Glossary · UK

What is Death in Service?

An employee benefit that pays a tax-free lump sum to your beneficiaries, usually a multiple of salary, if you die while employed.

Full Definition

Death in service is a benefit many UK employers provide that pays a lump sum to your chosen beneficiaries if you die while still employed by the company. The payout is typically a multiple of your annual salary, such as two, three or four times pay, and is usually arranged through a group life assurance scheme held under trust. Because it is paid through a discretionary trust, the lump sum normally falls outside your estate for Inheritance Tax and is paid free of Income Tax, reaching your family quickly without waiting for probate. You generally nominate beneficiaries using an expression of wish form, which the trustees consider. Cover usually ends when you leave the employer, so it is not portable like a personal life policy. It matters as a valuable, often free, layer of family financial protection, though the amount may be modest relative to a mortgage or long-term needs. Standard Inheritance Tax uses the GBP 325,000 nil-rate band, so keeping payouts outside the estate is advantageous.