GLA is often at the core of many business benefit structures. When communicated properly, this benefit is greatly valued by employees, as it financially provides for their beneficiaries at the time of their death.
Previous scheme designs have often linked to pension scheme membership; the recent auto-enrolment changes have had an impact on the take-up of companies’ pension schemes and have also had a knock on effect on GLA. Coupled with the continued reduction in the lifetime allowance, this means a review of your current structure is essential.
Types of GLA
There are two main types of GLA arrangement.
1. Registered schemes These require registration with Her Majesty’s Revenue and Customs (HMRC).
2. Excepted group life arrangement These style of arrangements are generally used for higher earners. Both schemes are written under trust with benefits paid by the trustees, to the employee’s beneficiaries tax free, subject to HMRC limits in the case of Registered schemes.
Considerations when reviewing the design of your GLA scheme
Often these schemes have inherited structures as a result of mergers and acquisitions and in some instances TUPE regulations apply. This can mean having various categories and benefit levels within your group life scheme.
Over the years employees may change employment contracts or terms but the benefits can remain unchanged. This can mean what you are insuring via your policy might not match the contractual promises you are making to your employees - you maybe under or over insuring, and your premiums may not be accurate. Some scheme rules may go back a number of years and you might be covering salary definitions, or operating earnings caps for example, which no longer exist. Due to Lifetime Allowance, it is becoming increasingly advisable to ensure you have an Excepted policy in place alongside a scheme which is registered for tax purposes. If you have not explored this you may have employees who, in the event of death, would leave their dependants with a 55% tax charge to pay. Normally there will be no increase in cost or premium when setting up an Excepted scheme but you will need to execute a trust deed and so it is important to seek advice before making this change.
What added-value might you be missing out on?
GLA providers are increasingly offering added-value services. When you’re reviewing your scheme, it’s worth checking to see if your provider offers:
Bereavement counselling Some policies often have some telephone or face to face sessions to help next of kin to come to terms with loss. This can include managing grief, and helping resolve any areas of upset which might remain.
Probate support Some polices offer support for beneficiaries from trained legal consultants. This can help the deceased’s relatives deal with practical issues including:
Registering a death
Obtaining a death certificate
Advice on what to do if no will exists
Advice to help deal with finances after a death e.g. closing bank accounts