Firms face “crippling” death in service liabilities as A-Day expires

Businesses are risking “huge” uninsured liabilities by failing to put in place limits on the amount of death in service benefit they will pay, before old rules governing this expire in April, according to GRiD.
The group risk trade body’s survey of 500 employers shows that a third are “undecided” about what action to take when pre A-Day rules are removed on 6th April this year and 48% plan to take no action.

Under the old rules, employers paid a lump sum death benefit of four times the employee’s salary, with an earnings cap of ?123,600 used to set a further limit on the salary that could be used to calculate benefits. However, A-Day rules, introduced in 2006, removed the earnings cap and set a lifetime allowance of ?1.8m on the maximum lump sum payable. Employers have enjoyed a five year period in which to transition to the new rules but this is set to expire.

Just 9.8% of the employers surveyed by GRiD will put a salary cap back into their scheme from this April, while 9.2% plan to remove the earnings cap. Within companies that plan to take no action, the percentage gets smaller with larger companies.

Katharine Moxham, spokesperson for GRiD, said: “It’s crucial for the relevant decision makers within companies to take action before the cut off date. The potential uninsured liabilities for dependants’ death in service pensions are even greater as they fall outside of the lifetime allowance and thus will be completely unconstrained unless action is taken. Group risk specialists can advise on the best action to take in time for the deadline.”
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