A recent report found fewer than half of large companies have excepted life assurance policies in place, despite potential disruption by the new lifetime and annual allowance limits.
A survey conducted by consultancy Aon has found that despite increased risk for covered employees to break through the new lifetime allowance and annual allowance limits with death-in-service lump sums, only 25 per cent of employers are reviewing their provision, increasing to 46 per cent for large companies.
We are being approached by more companies wanting to implement excepted life cover
Tamara Calvert, DLA Piper
Mark Witte, principal at Aon Employee Benefits, said many companies are not prioritising the issue because LTA and life assurance “have been dominated by pensions-related matters”.
For others, “it might be on their to-do list, or they are just comfortable with their existing strategy”, he said.
Witte emphasised the importance of employee communication and advised employers to “target the people directly affected… get advice relayed to the right people in the right way.”
He said the legislative changes are “an opportunity for death-in-service to revitalise, and isn’t necessarily a problem”.
Employee’s responsibility
Bhargaw Buddhdev, partner at consultancy Barnett Waddingham, noted that he has seen many more employers taking up fully excepted cover than cited in the survey.
However, he conceded that smaller companies are behind and are not prioritising the matter because of inadequate access to good advice. “Smaller employers often go directly to the insurer,” instead of seeking third-party counsel, he said.
Buddhdev said a potential consequence of employers not updating their provision strategies would be “the creation of an additional tax burden for the employee”.
He pointed out that while the employer should give general advice to senior staff, “this is all employers can do… the decision to take or not take up protection is ultimately up to the employee”.
Awareness, not revision
Tamara Calvert, partner at law firm DLA Piper, said the firm has observed higher activity around cover provision. “We are being approached by more companies wanting to implement excepted life cover” since the reductions were announced, she said.
In the face of this increased activity, Calvert emphasised that “the employer has no legal obligation except to communicate”.
However, she added that employers do have a responsibility to be aware of the potential disruption. “If only 46 per cent of [large] companies are even thinking about it, this is surprising; if 46 per cent are considering making changes, it isn’t,” she said.
“At least look at the issue and do put it on your agenda, even if you then decide not to change anything,” she added.
John Wilson, head of technical at consultancy JLT Employee Benefits, said by not paying enough attention to death-in-service benefits, companies risk losing talent by de-incentivising senior employees. “Have a rewards strategy in place,” Wilson said.
Wilson observed that while the Finance Bill 2016 remains a bill and not a law, people only now registering for cover will have to remain under temporary protection, which might not necessarily last.
