Can my employer take me off its death in service scheme when I’m 65?

21 September 2018


I have worked for my present company for over 26 years. I was eligible to be in the death in service scheme but a few months ago I received a letter from my employer telling me that when I reach the age of 65, in January 2019, I will be removed from the scheme.

As most people in my age bracket are expected to work longer and state pensions have been extended well over my original retirement age, is my company allowed to do this?

JD/via email


Yes, they are. When the government implemented the abolition of compulsory retirement it recognised that this would potentially send insurance premiums through the roof, as insurance companies would insist on higher premiums to reflect the increased risk of insuring older workers.

This may also have resulted in employers simply withdrawing insurance benefits for the entire workforce, which the government understandably wanted to avoid.

The Equality Act 2010 specifically provides an exception to the age discrimination provisions specified in the Act to allow employers to stop providing access to group risk insured benefits – such as income protection, life assurance, private medical cover and permanent health insurance – to their employees when they reach the age of 65.

This age restriction will, however, rise in accordance with any increase to the state pension age from its current age 65. Other benefits are not subject to this exemption and should be offered to all employees regardless of age (subject to any qualifying requirements).

So, in direct answer to your question, withdrawing death in service insurance from age 65 is not illegal age discrimination, although it’s not a great way to engage or motivate experienced employees either. As an HR professional, it does not sit well with me to treat employees differently because of a factor they can’t change, regardless of the law.

Why not consider asking your HR department if it is possible for your company to cover all employees to an older age, for example to an employee’s 70th birthday.

What is a death in service scheme?

Death in service is an employee benefit scheme offered in some workplaces. It means that your family or chosen beneficiary will get a tax-free lump sum from your pension scheme if you die before you retire.

The amount paid varies, but it is usually between two and four times your annual salary. So, someone earning £30,000 could expect a death in service benefit of between £60,000 and £120,000.

Your death doesn’t have to be caused by your job, you just have to be on the payroll when you die.

Most death in service benefits are paid to a beneficiary that you have nominated. So, if your family situation changes – perhaps due to divorce – make sure you notify your employer of your new beneficiary in the scheme.