Effect of disability benefit on ER pension contributions

[harza]

I have a disability benefit plan with 2 options for the level of cover on offer: 55% or 80% of salary.

Does anyone know (roughly) the cost differential between the 2 options? My employer will pay for the cover but it come out of the % employer contributions for the DC pension scheme.
i.e. the bigger disability cover premium would reduce amount of employer contribution to pension fund.

I have put this query to the life company but they said it will take up to 4 weeks for the reply!
Other details: age 30, no dependants.

 

[LDFerguson]

Hi Harza,

The cost of Income Protection cover is determined by quite a number of variables. You've covered age, but the other ones would be gender, occupation, smoker (y/n), waiting period before benefit kicks in ("deferred period"), ceasing age and escalation rates in benefits pre or post claim. Without all of these details, it would be virtually impossible to guesstimate a costing. The other one is obviously "how much cover", but you may not be willing to disclose this on a public forum as it's related to your income.

However, for what it's worth, the cost of cover will tend to be linear, i.e. cover for 80% of your salary will be around 1.45 times the cost of 55%.

 

[MMilken]

Harza

If you are in a Company Arrangement, then there would usually be a unit rate applied by the insurance company's policy.

This would be a flat rate - the advisor to your company's arrangements should be able to disclose this.

Depending on the age profile the unit rate should be somewhere between 1.5% to 3% per €1 of benefit.

So if the benefit was an annual income protection payment of €30,000 then the unit rate would be between €450 and €900 annual premium.

This might help you get a handle on things - just ask your advisor or the insurance company for the unit rate applying.