Group Life vs Relevant Life
Both are employer-funded ways to give employees and directors a death-in-service benefit, and both can pay a tax-efficient lump sum to a member’s family. The deciding question is whether your business has enough members to run a group scheme, and whether your highest earners are adequately covered within it.
The short answer
A single employer-arranged scheme providing death-in-service cover for multiple employees under one policy. Premiums are pooled across members, underwriting is typically limited up to a free-cover limit, and the benefit is usually expressed as a multiple of salary. Governed by a discretionary trust.
An individual life policy arranged and paid for by the employer, covering a single employee or director. Written in a discretionary trust, so the payout falls outside the individual’s estate. Premiums are generally an allowable business expense, and the benefit does not count towards the pension annual allowance.
Group Life covers many people under one scheme, making it efficient for larger workforces. Relevant Life covers one person per policy, making it the right tool for smaller businesses, sole directors, or individuals whose cover needs exceed what a group scheme can provide.
Which is right for you?
- You have five or more employees and want to offer death-in-service cover as a standard workplace benefit
- You want a single policy that covers multiple people without individual underwriting up to the free-cover limit
- Your employees earn broadly similar salaries, and a uniform multiple-of-salary benefit is sufficient
- You are looking to improve your benefits package to attract and retain staff
- You want to keep administration centralised under a single scheme rather than managing individual policies
- Some members of the team have health histories that might complicate individual underwriting
- You are a sole director, in a limited liability partnership, or your business cannot meet the group scheme minimum employee threshold
- A director draws significant dividends and needs cover that reflects their total package, not just their salary
- A senior individual’s cover requirement exceeds the group scheme’s free-cover limit, and you want to avoid individual underwriting within the scheme
- The individual has maximised their pension contributions and wants additional life cover outside the pension wrapper
- You want a straightforward individual policy that is quick to set up without scheme-level administration
- You are currently paying for a director’s personal life cover and want to restructure it through the company more efficiently
Side-by-side comparison
Real-world scenarios
Illustrative examples showing how the decision tends to play out. Names and figures are for illustration only.
Priya, running a logistics business with 34 employees
The majority of her team earn between £28,000 and £45,000. She has been meaning to add a death-in-service benefit and has recently lost a candidate to a competitor partly because of a weaker benefits package.
Read the full scenario
A Group Life scheme at four times salary would provide each employee with a meaningful lump sum benefit, and most would be accepted without medical evidence up to the free-cover limit. The pooled premium across 34 members is likely to be competitive, and the scheme can be updated annually as headcount changes.
Priya would not need to arrange and track individual policies for each person.
Marcus, sole director of a web development consultancy
Marcus takes a salary of £12,570 and dividends of £80,000 per year and has two children and a mortgage. He currently pays £210 per month for a personal term assurance policy out of post-tax income.
Read the full scenario
Because he has no other employees, he cannot meet the minimum membership threshold for a Group Life scheme. A Relevant Life Insurance policy arranged through his company could provide equivalent or greater cover, with premiums paid as a business expense.
The payout would be directed to his family via a discretionary trust, sitting outside his estate. His personal policy could potentially be cancelled once the new cover is confirmed in place, subject to taking advice.
Anya, whose group scheme underinsures her
Anya’s engineering firm runs a Group Life scheme at three times salary for all 18 employees, which works well for most of the team. Anya herself earns a total package of £190,000 including dividends.
Read the full scenario
The group scheme calculates her benefit on her declared salary of £30,000 only, giving her a death-in-service payout of £90,000. She also exceeds the scheme’s free-cover limit, meaning any increase in her personal benefit would require individual medical underwriting within the scheme.
A separate Relevant Life Insurance policy, structured to reflect her full remuneration, could sit alongside the Group Life scheme and fill the gap, without interfering with the existing scheme arrangements or triggering a review of the group terms.
The rule of thumb
Frequently asked questions
How many employees do I need to set up a Group Life scheme?
What is the free-cover limit and why does it matter?
Does a Group Life payout affect the pension allowance?
Can a director be covered under both a Group Life scheme and a Relevant Life policy simultaneously?
What happens to cover when an employee leaves the company?
Is Relevant Life Insurance more expensive than being in a Group Life scheme?
Related decision guides
Not sure which is right for you?
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Get a Free Quote →This guide is general information about how these policies work and is not personal advice or a recommendation. Tax treatment depends on your individual circumstances and the rules may change. The figures in the scenarios are illustrative only. Named individuals in scenarios are entirely fictional and created for illustrative purposes only. Consider speaking to a qualified adviser before deciding what is right for you.
