The Autumn Budget: Why protection advice needs a rethink
Jonathan Hall
Scottish Widows Protection Specialist
Let’s be honest - when the Chancellor’s Budgets land, most advisers brace for the usual headlines: frozen tax thresholds, pension tweaks, and the perennial squeeze on household budgets. But beneath the surface, these changes could also impact protection advice.
Protection isn’t just a ‘nice to have’ - it’s financial resilience. In a world where every pound counts, advisers have a unique opportunity to position protection as the cornerstone of financial security. The Budget’s ripple effects are everywhere, and they’re opening doors for more meaningful, client-centered conversations.
1. Affordability pressures: Making protection non-negotiable
With income tax and National Insurance thresholds frozen until 2031, clients are being nudged into higher tax bands by inflation alone. Disposable income is shrinking, and every discretionary spend is under scrutiny. Here’s the uncomfortable truth: Statutory Sick Pay is just £118.75 per week for 28 weeks - a total of £3,3251. Could your clients afford a long break from work?
More than one in three working-age Britons will take three or more months off work due to illness or injury during their career. In fact, a 30-year-old has a greater than 1 in 3 chance of being off work for over three months before retirement - a risk that’s higher than dying early, yet often overlooked.2 The financial impact can be significant: chronic illness can reduce annual earnings by £1,400-£2,200, and two in five people diagnosed since the pandemic have lost 10% or more of their income.3
Now is the time to talk to clients about income protection and critical illness cover - because when life changes, their financial security shouldn’t. Instead of pitching protection as a “nice-to-have,” challenge clients to see it as essential. Try benchmarks that resonate: “Allocating 5% of income to protection can help safeguard your family’s future.” Breaking it down like this can help clients reframe priorities.
2. Salary sacrifice cap: Rebalancing priorities
From April 2029, only the first £2,000 of pension contributions via salary sacrifice will remain exempt from NICs4. For many, this means pension efficiency is taking a hit. But here’s the twist: reduced pension efficiency could free up funds for protection needs. Advisers can help clients rebalance, ensuring their financial resilience isn’t compromised by shifting tax rules.
3. Savings and ISA changes: Shifting the security conversation
Cash ISA allowances will fall to £12,000 from April 2027, and tax on savings and dividends will rise by two percentage points from 2026/275. The old “save your way to security” narrative is losing ground. In 2024, UK insurers paid out a record £8 billion in protection claims, including £1.3 billion for critical illness and £4 billion for life insurance. The average critical illness payout was £67,600; life insurance, £79,7036.
Protection isn’t just a backup plan - it’s a way to safeguard wealth without relying solely on taxed savings. Advisers can use these stats to spark conversations about what real financial security looks like in a changing landscape.
4. Vulnerability and Consumer Duty: Going deeper
Economic strain is making more clients vulnerable. Only 7% of Brits have income protection, leaving 93% exposed to financial risk during illness.7 Income protection claims can continue for as long as required (dependent on the policy term), in fact according to the ABI, over 1,660 individual income protection claims have been in payment for more than 10 years, and 376 for over 20 years, showing that long-term claims are common8.
This isn’t about ticking a regulatory box - it’s about empathy. Ask open-ended questions: “If illness reduced your income, what would change for your family?” The goal isn’t to prescribe, but to help clients explore their own risk and resilience.
5. Intergenerational planning: Preparing for tax drag
Frozen thresholds and rising property values mean more estates will fall into taxable territory.4 In 2024, Scottish Widows paid £236.6 million in protection claims, with 99.1% of life insurance claims and 91.8% of critical illness claims accepted. Top causes for critical illness claims? Cancer (64%), heart attack (10.4%), stroke (8.6%)9.
Protection isn’t just about today - it’s a tool for intergenerational planning. Advisers can help clients see how protection fits into the bigger picture, ensuring their legacy is secure.
The Budget may tighten belts, but it also opens doors for meaningful advice. Protection provides peace of mind when clients need it most. Advisers who challenge the status quo, ask better questions, and use evidence to spark new thinking will be the ones who truly add value.
So, next time you sit down with a client, don’t just talk about what if’s. Talk about resilience. Talk about what really matters when life throws a curveball. Because in this new landscape, protection advice isn’t just important - it’s transformative.
Sources:
2 WeCovr, 2025
4 Gov. UK
5 2025 budget summary, lordslibrary, 2025
7 Scottish Widows & YouGov research, 2025
9 Scottish Widows Claims, 2024