Employee benefits

Death in service

Group death-in-service protects your employee’s dependants and loved ones by providing a tax-free lump sum to named beneficiaries in the event of the employee's death.

The provision of this relatively low-cost benefit demonstrates the value you place in your workforce and can align your offering with, or even differentiate it from, competitors when recruiting staff.

To enable benefits to be paid tax-free, group life schemes are written under discretionary trusts and normally set up as registered schemes under regulations that relate to occupational pension schemes. As a consequence, any lump sum paid by the scheme is regarded as a pension benefit.

In the event of a scheme member’s death, the value of the lump-sum payment is added to the value of the employee’s pension death benefits, and the combined total is tested against the prevailing lifetime allowance (LTA) level.

As recently as 2010 the LTA was £1.8m, but a succession of pension reforms has seen the allowance reduced to its current level of £1m.

With pension benefits above this level taxed at up to 55%, it may be better to set up an Excepted Group Life Policy rather than a registered scheme. Benefits paid under excepted schemes are not regarded as pension benefits and are therefore not set against the LTA.

As an independent broker we can select the most appropriate and competitive arrangement for your needs. We understand that your circumstances are unique and will recommend tailored solutions to meet your individual requirements.

For more information about our services or to speak to one of our consultants, simply complete our enquiry form, send us an email or call our Cambridge office on 01223 720209 or our Norwich office on 01603 692733.

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