Group life: excepted vs. registered policies at a glance
We spell out the differences between excepted group life and registered group life in this handy table.
The majority of group life policies are set up under pension legislation as a registered group life scheme. This means any lump sum benefits from registered group life schemes will be aggregated with those from other registered pension schemes and tested against the Lifetime Allowance (LTA).(1)
The alternative, an excepted group life policy, is subject to life insurance legislation not pensions legislation and so these life insurance benefits are not tested against the LTA. However, they are subject to more complicated inheritance tax rules which are applicable to discretionary trusts, and where the employee buys excepted group life insurance through salary sacrifice, the premium will be subject to income tax and National Insurance Contributions.
*Tax charges after 10 years (periodic charge) and on exit may apply if there is value in the trust at that time, created if an employee dies and the benefit is yet to be paid to the beneficiaries, or if an employee is terminally ill. (2)