The introduction of pension freedom and the need for employees to take more responsibility for their retirement planning is strengthening the case for employers to offer Group Income Protect cover, research from MetLife Employees Benefits shows.
The UK Employee Benefit Trends Study reveals 24 percent of employees feel confident about their retirement saving plans with their biggest financial concern being security if the main wage earner were no longer able to work (47 percent). This was followed by concerns over financial security to cover serious illness costs (45 percent) and financial security for their family if they were to die prematurely (43 percent).
Currently only 11 percent of employees are covered by income protection in the workplace according to the research. This leaves a huge protection gap which is particularly evident in pension contributions, which are at risk if an employee is unable to work.
The study highlights the key role income protection plays in maintaining pension contributions. If an employee were to fall sick and their pension contributions were not insured, pension payments would cease unless the employee were able to pay them out of savings. Income protection schemes address this issue by providing the option of pension contribution cover, meaning that should an employee be unable to work for a period of time, their contributions are protected.
Tom Gaynor, MetLife UK Employee Benefits Director, comments:
“The option to cover pension scheme contributions as part of an income protection scheme shouldn’t be underestimated or overlooked. The fall of defined benefit pensions has left a big gap. However, there is an opportunity for employers to address this gap by offering full or part-paid life cover to employees who are clearly worried about what would happen to their families if they were to die prematurely.”
The need for group life cover has also been highlighted by the decline of defined benefit schemes, these traditionally offer lump sum death benefits which are not available in defined contribution schemes.