Well, that’s big news. Yesterday the Government announced details of a proposed state income insurance scheme, which would pay people who lose their jobs up to 80% of their wages/salary for up to six months.
The proposed scheme covers people who lose their jobs due to health conditions and disabilities – as well as redundancy and lay-offs. The scheme would be run by ACC, and funded by compulsory levies paid by employers and employees (similar to ACC levies, and KiwiSaver contributions).
The Income Insurance Scheme at a glance
A summary of the proposals in the New Zealand income insurance scheme.
Broad coverage for different working arrangements
Coverage for job losses due to redundancy, layoffs and health conditions and disabilities
A four-week notice period and four-week payment, at 80% of salary, from employers
A further six months of financial support from the scheme, at 80% of wages or a salary
Option to extend support for up to 12 months for training and rehabilitation
A case management service to support people’s return to work
Administered by ACC
Funded by levies on wages and salaries, with both workers and employers paying an estimated 1.39% each
Workers eligible after six months of levy contributions in the previous 18 months
Some commentary from us.
There are around 650,000 income protection policies on issue in New Zealand, earning premiums of more than $450 million a year for insurers, figures from the Financial Services Council show. New Zealanders are likely to have car and contents insurance and will have house insurance if they own a home or an investment property, especially if they have debt associated with it. Insurance for health, income, trauma and life are another story. These are the ones we refer to as Personal Insurance.
There are 2 primary reasons Kiwis don’t have Personal Insurance
One: The good old attitude of “she’ll be right and it won’t happen to me”, or
Two: Affordability! The reality is that many households are living paycheck to paycheck so being able to pay rent and put food on the table comes well ahead of insurance.
This concept of a compulsory Income Insurance is great in terms of helping to provide more protection for everyday Kiwis. The issue is that like the changes with the CCCFA (which was implemented to help the vulnerable), the devil is going to be in the detail. A first glimpse shows that it will in effect be another tax and for those Kiwis living on low incomes this will effectively be cutting into their paycheck at a time when inflation is kicking in – and the minimum wage is not enough to support a household with increasing costs.
We will be interested to see more detail about the proposed scheme as it released.
By the way, if you want to have your say on the proposal you can make a submission at this link. Have your say on the proposed Income Insurance scheme
As always, we want to hear from you if there is anything you want to talk through. Individual solutions for individual situations is what we do!