Tax break proposed for insured workers
A leading insurer is urging the government to introduce a tax break for people who take out income protection insurance.
Zurich said a temporary annual tax-rebate of £50 per insured person would stimulate an underinsured market and potentially save the government and taxpayers hundreds of millions of pounds.
Research conducted by economist Kyla Malcolm for Zurich revealed that income protection insurance – which pays out when someone is unable to work through accident or illness, already saves the government and taxpayers £185m each year, but has the potential to go much further.
It found that if the levels of income protection provided through employers in the UK – currently at 9% – reached 35% like in the US, it would save £725m a year, with claimants covered by the insurance better off by £820m each year.
In a letter to Chancellor George Osborne, Zurich UK Life’s CEO Gary Shaughnessy said the tax rebate should be offered to both companies offering income protection to employees, and to people taking up the insurance privately.
Shaughnessy said: “A tax rebate would deliver considerable value to insured people, while the Government would end up making substantial long-term savings at a time when we know it has to find viable alternatives to high welfare spending.”
The proposed tax rebate would last two years and would be targeted at employers and those earning between £20,000 and £41,000 a year, as they would benefit from income protection cover and are most in need of an incentive.
Zurich calculated that the cost of a rebate to Government would be around £300m over two years.
The insurer said this cost could be directly funded in less than two years from the annual £185m worth of savings that the Government is already making from the current level of income protection as a result of saved welfare benefits, increased tax revenue and rehabilitation services.
One million employees spend more than four weeks off work due to illness each year, costing the UK economy £15bn a year, according to the Department for Work and Pensions.