Death In Service

Death In Service

A Death in Service scheme provides a lump sum payment to the beneficiaries of an employee should they die whilst in service with the company.

Also known as Group Life Cover, this type of cover is generally cheaper than an individual insurance policy because it is arranged on a group basis and preferential rates can be obtained.

Death in Service Essentials

  • The amount of benefit paid for by the employer can be based on either a multiple of salary or a fixed amount for various groups of employees.
  • As the scheme is written under trust, benefits are usually paid out tax-free.
  • Paid as a lump sum or a multiple of the employee’s salary which includes aggregate pension and life insurance benefits.
  • For the 2015/16 tax year, the Lifetime Allowance has been set at £1.25 million. Any excess lump sum will be subject to a 45% tax charge.
  • Payable to the employee’s spouse, dependents or other beneficiaries (at trustees’ discretion).

This can be used to provide:

  • A lifetime income or lump sum for the employee’s spouse or partner.
  • An income for the employee’s children until age 18.
  • An income for other financial dependents, such as an elderly relative (if the employee has no spouse).

Spouse’s Pension

Within a Death in Service scheme, it is also possible to offer a Spouse’s Pension option. This is a guaranteed income payable to a spouse for the rest of their life should the employee die whilst in service with the company (equivalent to maximum 4/9ths of the employee’s salary).

In the event of a claim, the pension received by the spouse would be liable to income tax as part of their earned income.

For more details and advice on any aspect of Death in Service, click here to visit the Vintage Corporate website, call Vintage Corporate on 020 8371 5232or email info@vintagecorporate.co.uk