GROUP PROTECTION
Helping to provide your employees and
their dependants with financial security
Safety & Security are two of the most sought after needs for employees to work in any business for a long period of time - Will they be able to maintain their property and/or job, so they can provide for their family tomorrow and in the future? It's impossible to predict, so how can the employer provide
this to their staff?
LIFE ASSURANCE
Group Life Assurance enables employers to provide a tax-free lump sum benefit payment, and/or a longer term income, to an employee's family and dependants if they should die in service. As well as encouraging staff loyalty and demonstrating a genuine care for staff welfare, provision of group life assurance also goes some way to reassuring employees that their efforts in the workplace really count.
BENEFITS FOR THE EMPLOYER
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Simplified underwriting requirements.
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For registered occupational pension schemes, premiums are usually allowable as a business expense and enjoy corporation tax relief, thus reducing the real cost.
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Wide variety of options contained in the plan means that the right plan can easily be constructed
BENEFITS FOR YOUR EMPLOYEES
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Bereavement Counselling and Probate helpline
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Provides peace of mind and reassurance
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Premiums paid on an employee's behalf are not treated as a benefit in kind, so are therefore not subject to income tax
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Any lump sum payable to dependants is not subject to Inheritance Tax
CRITICAL ILLNESS
Group Critical Illness insurance pays a tax-free lump sum to an employee who is diagnosed with a serious condition, such as heart attack, cancer or stroke, or is undergoing a specified surgical procedure, such as major organ transplant or open heart surgery.
The benefit is paid once the employee has survived for a set period, typically 14, 28 or 30 days, and is payable whether or not they are able to return to work.
Added-value benefits are common in Group Critical Illness insurance policies. These include Employee Assistance Programmes and access to the second-opinion service Best Doctors.
It is relatively easy to implement Group Critical Illness insurance, either on an employer-funded or voluntary basis or within flexible
benefits plans. Insurers will stipulate minimum scheme sizes, which depend on the way cover is funded, but they generally start with about
five employees.
As this is a group risk-benefit, it is exempt from default retirement age legislation, so employers do not have to offer it to staff who have reached the state pension age. Those that want to go beyond this will find most insurers stop cover at age 70.
Whether Group Critical Illness insurance is implemented on an employer-paid or voluntary basis, employers should take care to explain the cover to employees, particularly insurers’ definitions of when they do and do not pay out. For example, although policies cover conditions such as cancer, this will not necessarily include minor forms of the disease that are not considered life-threatening.
Although it does not have the reach of a more established product such as life assurance, Group Critical Illness insurance is rapidly gaining popularity. This is partly driven by pensions auto-enrolment, which is leading some organizations to conduct wholesale reviews of their benefits.
INCOME PROTECTION
CALL FOR COMPULSION
As employees are opted into their employer’s Pension scheme, the link between workplace Pensions and Group Income Protection schemes has meant that many staff have automatically received Group Income Protection cover, too.
In fact, there are now calls to make Group Income Protection a compulsory benefit. Supporters of this move argue that having insured benefits in place would significantly reduce the welfare burden on the state.
But, with auto-enrolment continuing to roll out over the next few years, such a move is unlikely to happen soon. In the meantime, insurers are seeking to attract employers with more affordable options.
Top of these is the limited-term policy, which can cut the cost of cover by up to 60%. Rather than provide cover until state pension age, these plans pay out for two to five years, after which a lump sum of up to five-times salary can be made. This lump sum could be used to pay redundancy or fund early retirement.
REHABILITATION SUPPORT
While Group Income Protection provides a highly desirable financial benefit for an employee who is unable to work because of illness or injury, a plan’s additional features can be even more valuable.
Most insurers include a rehabilitation service, which can help employers to manage sickness absence and provide the advice and medical intervention to facilitate an employee’s return to work.
For example, as soon as an insurer is notified that an employee is off work and could become a claim, it will case-manage the absence and put together a rehabilitation plan for the employee. This could include a return to work on a part-time basis, or to a lower-paid position. Where this happens, the insurer will pay a partial benefit, so the employee is not out of pocket.
As state benefits continue to reduce, insurers are likely to explore other lower-cost options to enable more employers to take out Group Income Protection.
PENSIONS
WHAT IS PENSIONS SALARY SACRIFICE?
Pensions Salary Sacrifice involves employees sacrificing a portion of their salary to contribute into their Pension scheme Instead of a Pension scheme member agreeing to pay, say, £50 of their salary direct to their
Pension Scheme.
The provider agrees with their employer that their pay is contractually reduced by £50 per month, and that the employer makes this contribution to the Pension scheme in addition to any contribution that the employee makes.
Pension Salary Sacrifice arrangements enable employees and employers to make tax and national insurance (NI) savings because the member’s Pension contribution is taken out of gross pay.
WHAT COULD GO WRONG?
The tangible result of sacrificing part of a salary is that it will decrease, which could result in an employer breaching the minimum wage laws.
Employers must also consider that staff may be involved in multiple salary sacrifice arrangements , which could also result
in the same outcome.
Pension Salary Sacrifice also involves vast amounts of administration and HR work, which employers may not have the capacity to manage.
A common mistake that many employers make when implementing salary sacrifice is failing to thoroughly review their HR processes and as well as, in some cases, failing to provide a lack of effective communication and exchange of information with staff.
