DWP PUNISHING PEOPLE FOR INCOME PROTECTION

DWP PUNISHING PEOPLE FOR INCOME PROTECTION

FSA URGED TO ADD GUIDANCE ON BENEFITS IMPACT

Jamie Hepburn, SNP MSP for Central Scotland, has condemned UK Government
rules which have left one of his constituents facing bankruptcy and
repossession because of an insurance policy designed to prevent that
situation.

An Income Protection Policy, designed to ensure mortgage and loan
repayments are covered in the event of redundancy is counted as income by
the DWP preventing those who have been made redundant claiming Job Seekers
Allowance.

After being made redundant and claiming six-month’s contribution-based Job
Seeker’s Allowance (JSA), Mr Hepburn’s constituent (who has asked to
remain anonymous) was told that the income from the insurance policy was
over the threshold for claiming income-based JSA and he was no longer
entitled to claim.

Because the policy only covers the value of the mortgage and loan
repayments, Mr Hepburn’s constituent has been effectively left with no
other source of income.

Under UK Government rules, if the insurance policy had been specifically
for the mortgage and loan costs, rather than a general income protection
policy, the rules would not apply and JSA would still be paid.

Mr Hepburn wrote to the Secretary of State for Work and Pensions to
express his concern, and an appeal tribunal has since considered the case
but found no flexibility in the Government’s rules [1].

Commenting, Jamie Hepburn MSP said:

“This ridiculous situation has left my constituent facing repossession and
bankruptcy just before Christmas – because he took steps to protect
himself from exactly that scenario.

“In difficult times more and more people will be tempted to take these
policies to keep their homes and families safe. They must be aware of the
consequences.

“The FSA should ensure any adviser or seller has to make buyers aware that
the DWP will count this income – even if it only covers mortgages

“I would encourage anyone thinking of taking out insurance policies to
protect their income or debts in the case of redundancy to look carefully
at what effect these would have on their benefit entitlements from the
state. Insurance companies and banks also have a responsibility to
explain such policies clearly to their customers.

“But responsibility also lies with the UK Government not to punish those
who try to protect themselves against a loss of income in these difficult
economic times. If my constituent had not taken out this policy, he could
be entitled to mortgage interest support from the benefits system, as well
as Job Seekers Allowance. Instead, he’s entitled to neither.

“It’s incredible that the UK Government rules are having this effect, and
I’ll be continuing to work with my constituent to see if there’s any
flexibility or support available to him.”