The launch of so-called ‘pension freedom’ and the need for employees to take increased responsibility for their retirement planning is strengthening the case for employers to offer group income protection cover, according to research from MetLife Employee Benefits.
Data from MetLife’s UK Employee Benefits Trends Study reveals just 24% of employees are very confident about their retirement saving plans and their biggest financial concern is security if the principal wage earner is no longer able to work (47%), followed by financial security to cover serious illness costs (45%) and financial security for their family if they were to die prematurely (43%).
The study shows just 11% of UK employees are covered by income protection in the workplace leaving a huge protection gap which is particularly glaring when it comes to pension contributions, which are at risk if they are unable to work.
The research highlights the key role income protection plays in maintaining pension contributions. If an employee was to fall sick and their contributions were not insured, pension payments would stop unless the employee could pay them out of savings. Income protection schemes address this with the option of cover for pension contributions so that, should an employee not be able to work for a period of time, their contributions are protected.
The decline of defined benefit pension schemes has also highlighted the need for group life cover – defined benefit pension schemes traditionally offered lump sum death benefits which are often not available in defined contribution schemes.
Tom Gaynor, MetLife UK Employee Benefits’ director, said: “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.”