESA and WRAC Changes for April 2017 and Group Income Protection
Changes to Employee Support Allowance (ESA) and Work Related Activity Component (WRAC)
In the spring budget the government announced changes in the way that people will receive incapacity benefits.
The current system allows eligible claimants to receive Employee Support Allowance (ESA) once Statutory Sick Pay has been exhausted. This is broken down into three different sections. Basic Allowance, Work Related Activity Component (WRAC) and the Support Component.
Access to each section is determined by eligibility and the length of time the claimant has been out of work.
The Work Related Activity Component (WRAC) is based on claimants that are unable to work but are capable in taking part in work related activity. This will be people looking for work or attending courses, training and interviews where possible. This is a short term payment.
The Support Group are people who are, for whatever reason, unable to work or partake in any work related activity. This constitutes the long term unemployed and benefits can be paid to state pension age.
This is all set to change from April 2017. The new system will see the removal of the Work Related Activity Component (WRAC). At the moment SSP is being paid at £88.45. The basic allowance after 28 weeks is £73.10. If you are eligible for the Work Related Activity Component (WRAC) then you will receive an additional £29.05 a week on top of the basic allowance for up to another 39 weeks.
If you eligible for the Support Component then this is paid at £36.20 on top of the basic allowance of £73.10.
Claimants placed in the Work Related Activity Group will only be able to receive the basic allowance after 28 weeks. This will be for up to 52 weeks.
Claimants in the Support Component Group will be unchanged.
How will this effect Group Income Protection schemes?
This will have ramifications for any Group Income Protection (GIP) scheme that has a benefit link to Employee Support Allowance (ESA) and the Work Related Activity Component (WRAC).
Traditionally Group Income Protection (GIP) pays a percentage of a claimants salary minus state benefits. As state benefits evolve then Group Income Protection (GIP) needs to keep pace.
We at Health Matters are activity discussing the state benefits links and the options of how to remove this with limiting the impact to the scheme members and to the premiums paid for the schemes.
These options mainly include looking at different levels of flat benefit and taking out the link completely. Making these changes will then remove any requirement to keep abreast of state benefit policy changes.
The insurers are now looking at different options for Group Income Protection. Below is a link to a recent publication from UNUM about this subject and options they are proposing.
This document provides a good basis to start the discussion. UNUM are looking to provide an flat offset of £5300.00 instead of the current Employee Support Allowance (ESA) and the Work Related Activity Component (WRAC) figure of £5312.00. This would give an additional £12.00.
Other insurers will follow suit and publish what they are going to do.
Health Matters can look at your current scheme and make sure that it suits your requirements and will look at the options available to you including the set off set outlined above and in the UNUM document.
Please do get in contact with us to discuss your scheme and your options.