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Employee Benefits News

Latest News
25 Sep 2017

Warning over risk of non-compliant group risk protection

Employers are in danger of having group risk protection policies that are not legislatively compliant as the State Pension Age (SPA) increases, Group Risk Development (GRiD) warned last week.

The industry body is urging employers to check their arrangements for group risk insurance benefits (group life assurance, group income protection and group critical illness), which can legally cease at age 65 or SPA as this rises beyond 65.

Although SPA has already increased to 66, 67 or 68 for many people (and could go beyond that into the future), GRiD members are still seeing policies where employers have kept a fixed cease age of 65 (or even 60). This potentially exposes them to uninsured liability for benefits that arise after that fixed age — meaning that the employer will have to find another way of funding any payments that are due for older employees.

Instead, employers should redefine the cease date under the insurance as “65 or SPA, if later”.

GRiD also noted that the same oversight can be reflected in contracts of employment, which should be reviewed and amended to reflect the correct legal position, the actual intentions of the business and the insurance in place.

Katharine Moxham, spokesperson for GRiD, said: “Group risk providers are flexible in accommodating a range of upper ages, or providing other solutions — such as arranging a limited payment period under a group income protection policy, and it doesn´t have to be prohibitively expensive either. The first port of call for all employers is to talk to their adviser and their provider: they´re on hand to help.”

Moxham encouraged employers to plan ahead, as it is easier to negotiate terms in advance than at the time when the first employee reaches 65.

“Developments are being made all the time to group risk benefits to ensure they are appropriate for the modern, post-welfare reform world, and it is important that employers regularly review their benefit design to ensure it is fit for purpose, reflects current legislation and meets the changing needs of their business and their workforce,” she added.

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