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's 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.”