What financial support can you get if you are suffering with long-term illness?

Long-term illness isn’t something anyone wants to contemplate and, when it does strike, money is the last thing on many families’ minds. But financial worries can start to creep in over time, causing problems of their own – particularly for those who are forced to take an extended period of sick leave.

Having a public health system in the UK means most families are protected from extortionate medical bills. However, long-term illness can still bring loss of earnings, not to mention a range of invisible costs. These could include anything from higher energy bills to the costs associated with purchasing specialist equipment.

On top of this, there is also your pension to consider. Long absences from work mean missed contributions, and the impact of this snowballs over time as you miss out on valuable investment growth and the effects of compound returns.

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You don’t have to be ill yourself to be facing these challenges either. If you are caring for a loved one who is suffering from a long-term illness, you might be struggling financially too. Broadcaster and journalist Kate Garraway has spoken candidly about the challenges her family faced when her husband Derek Draper fell ill in 2020, after suffering complications linked to Covid-19.

Speaking before he passed away earlier this year, Garraway said: “Derek's care costs more than my salary from ITV and that is before you pay for a mortgage, before you pay any household bills, before you pay for anything for the kids, so we are at a crunch point.” This is the last thing families need when they are navigating some of the most difficult moments of their life.

Thankfully, you can access support from your employer and the government – from Statutory Sick Pay to the Employment and Support Allowance. For the majority of people, these schemes won’t make up for the full value of lost earnings but can act as valuable lifelines nonetheless.

What you might not know is that your bank may also be able to offer some help. For example, cancer charity Macmillan has recently partnered with Santander UK to train more than 2,000 customer-facing employees to offer tailored support to people living with cancer.

“We constantly hear from people about how challenging it is to get financial help after receiving a cancer diagnosis,” says Becky Ettinger, head of corporate partnerships development at Macmillan Cancer Support. “We encourage anyone who is struggling to contact their banks or building societies for help or get in touch with the free Macmillan Support Line which can offer confidential guidance or provide a listening ear.”

What sick pay are you entitled to from your employer?

If you are signed off work as a result of illness, it is likely you will be entitled to some form of financial support from your employer. You can get £116.75 per week in Statutory Sick Pay (SSP), paid by your employer for up to 28 weeks. The entitlement kicks in once you have been sick for more than three days in a row.

You may be entitled to more than this if your company has a more generous sick pay scheme, but this varies from company to company and is not a legal entitlement. Some employers may also offer support beyond the 28-week point.

To qualify for SSP, you need to be classified as an employee and earn an average of £123 per week or more (before tax). This would be equivalent to £6,396 per year. It is paid in the same way as wages, so you should receive it on your usual payday. You will receive SSP for the days and hours you would usually work, so your entitlement will be less if you are a part-time employee. It is a taxable benefit, meaning income tax and National Insurance will be deducted.

Unions have called on the government to expand sick pay benefits to remove the three-day wait and to expand them to those who earn less than the £123 weekly threshold. Commenting earlier this year, Paul Nowak, general secretary of the Trade Union Congress suggested women and those on zero-hours contracts were at particular risk of missing out.

Women are more likely to take on part-time work as they are disproportionately impacted by the care burden. Black workers are also 2.7 times more likely than white workers to be on a zero hours contract, according to research from Lancaster University. This puts both groups at a financial disadvantage should they fall ill.

Nowak says those on zero hours contracts are eight times more likely than those on secure contracts to miss out on statutory sick pay because they don’t earn enough to qualify.

Government support for long-term sickness

If your SSP has come to an end and you are still too unwell to work, you may be eligible for the Employment and Support Allowance (ESA) from the government.

If you are applying from now, you will receive the new style ESA. How much you get will depend on factors like your age and whether you are able to get back into work. You will usually get the “assessment rate” for 13 weeks while your claim is assessed. This is up to £71.70 per week if you are under 25, or up to £90.50 per week if you are aged 25 or over.

After you have been assessed, you will be placed into one of two groups if you are entitled to ESA. These are a “work-related activity” group for those who are able to get back into work in the future, and a support group for those who are not. You will receive up to £90.50 per week in the former, and up to £138.20 per week in the latter. New style ESA lasts for 365 days if you are in the work-related activity group. It is indefinite if you are in the support group.

