Katharine Moxham: Five upcoming changes for group risk protection
Legislative changes are always a challenge for UK plc, and the most recent amendments to laws covering group risk benefits are no exception. For those employers looking to offer employer-sponsored life assurance, income protection and critical illness for their staff, there are five key changes to be aware of.
The Work, Health and Disability Green Paper: improving lives
The paper, from the Department of Work & Pensions’ and Department of Health’s Joint Policy Unit, highlights the important role that group income protection can play in supporting employers’ health, wellness and attendance programmes.
Although the consultation closed on 17 February 2017, the dialogue continues and employers need to be aware that reducing the employment disability gap and supporting ill or disabled employees will take centre stage.
Delinking group life from pensions
Although the government's consultation on pension tax relief was put on hold, we anticipate that this will be resumed.
The linkage of death benefits with pensions legislation has become more problematic, especially given the reduction in the lifetime allowance. GRiD will make the case for a separate tax regime to be established for death benefits to ensure that unintended consequences – damaging for employers and a large section of the working population – are avoided.
Employers need to be aware of how this situation progresses so they can be prepared for any potential impact to their business.
Delinking group income protection from state benefits
The reduction of Employment & Support Allowance (ESA) from April 2017 will have an impact on most group income protection policies. In current terms, this means that new ESA claimants who are placed in the work-related activity group will receive £3,801 instead of £5,312 a year. It’s more important than ever that employers work with their advisers and group risk providers to review group income protection benefit design to ensure there are no shortfalls in cover, it is fit for the modern, post-welfare reform world and meets the needs of their business.
The Insurance Act 2015 (effective from August 2016) places greater onus on employers and advisers to ensure the right information is made available to insurers so that they can accurately assess the risk they are taking on – for example, full and accurate details of people who are off sick and why.
Group risk benefits pay out in catastrophic circumstances for employees and their families and it's vital that all those involved in their set-up and ongoing operation act with due diligence and care. It is also critical that employers seek expert advice on the potential impact of these changes to ensure there are no shortfalls in the benefits they offer their staff.
Draft legislation limiting the range of benefits that attract income tax and national insurance contributions advantages through salary sacrifice appears to exempt death in service schemes written through a registered pension scheme, but excepted group life policies and group income protection currently appear to fall within scope of the changes.
Employers will be working closely with their group risk providers and advisers to ensure they get value for money within their flex programmes. This is not just about how the timeline will have an impact but also about using the extra support services that come with group risk policies, which can be key to optimising budgets.
Nothing stays the same – employers will face challenges this year but there has never been a better time to build strong tri-partite relationships between employer, adviser and provider. Our industry is at its best when we work together; we develop extraordinary solutions to support employers and their staff and this year will be no exception.
This article is written by Katharine Moxham, spokesperson for Group Risk Development (GRiD)
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