Salary-linked cover
Benefit set as a multiple of each employee's basic salary, typically two to four times. Cover scales automatically as people are promoted or get pay rises, with no need to recalibrate manually.
Group death in service pays a tax-efficient lump sum to an employee's family if they die while in your employment. Easy to administer, valued by employees, and deductible as a business expense.
Important: The tax treatment of group death-in-service arrangements depends on the policy structure (registered or excepted), the individual circumstances of the employer and employee, and current HMRC rules, which may change. Always seek independent advice from a qualified tax consultant before proceeding.
A group death-in-service scheme is owned by the employer and covers a defined group of employees. If a covered employee dies while in service, a lump sum is paid out through a discretionary trust to the employee's chosen beneficiaries.
Most schemes are structured as a multiple of salary, commonly two to four times, with some schemes going as high as ten times. Alternatively, a flat fixed sum can be set per employee, for example £50,000 or £100,000.
Each scheme has a Free Cover Limit, the maximum benefit an insurer will provide without individual medical underwriting. Most employees fall comfortably under this limit, so cover is granted automatically on joining.
Premiums are calculated on the profile of the workforce as a whole, not individual underwriting. The rate is reviewed each year at renewal and adjusted for changes in headcount, salary and the workforce profile.
The lump sum is paid into a discretionary trust set up alongside the policy, then distributed to the employee's nominated beneficiaries. This keeps the payout outside the deceased's estate for inheritance tax purposes.
Group death-in-service is one of the most tax-efficient employee benefits available. The structure is recognised by HMRC and the tax treatment is generally favourable for both the business and the employee, subject to the rules being followed correctly.
Premiums paid by the employer are typically treated as an allowable business expense, reducing the company's corporation tax bill. This is subject to the "wholly and exclusively for the purposes of the trade" rule.
Group life premiums paid by an employer are not normally treated as a P11D benefit-in-kind for the employee, so the employee pays no income tax on the value of the cover.
The lump sum is paid to the trustees and then distributed to beneficiaries, who receive it free of income tax. Inheritance tax is also normally avoided where the payment is made through a properly drafted discretionary trust.
An Excepted Group Life Policy sits outside the registered pension regime, which can be helpful for high earners whose total pension and life cover would otherwise have lifetime allowance implications. We'll advise on whether a registered or excepted structure is appropriate.
We compare group death-in-service schemes from all major insurers and recommend the structure that best fits your workforce, your tax position and your wider employee benefits strategy.
Benefit set as a multiple of each employee's basic salary, typically two to four times. Cover scales automatically as people are promoted or get pay rises, with no need to recalibrate manually.
A flat lump sum is set for each member of the scheme, regardless of salary. Simple, predictable and well suited to smaller schemes or workforces with a wide salary range.
The standard structure for most employers. Benefits are paid under the umbrella of a registered pension scheme. Tax-efficient and straightforward for the majority of workforces.
An alternative structure that sits outside the registered pension regime, useful for high earners whose lump-sum cover would otherwise cause lifetime allowance issues. Requires careful trust drafting.
The level of benefit each member is granted without medical underwriting. We position the scheme to maximise the Free Cover Limit so the most employees get automatic cover from day one.
Some schemes can be extended to provide a smaller lump sum on the death of an employee's spouse or registered partner. A low-cost addition that's valued highly by employees.
It is an employer-owned life insurance scheme that pays a lump sum to an employee's chosen beneficiaries if the employee dies while in employment with the company. The cover is part of the employee's overall benefits package and is one of the most cost-effective protections an employer can offer.
The lump sum is paid through a discretionary trust to the employee's nominated beneficiaries. It is generally paid free of income tax. Properly structured, the payment also sits outside the employee's estate for inheritance tax purposes, meaning the family receives the full amount without further deductions.
Generally no. Premiums paid by the employer for group death-in-service cover are not normally treated as a benefit-in-kind on the employee's P11D, so the employee pays no income tax on the value of the cover provided to them. This is one of the features that makes group death in service especially tax-efficient.
The Free Cover Limit is the maximum amount of benefit an insurer will provide to a member without requiring individual medical underwriting. Members whose benefit sits at or below this level are covered automatically on joining the scheme. Members whose benefit exceeds the limit may need to provide medical evidence for the portion above the FCL.
A Registered Group Life Policy sits under the umbrella of HMRC-registered pension legislation. An Excepted Group Life Policy sits outside that regime. The excepted structure can be helpful for high earners whose total pension and lump-sum life cover would otherwise interact with lifetime allowance rules. Both are valid; the right choice depends on the workforce.
Group death-in-service is one of the most cost-effective employee benefits available. Premiums are calculated on the profile of the workforce as a whole (the unit rate) rather than individual underwriting, and the rate is reviewed annually. The cost depends on the size of the workforce, the age and gender mix, the chosen benefit level and the industry. For most employers, the cost works out as a very small percentage of payroll.
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