group life insurance

What are group life insurance (or death in service) schemes?

Group life insurance (often referred to as life assurance or group death in service) pays out a tax free lump sum to nominated beneficiaries, and/or a taxable pension payable to the employee’s dependants, in the event of death.

Depending on the circumstances of your employees you may also want to consider:

  • Excepted group life insurance policies – deliver lump sum death-in-service benefits in a tax-efficient way. The life benefit paid on a member’s death is exempt from the Lifetime Allowance (LTA) calculation and the pay-out is not subject to the possible 55% tax charge on benefits in excess of the LTA.
  • Trusts – group life insurance policies are written using a discretionary trust so that the benefits can be distributed by the trustees, outside the member’s estate. HMRC regards a trust as the most common structure for both registered schemes and excepted schemes. This has the advantage that benefits can be paid without an Inheritance Tax (IHT) charge and without waiting for probate.

What are the benefits of life insurance (life assurance)?

Key benefits can include:

Employer benefits

  • Low cost benefit that is highly valued by employees
  • Attract and retain high calibre staff – saving you money
  • Improve employee engagement, meaning a more productive workforce
  • Often include added value services such as bereavement counselling and a probate helpline, to support your HR team
  • Flexibility over the level of cover you provide, so you only pay for the level of cover you need

Employee benefits

  • Peace of mind that their family have a degree of protection in the event of death
  • Feel valued by their employer
  • Increased job satisfaction
  • Financial support for employee’s family, through tax free lump sum payment
  • Emotional support through additional services such as bereavement counselling and probate helpline

Did you know that lump sum death benefits from registered group life insurance schemes count towards the Lifetime Allowance, along with registered pensions?

Any benefits that exceed the Lifetime Allowance are subject to a tax charge as high as 55% for lump sum payments, payable when the benefits are paid either to the member (in terms of pensions) or to their beneficiaries (in the case of death benefits).

You may want to consider the implementation of an excepted group life insurance scheme to run alongside any current registered policy. Excepted group life insurance schemes provide lump sum death benefits outside of the registered pension scheme environment. So, any benefits paid are not included in the calculation of the Lifetime Allowance.


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Mercer Marsh Benefits (MMB) is a trading name of Jelf Insurance Brokers Ltd, which is authorised and regulated by the Financial Conduct Authority (FCA). Not all products and services offered are regulated by the FCA (for details see Registered in England and Wales number 0837227. Registered Office: 1 Tower Place West, London, EC3R 5BU.