Protection benefits should get the same salary sacrifice advantages as pensions, says Canada Life Group Insurance scheme underwriting specialist Alan Sparks in a recent article in Corporate Adviser. (To read Alan’s article in full, please click here.) With the results of HMRC’s consultation on salary sacrifice for the provision of benefits-in-kind due to come into effect on 6 April 2017, group risk insurers believe their products should be excluded for reasons similar to those excluding benefits such as pensions, childcare and cycle schemes.
The background to the situation arises from HMRC’s concern that they may not be collecting tax due on salary sacrifice arrangements, particularly those where the benefit-in-kind doesn’t meet its economic value; the basic approach being that tax and national insurance should be paid on the full economic value. However, the government is keen to encourage ‘certain behaviours’ so it excludes pension contributions, employer-supported childcare and cycle schemes in an effort to promote their take up.
But, say the group risk insurers, their products should also qualify for exemption as they “align with the government’s desire for personal economic resilience and can save the state money by reducing financial hardship if employees are ill, injured or die.”
It’s a persuasive argument but the water is muddied by inconsistencies and a lack of clarity. For example, technically, group life insurance ‘may’ be excluded if it’s provided under a registered pension scheme – but the growing market for excepted group life cover fulfils the same need and should, therefore, also qualify for exclusion.
Protection benefits for employees serve an important function for the employee, their employer and the state and should be treated like pensions. Will be the consultation recognise this and provide much-needed clarity? We’ll have to wait a few months for the answer but, in the meantime, group risk insurers can only speculate and follow the maxim ‘hope for the best and plan for the worst’.
As a firm of independent financial advisers we can provide impartial advice to help you design and create an employee benefits’ package with a competitive edge, one that can make a real difference both to who you recruit and who you retain. If you have an employee benefits’ package, we’ll review it and recommend any changes we think could turn it into something hard to refuse. We can provide an annual review to ensure your employee benefits’ package remains fresh and competitive, grows in value as your employees’ careers develop and stays within your budget.
So, if you’re looking for help with any aspect of your employee benefits’ package, please call us on 020 3714 9565 or ask us to call you by sending an email to firstname.lastname@example.org.