Why Advisers should champion Income Protection amid the latest welfare shake-up

The recent welfare reforms have stirred the pot quite a bit, shaking up the status quo and making waves across the board. As advisers, it's crucial to understand what these changes entail and why income protection should be at the forefront of your recommendations. Income protection insurance isn't just a safety net—it's a lifeline. Let's dive into why this should be a top pick for advisers and how it can benefit your clients in this new welfare landscape. 

What's Changed? 

The Spring Statement has ushered in a series of significant welfare reforms aimed at reducing government spending and encouraging self-reliance. These changes mean more stringent rules for benefits, lower payments, and a larger push towards employment. While these reforms might promote financial independence, they also pose challenges for those who can't work due to illness or injury. 

Summary of Changes: 

• Only 1 in 4 people fully understand the welfare reforms set out in the Spring Statement.¹ 
• Overall, it's estimated that in 2029/2030, 3.2 million families will be impacted due to these changes, with an average loss of £1,720 per year compared to inflation.² 
• Changes to Personal Independence Payment (PIP) entitlement rules will mean 430,000 future recipients will not get the PIP they would have otherwise been entitled to, with an average loss of £4,500 per year.² 
• Rebalancing support in Universal Credit to encourage more people into work, impacting 730,000 future Universal Credit health recipients with an average loss of £3,000 per year.² 
• Universal Credit health element for new claimants will halve from £97 per week to £50 from 2025/26.² 
• ESA claimants may face more frequent reassessments to ensure eligibility.²

Sources: ¹LBG – Sprint statement survey, March 2025, ²Gov.uk - Spring Statement 2025 health and disability benefit reforms – Equality Analysis 

Why Income Protection? 

Unlike other insurance types, income protection covers a wide range of conditions and offers long-term support, making it an essential safety net for clients who may otherwise rely on government support if they were off work due to illness or injury. Recommending income protection could help clients secure their financial future and ensure they have money coming in when times are tough. 

Financial Security 

One of the biggest perks of income protection is the potential financial security it offers. If clients fall ill or get injured, they might lose a significant portion of their income, leading to financial struggles and stress. Income protection steps in to provide regular income to cover essential expenses like mortgages, bills, and everyday costs. This support can ease the stress and allow clients to focus on getting better without worrying about their finances. 

Flexibility and Customisation 

Income protection policies are flexible and can be tailored to fit individual needs. Advisers can work with clients to customise policies based on their specific situations, including cover levels, waiting periods, and benefit periods. This customisation ensures clients get the right level of protection and maintain their lifestyle even if they can't work. By recommending income protection, advisers provide a personalised solution that meets unique needs. 

Standing up to Client Objections 

The proposed reforms provide a compelling reason for advisers to confidently challenge client objections around relying on the state. While welfare benefits offer some financial support, they might not be enough to cover all expenses. Income protection can fill the gap between government support and actual financial needs, ensuring clients have a solid safety net. Advisers can highlight the importance of income protection as an extra layer of security, making sure clients are fully covered financially. 

Case study – for illustrative purposes only – information correct as of April 2025 

Katie & Owain are getting married next year, they have their own home with a mortgage and plan to start a family in the future. 

They are looking for financial advice now they have settled into their home following Owain’s recent job promotion. 

Owain works in business administration 

Katie is an estate agent 

Income – information correct as of April 2025
 

Katie suffers an injury at work which results in a slipped disk and back surgery.  Due to the nature of her job, she is off work long term whilst she recovers. for 12 months and despite not being fully recovered, needs to return to work for financial reasons. 

The future
 

Long-term Financial Planning 

Income protection isn't just a short-term fix; it's a vital part of long-term financial planning. By recommending income protection, advisers help clients build a solid financial strategy that prepares them for potential risks and uncertainties. This proactive approach ensures clients are ready for anything and can keep their financial stability over the long haul. Advisers should emphasise the importance of income protection as part of a comprehensive financial plan that protects clients' futures. 

Peace of Mind 

Ultimately, income protection gives clients peace of mind. Knowing they have a reliable income if they fall ill or get injured provides a sense of security and confidence. This peace of mind is priceless, especially with the welfare reforms limiting government support. Advisers can highlight the emotional and psychological benefits of income protection, showing how it reduces stress and anxiety for clients and their f3amilies. 

In Summary 

The welfare reforms from the Spring Statement underscore the necessity of income protection for all clients. As advisers, it's crucial to understand these reforms and the importance of comprehensive financial security. Income protection offers reliable income, financial stability, and peace of mind in times of illness or injury. By recommending income protection, advisers help clients navigate the changing welfare landscape and ensure they have the support needed for financial well-being. It's a key tool that complements welfare benefits and is an essential part of long-term financial planning.