As part of your application, private pension income will be taken into consideration and could influence how much you can get. For example, if you receive more than £85 per week, half your private pension income over this amount will be subtracted from your ESA payments. “If you get £100 a week from a private pension, then £7.50 will be subtracted from your ESA payment each week,” the government explains.

You can also apply for Universal Credit if you are unable to work because of illness or a health condition. To claim, you must be under state pension age and have £16,000 or less in money, savings and investments (unlike ESA, where savings are not taken into consideration).

“You may be able to claim new style Employment and Support Allowance with, or instead of Universal Credit, depending on your National Insurance record,” the government explains. “If you get both benefits, your Universal Credit payment is reduced by the amount you get for new style ESA.”

Financial support if you are sick and self-employed

Self-employed people do not qualify for SSP but can claim ESA instead, provided they are under state pension age and have paid enough in National Insurance contributions (usually in the last two to three years).

Some self-employed people also consider insuring themselves against illness or injury. Insurers offer a range of policies including long and short-term income protection, however it may be more difficult or expensive to arrange a policy if you have a pre-existing condition.

Contacting your bank for support if you are unwell or need additional support

Those with a long-term illness may benefit from speaking with their bank – particularly if they are worried about managing repayments on their mortgage, loans or credit cards. Speaking to your bank as early as possible is usually the best course of action if you have concerns.

Mark Weston, director of financial support at Santander UK, tells MoneyWeek: “We want customers to know they can get in touch with us as there may be support we can offer to help them. Lots of people think they can only get help once they reach crisis point or arrears, but there is lots of support we can offer prior to that point.”

The bank says it will spend time listening to each customer's personal circumstances before taking any steps. Support could look different for every customer, ranging from signposting customers to government support mechanisms to letting them know what options are available to them under protections like the Mortgage Charter. 

“Sometimes, it is as simple as just giving the customer a bit of breathing space,” Weston adds. “Once a customer lets us know they are suffering with an illness like cancer, we may pause any communications for a period. This can help give the customer the time they need to think about the next steps without any added pressure.”

Speaking to your bank about topics like illness isn’t always easy, but thankfully several are making efforts to improve accessibility for customers, including those living with illness or disability. For example, Nationwide recently partnered with the Stroke Association and the British Institute of Learning Disabilities (BILD) to help customers with communication difficulties when engaging in face-to-face interactions in its branches.

Having worked with a panel of people who experience communication difficulties, the bank has developed a set of custom-made cards with pictures and phrases that can be used as communication aids. These cover a range of banking matters including savings, payments, lost and stolen cards, and suspected fraud and scams.

In general, banks are required to provide reasonable adjustments for customers and many have systems in place so you can notify them of any additional support you need. This could include things like braille statements or a British Sign Language interpreter.

With your permission, several banks will record this information about you so you only have to notify them once. For example, NatWest manages this through its “Banking My Way” service while Santander has a policy known as “tell us once”.

“In general terms, the purpose of ‘tell us once’ is to provide vulnerable customers with an ability to disclose information that may help us to support them better in the future,” says Yvonne Calland, a business manager in Santander’s customer care division.

“Whether this is something temporary or permanent, our ability to record this (with the customer’s consent) will ensure that we are prepared to support and provide good outcomes during all future interactions,” she adds.

Limiting the impact of illness on your pension

One of the most financially damaging effects of long-term illness is what it can do to your pension – whether you are suffering with illness yourself or taking time out of work to care for someone else.

Under auto-enrolment rules, Statutory Sick Pay counts as qualifying earnings for pension contributions. However the size of the contributions will fall during this period. If you are too unwell to return to work after SSP ends, your pension contributions could stop altogether. The effects are exacerbated over time as you miss out on the potential for valuable investment growth.

Making voluntary contributions to your pension could be a sensible option if you are able to, but this isn’t financially viable for everyone, particularly if you are struggling with loss of present earnings. If your spouse is in a position to contribute to your pension while you are unwell, this could help reduce the gap a little.

When it comes to your state pension, you don’t necessarily have to miss out. If you are receiving financial support from the state because you are too ill to work, you may be able to get National Insurance credits which count towards your state pension.

For example, if you are on ESA, you will receive Class 1 National Insurance credits automatically. If you are on SSP but you are not earning enough to count as a “qualifying year” for National Insurance credits, you can apply for Class 1 credits by writing to HMRC. You will need to say when the credits are for and why you are eligible.