Death In Service Benefit



Are Death In Service claim cheques made payable, from the Insurer to the Employer or the Employee?

Is it possible that an employer is not 'obliged' to pass on the amount due for whatever reason?

Can the employer insure the employee without them knowing or have double the cover that might be stated in the pensions rule book?


Death in service benefits

Technically, death in service cheques should be paid to the employer or the trustees of the pension scheme. The employer/trustees have promised benefits on death: they then insure that benefit to make sure they can cover the cost if it arises. The insurance contract is technically a private matter between the insurer and the employer, and the employee is not a party. However, it is common for the insurers to make cheques payable directly to the beneficiaries to save hassle.

The employer/trustees have to meet their obligations for death benefits whether or not they have received anything from the insurer. If they do not pay benefits, they can be sued - though the Pensions Ombudsman would be quicker and cheaper. Joe Duffy might be even faster.

There is nothing to stop an employer insuring a larger amount than promised by the pension scheme, if the insurance company is willing and the employer pays the premium. One possible reason for this might be to cover them for the effect of the loss to the business if a key employee dies. The employee's beneficiaries are entitled to the amount promised under the pension scheme: if the amount insured is higher (or lower) this does not affect their rights.



Death Benefit

In the event of the death of an employee, the specified death benefit is generally paid to the Trustees of the scheme who will then pay such in accordance with the scheme rules.
This could be in the form of a cash amount (up to 4 x Salary) with any excess in the form of a pension to a surviving spouse.
The scheme rules will state what benefits are provided on retirement and the Trustees are required to administer the benefit.
I have never heard of the Employer insuring an employee for more than the specified benefit (other than under a specific Keyman Insurance arrangement). Whatever benefits are promised in the scheme rules must be provided and the Trustees are obliged to ensure that the scheme benefits are in accordance with the Rules.


Death Benefits

Just to add - if the pension scheme provides a spouse pension, the employer/trustee may insure an addiitional lump sum to help meet the cost of that benefit.