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Happy new state benefits year?

Apr 5, 2018, 11:15 AM

Find out how Aviva Flex-pertise™ can help fill the gaps

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Aviva Flex-pertise™ is the UK market leader for flexible employee benefits1. Here’s how life, critical illness, spouse/partner and income protection cover can help fill gaps in recent changes to the UK state benefits system.

Government and employers are trusted on financial issues

As well as the start of a new tax year, Friday 6 April 2018 was also the start of the new state benefits year. For many people, these benefits are the sole source of financial help in difficult circumstances. Our research2 shows that 57% of UK parents with dependent children regard the government as the most commonly trusted source of financial support, followed by employers, with 50%. For those with limited financial resources, state benefits are a lifeline. But how far does the lifeline stretch? Let’s look at mortgage support and bereavement benefits.

Mortgage benefit becomes ‘second mortgage’ loan system

Since 1948, a benefit known as SMI (Support for Mortgage Interest)3 has helped people pay their mortgages and avoid repossession. The key reasons for claiming this benefit included the death of a partner, long-term disablement or unemployment. From 6 April 2018 the current system ends for both new and existing claimants and is replaced by what is effectively a ‘second mortgage’: a government loan secured against the home.

The sum of the loan payments and accrued interest will become immediately due and payable when the claimant’s home is sold or transferred. The key difference with the previous scheme is that it’s substantially less generous and creates more debt. It can also result in eroding a home’s value as an inheritance. For many people without adequate life cover, critical illness cover or income protection, these changes can present a real challenge and might come as an unwelcome surprise.  

Limited payout from state death benefit rebrand

Another important change was to Bereavement Allowance (formerly Widow’s Pension )for deaths occurring on or after 6 April last year. The benefit was rebranded and simplified as ‘Bereavement Support Payment’.4 It consists of a one-off payment of either £2,500 or £3,500 and then 18 monthly payments of either £100 or £350. (The higher rates refer to claimants receiving Child Benefit). So the highest total amount a person could receive is £9,800. Contrast this figure with our maximum Group Life cover benefits of 15 x salary.

What this means for Group Protection flex benefits

It’s no surprise that state benefits have been modified to ease the pressure on government finances. After all, the system supports a growing market of around 66 million people5 who are customers from cradle to grave. With £541 billion’s worth of public sector spending allocated to social protection, education, personal social services and health, this amounts to roughly £7 out of every £10 the government spends.6

David Matthews, Distribution and flex lead, said: “Our research7 shows that UK families regard employers as a trusted source of financial support. This is where Group Protection flex benefit schemes can make a real impact and transform the fortunes of employees in places where the state is under pressure to deliver. Aviva’s life, critical illness, spouse/partner and income protection cover can all provide a valuable supplement or superior alternative to many aspects state provision.

Find out more

There are many reasons why we hold the largest share of the Group Protection flex market. See our guide to Aviva Flex-pertise or contact your Aviva Account Manager for more information.


1 Swiss Re Group Watch 2017: Aviva has the largest share of Group Protection flex market, based on in-force Group Protection premiums written under flex.
2 Aviva Protecting Our Families 2017.  Page 1 ‘Government is the most commonly trusted source of financial support (57%)’.  https://www.aviva.com/content/dam/aviva-corporate/documents/newsroom/pdfs/reports/6904_Aviva_PoF_interactive_secure_17.03.17_87Arq6l.pdf
3 GOV.UK Support for Mortgage Interest (SMI) https://www.gov.uk/support-for-mortgage-interest
4 GOV.UK Bereavement Support Payment https://www.gov.uk/bereavement-support-payment
5 Office for National Statistics. https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/july2017
6 Autumn Budget 2017 Public sector spending 2018-19 (Chart 1, p5) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661480/autumn_budget_2017_web.pdf
7 Aviva Protecting Our Families 2017.  Page 1 ‘Government is the most commonly trusted source of financial support (57%), followed by employers (50%)’.  https://www.aviva.com/content/dam/aviva-corporate/documents/newsroom/pdfs/reports/6904_Aviva_PoF_interactive_secure_17.03.17_87Arq6l.pdf

(Sources 3, 4, 6: public sector information licensed under the Open Government Licence v3.0.)

GR05040 04/2018

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