07 Jun 2012
With the forthcoming pension reform changes that commence in October of this year, we have been looking at the implications that these changes may have on Group Income Protection Schemes.
A Group Income Protection scheme (GIP) is implemented by an employer in order for them to be able to provide an employee with a continued income in the event that they are unable to work due to accident or illness.
Most employers provide some form of sick pay for their staff, however, employees suffering from long term sickness, something that is likely to affect as many as 1 in 5 people during their working lives*; can result in a significant financial burden for the company. A GIP scheme can satisfy this financial commitment as it will provide the sick pay funds (up to a maximum of 80% of the employees salary, less state benefits) for the employer to process through payroll and then pass onto the employee.
With the onset of auto enrolment, employers will be obliged to make mandatory pension contributions, even if the employee is absent due to illness. As a result, the following points will be vitally important:
Pension contributions will become an additional liability that employers have to manage along with any sick pay requirement that has been stipulated in employee’s contracts of employment. The implementation of a new GIP Scheme can cover this liability.
Existing GIP schemes can be extended to also insure pension contributions, therefore satisfying the requirement that has been produced by auto enrolment. Many GIP Schemes already include this option but it may be an appropriate time to review your existing Scheme.
A GIP scheme should not be viewed solely as a supplier of funds in the event of an employee’s absence due to accident or illness. These schemes also provide valuable rehabilitation services with features such as access to medical professionals and in some cases medical treatment to ensure employees get the support to return to work as quickly and as safely possible.
Prevention of illness and duty of care are important considerations for an employer, both of which can be addressed by the implementation of a GIP scheme which includes an Employee Assistance Programme (EAP). EAP’s provide medical helplines, face to face counselling and additional benefits for employees.
If you would like a review of your current sick pay provision and the costs for implementing a new GIP scheme or amending a current scheme to provide benefit for pension contributions, then please do not hesitate to contact us.
Wingate will discuss your business circumstances with you to ensure we identify your specific business needs.
Based on this research we will provide you with a report confirming the options available and our recommendations without cost or obligation.
If you wish to make changes to your benefits, we will implement these adjustments on your behalf.
Wingate Benefits Solutions is here to assist you with all aspects of Group Risk Benefits. Should you wish to discuss this or any other such matter please contact your Wingate Benefit Solutions adviser on 0844 406 0027.
Tax and legislation are liable to change. This information is based on Wingate Benefits Solutions’ current understanding of UK law and HM Revenue & Customs practice and legislation. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of the information contained herewith. It is recommended that professional advice is sought prior to entering into any financial arrangement.