having problems over what classifies as capital

[watson66]

Please help us. My husband has been on long term sick for 3 and 1/2 years. He gets incapacity benefit, and PHI (permanent health insurance). The PHI company have made him an offer of £14,000 in full and final payment, on the condition he terminates his employment with his employer.

 

Currently we get a little help with our rent and council tax. If the payment is classed as capital it wont affect what we get in benefits, in fact we will be better off, as will only have the incapacity benefit coming in as a monthly earning. However, the council are now saying they aren;t sure if they will class this lump sum as capital but may treat it as an earning.

 

Can anyone help?

 

Obviously a lump sum would be amazing we could treat the kids to take them on a once in a life time holiday, and pay off some debts, but if they treat it as an earning it will be gone in a year paying our rent.

 

Also if anyone knows if its tax free that would be great too.

[honeybee13]

Hello there. I don't know if it's tax-free, but the insurance company should be able to tell you, and obviously that's important for anyone.

 

Have you done the maths to work out the amount your OH would be paid over the rest of the life of the PHI policy multiplied by the number of years it has to run? I mean, if the PHI pays 1000 a year for the next 10-14 years, the offer might be fair. In my experience, insurers tend to offer a lump sum thinking that gullible people will accept and go away, saving the insurance co money.

 

I'm not sure about whether this would alter your benefits or council help, but I think it might. Hopefully, someone will be along to answer that for you.

 

HB

[watson66]

Hello there. I don't know if it's tax-free, but the insurance company should be able to tell you, and obviously that's important for anyone.

 

Have you done the maths to work out the amount your OH would be paid over the rest of the life of the PHI policy multiplied by the number of years it has to run? I mean, if the PHI pays 1000 a year for the next 10-14 years, the offer might be fair. In my experience, insurers tend to offer a lump sum thinking that gullible people will accept and go away, saving the insurance co money.

 

I'm not sure about whether this would alter your benefits or council help, but I think it might. Hopefully, someone will be along to answer that for you.

 

HB

 

Thats a very good point, the thing is we cant guarantee he will always pass their medicals. We dont know how long they will keep paying, i think its ongoing as long as he passed their medicals. My hubby never wants to return to his employment thats the other problem so this way it frees him for the future for when hes hopefully feeling better.

 

To be honest the 14,000 is only just over what they are paying him a year! Do you think if we called their bluff we would get more?

 

Oh and the tax fee thing has to be apparently assessed and decided by HRMC, so we dont know, it looks like it may be but not sure, its the council thing worrying me cos were going to be worse off despite the lump sum.

[honeybee13]

Well, off the top of my head, I would say the PHI offer is a rubbish deal. You could try asking them how they've calculated the amount, or ask via your OH's company if it's not his own policy.

 

Some companies seem to make a joke offer in the hopes of getting rid of people off the books. I can't say if they will increase the offer and I take your point about your OH not passing the medicals. Have you had any professional opinions about that?

 

I don't quite understand why they want him to leave the employer, do you know please?

 

HB

[watson66]

Well a lot of him leaving in first place was due to stress at work so for him its a benefit not to have to go back there, I guess for them, it just clears their books after 3 and 1/2 years. We feel very lucky that they had the insurance in place to pay him, but do see where your coming from about paying him off. Maybe we should say we want to walk away with 14,000 so if it comes back not tax free, they will have to up the amount, to cover the tax?