Earlier this year the government confirmed its intention to remove the use of a default retirement age for the purposes of compulsory retirement.
What does this mean?
As a result of these changes and due to the fact that the workforce will be able to work past the age of 65 (which has typically been the chosen default retirement age for most employers), all Group Risk schemes such as Group Life Assurance, Group Private Medical Insurance and particularly Group Income Protection Schemes will need to be reviewed to ensure that the cover in place is suitable for the needs of the workforce.
The Government have announced it will introduce an exemption to the principal of equal treatment where Group Risk insured benefits are provided by an employer. This will permit these benefits to be withdrawn in line with the State Pension Age which will initially be 65 but will increase thereafter.
We would recommend that employers consider whether they wish to utilise the exemption and withdraw the provision of benefits to persons aged above the State Pension age.
We would recommend the following are considered when reaching any decision.
- At this stage the cost of continuing life assurance benefits for employees who continue working beyond age 65 is not prohibitive although it is possible that as more employees continue working beyond the state pension age the costs will rise due to the increased risk associated to a larger number of older employees within the scheme.
- It is anticipated the increased and sometimes prohibitive costs associated to extending income protection, critical illness and private medical insurance costs beyond age 65 will continue.
- Is there a business case for retaining ‘competitive’ edge on your employee benefits by maintaining these for persons who continue working beyond the state pension age?
- Is there a desire within the organisation to continue benefits for the older employees who typically have been long serving and loyal and arguably have an increasing need for the benefits as they become older
- It will be necessary to apply a consistent policy to avoid discrimination. If employers agree to continue insured group risk benefits for some persons working beyond the state pension age this would need to apply to all employees unless an employer is able to objectively justify a specific retirement age for certain types of employee.
- If you currently offer income protection (or PHI) benefits which continue up to age 65, there is an immediate need to amend the scheme so this provides benefit up to at least the higher of age 65 or the State Pension age
- In view of the significant cost of continuing income protection benefits for employees aged 65 or over, many employers are reviewing their schemes. These reviews consider alternative benefit structures which are designed to ensure the scheme remains viable for the employer whilst maintain value for the employees.
- It is important you fully consider your options prior to reaching any decisions as it will be more challenging to make changes in the future than reaching an informed and appropriate decision now
What do you need to do?
We are already in the process of contacting you to raise any issues which may affect the cover already in place but should you wish to arrange a meeting to discuss these issues, please let us know.
Non ‘Group Risk Clients
We strongly recommend that you contact us as soon as possible in order for us to review your existing arrangements to ensure that they take into account these changes and are suitable for your business now and for the future.
- 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.