House Deposit Savers ‘Most at Risk of Financial Loss After Injury’
Young people saving for a home could face the highest financial loss if they were unable to work after being seriously injured or suffering an illness.
This is according to a new analysis by the Association of British Insurers (ABI).
Some liable to lose 80% of income
The ABI found that a person who has saved more than £16,000 for a house deposit, with no dependants and without income insurance, could potentially lose as much as 80% of their monthly take-home income.
According to the ABI, this is because anyone with more than £16,000 in savings is not entitled to Universal Credit when ill or injured. This is despite this amount being significantly lower than the UK’s current average house deposit of £41,099.
The ABI revealed that for someone earning £30,000, this would be equal to a fall in income of more than £1,500 every month, going from £1,995 to £389.
The organisation also found that even those with children or no savings at all will stand to lose roughly half of their monthly take-home income. This could leave them unable to pay their rent or mortgage, as well as affect their ability to afford other general living costs.
Many may face ‘financial catastrophe’
According to the ABI, losing up to 80% of net pay would typically result in those affected having to rely on their savings. As they would not be eligible for Universal Credit, this would therefore put homeownership at risk for them.
Yvonne Braun, director of long-term savings and protection at the ABI, explained: “Without the proper protections in place, many people face a financial catastrophe if they unexpectedly fall ill or are injured and are unable to work.
“This is particularly pronounced for younger people who have saved diligently for a house deposit as any savings above £16K wipe out their entitlement to Universal Credit, leaving them almost entirely reliant on their nest egg.”
Differing impacts
The amount of savings an individual has will affect their Universal Credit entitlement. Those with savings of more than £16,000 are not eligible for assistance, while the amount you may qualify for is tapered for amounts below £16,000.
According to the ABI, this means that for the first 28 weeks of not working, you are entitled to statutory sick pay of £408. However, this amount would then be replaced by National Insurance-based allowances, which is likely to be even less than the statutory level of sick pay.
The ABI gave the example of someone in their 20s, earning a gross household income of roughly £20,000 and savings of £5,000 seeing a 47% drop in their income after being unable to work. However, someone in their 30s, with savings of £16,001 and gross pay of £30,000 will see a 79% fall in income.
If you have been affected by a personal injury and have been left unable to work, you may be worried about how you’ll meet your financial obligations. But you could be able to make a claim for compensation with First4Lawyers, which could go a long way towards keeping you in a healthy financial position while you can’t work.
To discuss your options with our advisors for free and with no obligation, just give us a call, request a call back at the top of your screen or start your claim here.
