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Age rules could push up group protection rates

Group income protection premiums could rise by 50 per cent due to the new age discrimination rules, warns Legal & General.

It says many employers previously cut off benefits to employees once they reached 60 but the European legislation, introduced on October 1, 2006, requires them to extend benefits to employees to a default age of 65, unless they can justify otherwise.

Group risk technical manager James Walker says this could increase the cost of providing group income protection dramatically, leading to premium increases of up to 50 per cent for some schemes.

He says some employers are already threatening to reduce or scrap group income protection schemes entirely.

But Walker says employers need to be very careful and take legal advice when levelling down employee benefits which have been written into employees’ contracts.

He also warns that cutting back benefits could lead to more people falling back on state benefits.

Walker says there is still basic misunderstanding among employers and advisers over the new rules, with some believing they do not need to provide employee benefits to workers aged 65 and over.

Unum Provident head of commercial marketing Wojciech Dochan says: “We have seen a lot of firms increase the cut-off age to 65. There have been premium increases of 20 per cent and more but it depends on the age profile of the company and the previous framework of their benefits. We are engaging with brokers and clients on a scheme-by-scheme basis.”

Legal & General has produced a second update for IFAs on the implications for group risk benefits of the age discrimination rules. Advisers can obtain a copy by emailing group.risk@landg.com.

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