WIREDGOV

• Survey of employees reveals 1 in 4 admit to no back-up plan if they were unable to work long-term
• Twice as many insure their mobile phone rather than their own monthly wages

UK workers are risking their own financial security by failing to protect themselves adequately, in case they are forced to leave work by illness or injury, according to new research by the think-tank Demos.

The findings show that people are twice as likely to insure their mobile phone or their pet as to protect their own income.

1 in 10 of us will face a period of sickness absence of more than 6 months during our working lives. However, half (51%) of employees mistakenly assume that their employer would pay full salary for at least 3-6 months in the event of illness. The reality is that companies are only legally obliged to pay Statutory Sick Pay, currently £85.85 a week, for a maximum of six months.

Figures also revealed that almost 1 in 4 (23%) respondents admitted having no financial safety net in the event they would be unable to work long-term.

Over a third (35%) said they would rely on their own savings. However, when they were asked the current level of savings they could access in the event of emergency, half (49%) had less than £2,000 to support themselves and their family – the equivalent of just one month’s average salary.

The findings come from a survey of 2,024 adults, which features in a forthcoming Demos report into financial protection in the UK. This highlights surprisingly low levels of personal financial responsibility in the face of tough economic conditions and high long-term unemployment.

Recent government legislation, such as the pension auto-enrolment scheme, has shifted greater responsibility for financial security onto employers. This view is shared by the majority of under-45s surveyed who would welcome their employer helping them plan their financial protection. However, three quarters of workers (77%) said their employer either did not offer, or make them aware of, any insurance support.

The Demos survey also found:

- Two-thirds of people inaccurately underestimate the risk of themselves being unable to work for over six months. 17% believed that their risk was as low as 1 in 1000, when the reality is around 1 in 10.
- Twice as many people choose to insure their pet (13%) or mobile phone (12%) compared with taking out personal income protection insurance to protect their monthly wages (6%).
- 1 in 5 employees significantly overestimate the level of government benefits they stand to receive in the event of long-term sickness, believing they are entitled to at least £200 a week - £50 a week more than is actually provided by a combination of Employment and Support Allowance and Disability Living Allowance.
- In the event of sickness absence of over six months, 12% of workers said they would rely on their overdraft or a credit card to see them through, while a further 15% would turn to their families for help.    

Max Wind-Cowie, researcher at Demos and author of the upcoming report, said:

“These findings show a workforce on a financial cliff edge, one misfortune away from being unable to provide financially for themselves or their family. That twice as many people would rather protect their iPhone or Blackberry rather than their own monthly wages shows just how little aware of the risks people are.

“Many employees lack understanding about the realities of long-term sickness, find benefits confusing, or don’t even know what is available to them. Given the fact workers seem to rely a lot on their employers, it’s no surprise that they are looking to their firms to help them better plan for their individual financial security.”

Peter O’Donnell, CEO of Unum, commented:

“1 in 10 of us will be forced to take a leave of absence from work due to illness or injury during our working lives. A quarter of those who do leave work fall into poverty within 12 months.

“Given the risk and potential impact, it is no surprise that consumer organisation Which? describes Income Protection as a ‘must-have’ for UK workers. Workplace protection policies can benefit employees and businesses alike and are typically cheaper and more easily available than individual cover. It’s vital that concerned consumers ask their employers about the employee benefits that may be available to protect their family’s wellbeing.” 

NOTES TO EDITORS

The polling, conducted by Populus Data Solutions, interviewed 2,024 adults between 20-22 February 2013.

Demos will be unveiling its full report at a launch event in London on 24 April 2013. For further information about the project, titled Squaring the Circle, visit: http://www.demos.co.uk/projects/squaringthecircle

This research was supported by Unum.

For further interview or comment with Max Wind-Cowie or to discuss the possibility of case studies please contact Rob Macpherson.

MEDIA CONTACT

Rob Macpherson
rob.macpherson@demos.co.uk
020 7367 6325
(out of hours: 07554 424 137)

Mandy Blanks
mandy.blanks@unum.co.uk
01306 873616