Are you part of an Excepted Group Life arrangement?

Excepted Group Life arrangements are relatively uncommon and currently there is a difference between who can receive the benefits on death compared to a Relevant Life Policy (RLP), but this is due to be changed this year. The Finance Bill includes amendments to the definition of beneficiaries to bring it in line with the definition used for RLPs.

RLPs are single employee policies and Excepted Group Life arrangements are, as the name suggests, for groups of employees. Both these arrangements differ to a traditional Death in Service (DIS) arrangements, the benefits of which fall under pension scheme rules and as a result are tested against the Lifetime Allowance on death before 75. DIS schemes can cause issues for some members whose total benefits exceed the Lifetime Allowance should the benefit pay out.

Anyone with Enhanced or Fixed protection will lose it if they join a new DIS scheme operating under pension scheme rules, but the use of RLP or Excepted Group Life avoids this problem. 

The definition of who can receive death benefits currently is as follows: 

  • Relevant Life - the potential beneficiaries are any individual or charity
  • Excepted Group Life - the potential beneficiaries are limited to the members of the ‘employee's family or household’.  If an Excepted Group Life plan uses a wider class of beneficiaries then employer contributions will be classed as a benefit in kind on the employee.

The proposed changes are set about under clause 11:

11 Beneficiaries of tax-exempt employer-provided pension benefits

(1) In section 307(2) of ITEPA 2003 (“death or retirement benefit” is a benefit for employee or others on employee’s retirement or death), for “or a member of the employee’s family or household” substitute “, or paid or given in respect of the employee to any other individual or to a charity,”.

(2) The amendment made by subsection (1) has effect for the tax year 2019-20 and subsequent tax years.

Assuming the Bill receives Royal Assent and is passed, it will become effective from April 2019. 

If you have any concerns or wish to discuss your existing arrangement in further detail, please contact one of our Financial Planning Consultants on 0808 144 5575 or visit our website.

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