Don't let illness affect your income
Do you know anyone who works in the Civil Service?
If so, make them a cup of tea when you see them next, because the last year has been a tough time for our intrepid civil servants.
According to the latest numbers for 2016/17 from the NI Statistics and Research Agency (NISRA), civil servants have had the highest levels of sickness-related time off work than in any year since 2012.
When you average it out, it's 12.4 days per person, but that's just an average over the whole of the civil service.
In fact, just under half (49.5 per cent) of staff had no absences at all in 2016/17, so that the absence figures are concentrated on the other half of the working population.
Now we get to the most important statistic, from a financial planning point of view. Over the whole Civil Service, one in eight was off work long-term, meaning for three months or more.
At the last count, the Northern Ireland Civil Service employed 26,889 staff (out of a total public sector employment of 218,577). If one in three of those is on long-term sick, that's nearly 9,000 people per year. Not only is it expensive for the economy - equating to an estimated £32.7 million of lost production, says NISRA – but it proves that long-term illness is much more common than we might think.
Now, levels of sick pay are relatively generous in the public sector, especially after you have been there for a few years. However, most of us work in the private sector, of course, where levels of sick pay may not be as generous, but the likelihood of critical illness is the same.
If you want a second opinion about that likelihood, the pensions company Royal London has also produced some numbers to show how common health setbacks actually are.
A 30-year-old non-smoking man stands a one in three (32 per cent) risk of a health setback that will take him off work for two months or more, and the odds are worse if you are a smoker or have other unhealthy lifestyle issues.
Now that we have established that it well may happen to us, let's look at how we are fixed, financially speaking, if it does. The answer: it's not good.
The insurer Legal & General shows that we are not well prepared for being on long-term sick, or losing our income through accident or illness.
They tell us that if the main income is lost, the average household in the UK will run out of savings in 29 days. Unless we have sick pay or some other means of supporting ourselves through an extended convalescence, then within a month we could be reliant upon benefits, friends and family for financial support.
Have we safeguarded ourselves by taking critical illness insurance (CI)?
All CI policies cover the ‘core conditions' of cancer, stroke, heart attack, tumour, and MS, plus the need for certain severe medical procedures such as a heart operation or major surgery. The money is paid out as a single, tax-free lump sum. Many policies cover many more illnesses and conditions, and every policy is different, making it important to take financial advice and shop around.
The other alternative is Income Protection Insurance, or IPI. This is designed to provide a regular payment, a replacement income in the event that you are forced out of work due to a long-term illness. It runs alongside other benefits you may receive.
Do these insurances sound like good sense, considering the convincing ‘one in three' likelihood discussed above?
Well, remarkably few people are convinced. Aviva tells us that only one family in 10 have CI cover, and only one in 12 have income protection insurance.
If you have not protected yourself and your family so far, but have been given ‘food for thought' by the probabilities discussed above, then it may be time to act!
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information on our Facebook page “Kennedy Independent Financial Advice Ltd”