This is one of those posts that has the potential to save an employer an awful lot of money and/or hassle at a stroke.

Many employers offer a Group Risk scheme (which is industry jargon for any of Group Life, Group Income Protection, and Group Critical Illness schemes) as a benefit to their employees. Often these schemes have been running for years, or even decades, without any fundamental change to their eligibility conditions.

Historically it was not uncommon for such arrangements to be linked directly to pension scheme membership. For instance, you would only be eligible for Group Life cover if you were an active member of the company pension scheme.

Whilst this might well seem slightly unfair, this has been a common practice for a very long time. Such schemes have run perfectly well over this period, and the need to reconsider the eligibility has just not arisen for many employers.

Yet now it should. Every UK employer must shortly comply with Pensions Auto-Enrolment (AE) duties. This is likely to significantly increase pension scheme membership, which in turn could also up the numbers covered in the connected Group Life scheme.

The industry has been aware of this for several years, and somewhat naively I assumed that most such schemes had, by now, been reviewed. Yet this may not be the case. At a recent event I attended, Canada Life (a major provider of such schemes) speculated that, there were more than 30,000 schemes with eligibility still linked to pension membership. Even allowing for the fact that many such schemes will already be taking steps to counter this issue, that is still an awful lot of employers with a potentially nasty financial shock just over the horizon.

There are of course solutions and options that the employer can consider to mitigate, or even maximise, the impact of these changes. But the important thing is to recognise that the scheme may have an issue, and plan accordingly. So, if you think that your scheme may be one of the 30,000, now would be a very good time to take action to avoid a potential hidden cost.

Best regards

Steve