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Warning on group cover

Many employers are considering suspending death-inservice benefits following changes to group policies in the wake of the September 11 attacks, according to Watson Wyatt&#39s latest research.

The consultancy firm is predicting that there will be an increasing emphasis on lump sum payments and a potential reduction in death-in-service cover provision in the future as firms move to cap liabilities.

Watson Wyatt is encouraging employers to review their group death-in-service arr-angements.

It advises firms to consider include spreading death-in-service cover across two insurers, changing the contractual arrangements with employees to guarantee benefits only up to the limits of insurability, and rethinking the way that death-in-service benefits are designed.

Watson Wyatt head of healthcare and risk consulting David Cross says A-Day and pension simplification have forced employers to review the way death-in-service benefits are structured within their companies. He warns that death-in-service pensions are increasingly expensive compared with lump sums as well as being generally less tax efficient under the simplification proposals.

Cross says: “Since 9/11, insurers have typically placed single-event limits of between £50m and £100m. These are significant sums but for companies with large concentrations of employees, there is a risk of a potential shortfall in the event of a catastrophe.”

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