Implications for the Life Cover and Income Protection Policies
Following changes in January 2014 to the State Pension age, many employers are considering how this change impacts not only their pension arrangements but also their risk benefits package.
With employees seeking to work past their retirement age (typically 65), the underwriting and cost implications of providing risk benefits should be considered. Click on Life Cover or Income Protection to read more detail about each.
However, if a scheme decides to change the ceasing age for life cover for all members, this case by case underwriting can be avoided. We have developed simplified underwriting rules eliminating underwriting for all members, apart from those very close to retirement already. The ceasing age for life cover can now be changed to be separate from any specified NRA in the associated pension scheme. We believe this break of connection will make it significantly easier for employers to focus separately on their pension provisions, and their group risk provisions for members who remain working for longer. On the date that the risk ceasing age is increased the following members will need to be underwritten according to the size of the respective scheme: All other lives already accepted for life cover will be automatically covered for their life benefits up to the new risk ceasing age. For most large schemes (100+ members), the cost of changing the life cover ceasing age is quite low (approximately 1%-2% of premium). It can be done at any point in standard three year rate period, without triggering a full rate review. The price difference can be higher for smaller schemes. In the future this could leave a gap for claimants between Income Protection benefits ceasing and State (and possibly company pension) provisions commencing. There are cost implications associated with raising the IP ceasing age. However, rather than raise everyone’s ceasing age to 68, it can be significantly cheaper to align the ceasing age for each member with the State Pension age. As the older members will move to a lower ceasing age of 66 or 67, the cost increase is far lower than changing all members to 68. For the majority of schemes insured by Irish Life with 100+ lives, the cost of matching all Income Protection ceasing ages with each employee’s State Pension age is approximately a 10% increase in premium costs. The price difference can be higher for smaller schemes. Underwriting is very straight forward for increasing the Income Protection ceasing age. All employees who can satisfy Irish Life’s active at work requirement will have their Income Protection ceasing age increased. A number of Irish Life schemes have already changed the ceasing age on their scheme in response to the State Pension changes. Any employers concerned about the impact of the changes on their group risk offering should discuss with their usual Irish Life Income Protection claims manager or consultant to see if your scheme is suitable and qualifies.
Underwriting requirement
State Pension Age rule change summary
- From 1 January 2014 the State Pension (Transition) is discontinued, meaning people do not receive pension until age 66 (people born between 1 January 1949 and 31 December 1954 inclusive).
- From 1 January 2021 the State Pension age will change to 67 (people born between 1 January 1955 and 31 December 1960 inclusive).
- From 1 January 2028 the State Pension age will change to 68 (people born on or after 1 January 1961).
If you have any questions please contact your Consultant or Irish Life Account Manager.
