Sick pay and income protection
Choosing the deferred period: when should the policy start paying?
Enter your company sick pay scheme, your outgoings and your savings. The calculator shows the week your money runs short.
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Where company sick pay stops
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Savings run out in week
36
| Full pay ends after | 13 weeks |
| All company pay ends after | 26 weeks |
| Shortfall over 2 years | £38,285 |
A deferred period is usually chosen to start paying when full pay or savings stop, whichever comes first.
The deferred period of an income protection policy is the time between stopping work and the first payment. Common choices run from four weeks to a year, and the longer it is, the lower the premium, because short absences are far more frequent than long ones. The usual way to choose it is to start the policy when your other income stops. Take an employee on £3,200 a month whose employer pays 13 weeks of full pay and 13 weeks of half pay, with £2,300 of monthly outgoings and £6,000 set aside. Full pay ends after week 13; after week 26 only state benefits remain. On this case the savings run out in week 36, so a policy deferred to the end of company pay, 26 weeks, would start before the money is gone.
Rates read and sums checked by Radif Partners · Editorial policy · How the figures are worked out
The phases of this employee’s income
Company sick pay comes first, at full and then half pay, with Statutory Sick Pay included in it. Once company pay ends, New Style ESA is assumed to follow at the assessment rate, if the National Insurance record qualifies. The last column is the monthly shortfall against outgoings in each phase.
| Phase | Weeks | A month | Short each month |
|---|---|---|---|
| Company sick pay, full | 1 to 13 | £3,200 | -£900 |
| Company sick pay, half | 14 to 26 | £1,600 | £700 |
| Statutory Sick Pay | 27 to 28 | £534 | £1,766 |
| New Style ESA, assessment rate | 29 to 41 | £414 | £1,886 |
| New Style ESA, work-related activity group | 42 to 80 | £414 | £1,886 |
| After New Style ESA ends | 81 to 104 | £0 | £2,300 |
Four deferred periods compared
The next table adds a policy of £1,600 a month with each of four common deferred periods and shows the two-year shortfall that remains and the week the savings would run out. A four-week period duplicates months the employer already pays; fifty-two weeks leaves the half-pay and ESA months to savings that do not stretch that far.
| Deferred period | Shortfall left over two years | Savings run out |
|---|---|---|
| 4 weeks | £7,385 | week 96 |
| 13 weeks | £7,385 | week 96 |
| 26 weeks | £9,485 | week 83 |
| 52 weeks | £19,085 | week 36 |
How people usually decide
Three dates set the choice: the end of full company pay, the end of all company pay, and the point at which savings would be gone at the shortfall shown in the first table. A deferred period at the earliest of the three leaves no month without income; one at the latest is the cheapest that still avoids running out of money, if the savings would really be kept for this purpose. Where the savings are also the emergency fund for a boiler or a car, many people count only part of them.
What the state rates mean for the choice
The state pays most in the first months and least afterwards. Statutory Sick Pay is £123.25 a week at most; the DWP rates put the ESA assessment rate at £95.55 and the work-related activity group at £95.55, which stops after 365 days. Because the state support thins out over time, the cost of a long deferred period is borne in the hardest months. The full timeline lets you enter any benefit and period.
A worked choice for this employee
On these figures, a policy starting at week 13 would overlap the half-pay months and cost more than needed for the first part of an absence. A policy starting at week 26 begins as company pay ends, so the savings only have to cover the half-pay shortfall, which they do. A policy starting at week 52 leaves half a year of state benefits alone, which the savings would not cover. So the choice here is between the second and the third, and the second is the one that leaves no month in which the household runs out of money. Changing a single figure, such as the savings or the weeks of half pay, can move the answer, which is why the calculator is set to your own scheme.