1. The Protection Trinity: Shielding Your New Unit

The conversation at the expo consistently revolved around two key fears: losing an income and facing the worst-case scenario. We addressed these with the three pillars of family protection:

A. The Bedrock: Income Protection (IP)

Most parents initially ask about Life Insurance, but the reality is that the most common threat to a UK family’s financial security is long-term sickness or injury, not premature death.

• The Risk: Data shows that a working person is far more likely to be unable to work for six months or more due to ill-health than to pass away prematurely (Source: Association of British Insurers, 2024). Statutory Sick Pay is minimal (£116.75 per week as of 2024/25) and typically lasts only 28 weeks.
• The Solution: Income Protection (IP) replaces a percentage of your lost monthly income (usually 50%–70%) if you are unable to work due to illness or injury.4 These payments are tax-free and continue until you return to work or retire.5 This policy is the only way to genuinely protect your cash flow and cover crucial monthly costs like the mortgage, bills, and childcare.

B. The Safety Net: Life Insurance

With a new dependant, Life Insurance instantly shifts from being an option to an essential responsibility.

• The Calculation: The policy amount should cover two main areas:
  1. Liabilities: Clear the mortgage, outstanding loans, and credit card debts.
  2. Income Replacement: Provide a lump sum that, when invested, could provide the surviving parent with an annual income until the child leaves home.
• The Trust Solution: We strongly recommend that new parents set up their policy under a Trust. This ensures the payout is made directly to the beneficiaries (the partner and child) quickly and tax-efficiently, bypassing the often lengthy and costly probate process.

C. The Emergency Fund: Critical Illness Cover (CIC)

While IP covers the income loss, CIC provides a tax-free lump sum upon diagnosis of a serious, specified illness.

• The Need: This money is typically used for one-off costs—making changes to the home, paying off a chunk of the mortgage to reduce financial pressure, or funding recovery/private treatment.7
• Children’s Cover: Many reputable UK providers include free Children’s Critical Illness Cover as a bolt-on, paying a lower lump sum (e.g., £25,000 or 50% of the main policy) if the child is diagnosed with a severe condition.8 This small policy can be a huge financial help if a parent needs to take extended time off work to care for a sick child.

2. Securing the Legacy: Not Sacrificing Retirement

It is an understandable mistake: when faced with the cost of childcare, nappies, and potential reduced earnings (maternity/paternity leave), the pension is often the first place new parents stop contributing. This pause, however, comes at an enormous cost due to the power of compound returns.

A. The Compounding Consequence

If a 30-year-old stops a £200 per month pension contribution for five years due to childcare costs, they haven’t just lost the £12,000 they would have paid. They have lost the decades of tax-free growth and employer matching that £12,000 would have generated, potentially costing them tens of thousands of pounds at retirement.

B. Strategies for Maintaining Momentum

• Maximise Employer Matching: Even if you can’t afford to contribute more than the minimum, never contribute less than the amount that triggers your employer’s maximum matching contribution. This is free money and crucial for keeping the pension growing.
• Review Maternity/Paternity Leave: Ensure you understand how your workplace pension continues to function during parental leave. In some cases, employer contributions continue on the basis of your pre-leave salary, making it vital to keep your contributions going, even if smaller (Source: MoneyHelper, 2025).
• Prioritise Your Pension over Junior ISAs (JISAs): While setting up a JISA for the baby is tempting, the highest-priority savings vehicle must remain the parents’ pension. A child can take out a loan for university, but a parent cannot take out a loan for retirement. Fund your future first.

3. Getting Started: November’s Action Plan

November is a powerful planning month for new parents, offering the calm before the festive rush and, most importantly, the birth itself.

1. Income Assessment: Review your budget and maternity/paternity pay schedule. Calculate your minimum essential income (mortgage, bills, food). This number is the basis for your Income Protection policy.
2. Protection Audit: If you already have Life Insurance, check if it’s in Trust. If not, update it immediately. If you have no policies, prioritise getting Life Insurance and Income Protection quotes before the baby arrives, as your premiums will be based on your health today.
3. Will & Guardianship: Draft or update your Will immediately. This is the only way to legally appoint guardians for your child and determine how your assets will be distributed. Without a Will, UK intestacy laws, not your wishes, dictate the future.