However, knowing the best way to offer it to staff isn’t as clear-cut as it could be, says GRiD, the industry body for group risk protection benefits (employer-sponsored life assurance, income protection and critical illness).

 Provided the payments to beneficiaries are paid through a discretionary trust, they do not form part of the deceased’s estate so can be paid quickly (without the need for probate) and free from inheritance tax (IHT). For many years, the way to do this was to use a discretionary trust written under pensions legislation.

 Ironically, the introduction of the pension tax simplification regime in 2006 introduced some complexities for group life assurance. Excepted Group Life Policies (EGLPs) provide a simple alternative way of arranging life cover independent of a pension. For some people, particularly those who had protection for their pension tax position, life assurance could be provided more efficiently in this way. This means that benefits are disregarded when assessing pension tax charges. As the value of the Lifetime Allowance (LTA) has eroded and the simplicity of a non-pension arrangement has appealed to more employers, an increasing number of employees have been enrolled into EGLPs.

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