Can you afford to leave protection to chance?
The social security system has come under intense scrutiny during the coronavirus pandemic, highlighting some of the most serious gaps.
There is nothing quite like a crisis to show where societies are vulnerable. In the UK, the immediate concern of the coronavirus pandemic was the resilience of the NHS, which initially appeared at risk of being overwhelmed by demand for intensive care beds. Then, like many other countries, the UK was forced to provide extra financial support for people who suddenly found themselves out of work in these unforeseen circumstances.
The most significant element of the government’s response was the Coronavirus Job Retention Scheme (CJRS), which by late May was covering nearly 8.4 million employees – handing them up to £2,500 a month in replacement ‘pay’. Had the CJRS not been put in place, many of those employees would have looked to means-tested Universal Credit, under which the standard allowance for a couple aged 25 or over is just £594 a month, before any additions (e.g. for children). Even that lowly figure includes a temporary increase for 2020/21 of about £87 a month.
The damage that could have been done to millions of families by the fallout from Covid-19 has been mitigated by the government’s multifaceted response. However, the Chancellor is already acting to limit the cost of the Covid-19 measures on the government’s finances. In a year or so from now, the social security safety net will probably have reverted to its lowly pre-Covid-19 levels.
When that point is reached it will once again be important that you have your own financial protection arrangements in place to cover possible income loss due to illness or disability. The lesson of this experience is that the ‘normal’ social security safety net is inadequate, but full protection would probably be too costly for the government: protection needs to be personal.