MONEY MATTERS
Not many people like to talk about life insurance
or financial protection, but it can be crucial if disaster strikes. Dorothy Lepkowska looks at what options there are for teachers
N
o-oNe ever thinks they are going to die early or become seriously ill and unable to support their family but if it does happen the impact can be devastating. However, having some financial security by having some form of
financial protection in place can mean peace of mind and welcome support. All teachers who pay into the Teachers’ Pension
Scheme (TPS) have “death in service” benefit of three times their average salary which, in some circumstances, can also be paid after they have left service. This can benefit your dependents in several ways. A lump sum will be paid to teachers who die
in-service while in pensionable employment, or who died within 12 months of leaving pensionable employment on ill-health grounds without taking pension benefits. Similar payments are made to those who die while
on unpaid maternity, paternity, parental or adoption leave. If you die after leaving pensionable employment,
then the lump sum is calculated differently. The sum payable is the higher of either 3/80ths of your average salary for each year of service (increased in line with inflation), or the total value of your contributions paid to the TPS plus interest at three per cent per annum to the date of death. Those who die after retirement having received
a total of less than five times their annual rate of pension may also receive a supplementary death grant amounting to the difference. The TPS may also pay pensions to your widow,
widower, civil partner, nominated partner, children or other dependants, as well as paying a death grant in certain circumstances. If you die in service or within a year of leaving
service due to ill-health, provided you have not claimed pension benefits on ill-health grounds, a short-term pension equivalent to your salary at the date of death will be paid to your dependant/s generally for a period of three months. To qualify for a long-term survivors’ pension, you
must have two or more years’ eligible service. A long-term dependents’ pension will be paid
immediately to a surviving spouse, civil partner or other eligible nominated partner after the short-term pension stops and is increased annually in line with the rise in the cost of living. In simple terms, the long-term pension is calculated
at the rate of 1/160th of your average salary for each year of qualifying survivor benefits service. Additional long-term pensions can also be paid to
eligible children. eligible children include those under the age of 17 (or 23 if still in full-time education), or those who are dependent due to incapacity. Where there is one eligible child, that child will
receive half of the long-term dependents pension. Two or more children would receive the equivalent of the full dependent’s pension divided between them. A higher rate of child’s pension is paid if there is no pension payable to an adult dependant. Perhaps more than in most professions, teachers
tend to fall ill over prolonged periods. They can apply for ill-health retirement benefits if they retire for this reason but will have to provide medical evidence to support their claim.
Case study
Simon Fletcher, a history teacher working in an inner city school in the north of england, became seriously ill with cancer 15 years ago and underwent surgery and emergency treatment, including chemotherapy. Luckily, he had had a discussion with a colleague several years earlier and been persuaded to take out an
income protection plan. He said: “I never really believed anything serious was going to happen but always in the back of my
mind was the fear of how the family would cope if I ever become seriously ill. “After the original diagnosis and treatment I went back to work at my school, but several years later the
cancer returned and I needed further treatment. “This time, I had to give up work for good and was glad of the decision I took all those years ago. After
26 weeks, I began receiving monthly payments which helped to cover the mortgage. The plan has now been paying out for nine years and will continue to do so until I retire in a few years’ time. “It has meant that I’ve been able to support my children as they go through school and university while maintaining my dignity and self-respect after having to give up work.”
in association with Protect yourself
Ill-health benefits can be paid at two different levels
depending upon the severity of the illness. Unenhanced benefits equivalent to the pension earned up the date of ill-health retirement would be awarded if you are assessed as being permanently unable to teach but can do other work. enhanced benefits will be awarded if you are
assessed as being permanently unable to teach and unable to undertake any other gainful employment. Staff on long-term sickness may receive up to six
months’ full pay and six months’ half pay, under sick pay arrangements. However this stops after that and unless you have
private arrangements in place then your only benefit entitlement may be toemployment Support Allowance, which is currently a maximum of £99.85 for the most severe cases (following the initial assessment people would get £99.85 if put into the support group, or £94.25 if put into the work group – which of these groups you fall into will depend on your capacity to work). You can make sure that you do not lose income
by taking out an income protection plan, which can be set up to provide benefits in line with sick pay entitlement. It could pay a proportion of your gross salary until
your normal retirement age or earlier return to work. According to official figures, fewer than five per cent of households have any income protection in place. For example, a teacher who is off on long-term
illness, with a salary of £30,000, might receive six months of full gross pay of £2,500 a month, followed by a further half-year on £1,250. This teacher could put an income protection policy
in place which starts to pay benefits once their sick pay reduces and/or stops completely.
SecEd
• Dorothy Lepkowska is a freelance education journalist.
Wesleyan for Teachers offer a range of specially structured protection products.
Protection for you and/or your family
• Income Protection is designed to provide sufficient income should sickness or an accident prevent you from working.
• Mortgage Protection is designed to pay off your mortgage in the event of your death.
• Critical Illness Cover pays out a lump sum if you suffer a specified illness.
• Life Assurance is designed to pay any debts and perhaps to leave an additional lump sum to ease the financial burden on your dependents should you die.
Call us now on 0800 316 6554
quoting reference 60565 and arrange a no-obligation personal review and receive
£20 M&S voucher
FREE* Illustrative vouchers only
* Terms & conditions: For any teacher or related profession booking a no-obligation financial review by 31 July 2011. Offer based on one voucher per person and only one appointment can be booked during this particular promotion. No purchase is necessary. No alternative is available. Employees of Wesleyan are excluded. If a meeting is cancelled you will not be entitled to the voucher. You will be required to complete and return a confirmation card after your first meeting and a £20 Marks and Spencer voucher will be sent to you within 14 days of the confirmation card being received by Wesleyan for Teachers.
Wesleyan for Teachers is a trading name of Wesleyan Financial Services Ltd, which is authorised and regulated by the Financial Services Authority. Wesleyan Financial Services Ltd is wholly owned by Wesleyan Assurance Society. Registered No. 1651212. Head Office: Colmore Circus, Birmingham, B4 6AR. Fax: 0121 200 2971. Website:
www.wesleyanforteachers.co.uk. Telephone calls may be recorded for monitoring and training purposes.
Protect your financial health
WFT-AD-66-05/11
SecEd • May 19 2011
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