IHTM17091 - Pensions: excepted group life policies: introduction

Excepted group life policies are group life assurance schemes set up by employers which satisfy the criteria for an excepted group life policy in ITTOIA05/S481 & S482. The scheme is not a registered pension scheme or an employer-financed retirement benefits scheme.

The scheme is set up as a trust and the employer is the settlor of the trust for Inheritance Tax purposes. No benefits from the scheme are payable to employees; lump sum benefits are only paid to an employee’s family or dependants if the employee dies in service before retirement age. The trustees have discretion as to which one or more persons receive a lump sum on the employee’s death and in what proportion.

The only asset of the scheme is a term assurance policy that matures if the employee dies in service before retirement. The rules of the scheme are interdependent with the policy, so no lump sum is payable other than in accordance with the terms of the policy. All premiums are paid annually by the employer and the employees do not contribute to the scheme. The policy has no surrender value other than a pro rata refund of premiums for any unexpired period of cover paid for.

If a policy of this sort is mentioned in the IHT400, refer the matter to Technical who will give advice on these policies.