Glossary · UK
What is Excepted Group Life Policy?
A death-in-service life insurance policy structured under a discretionary trust outside the standard registered group life scheme, keeping payouts free of the Lump Sum and Death Benefit Allowance limits and inheritance tax.
Full Definition
An excepted group life policy is a form of employer-provided death-in-service life cover structured to sit outside the normal registered pension and group life scheme framework, instead being written under a discretionary trust arrangement that qualifies for specific Income Tax and Inheritance Tax exemptions set out in legislation (hence 'excepted' from the usual rules). The main advantage is that payouts from an excepted policy are not tested against the Lump Sum and Death Benefit Allowance (the cap on tax-free lump sums and death benefits that otherwise applies to registered pension and life cover benefits), which matters most for higher earners or senior executives whose pension savings, combined with a standard registered death-in-service benefit, might otherwise breach that allowance and trigger an unwelcome tax charge on their family. Because the policy sits in a discretionary trust from the outset, payouts also normally fall outside the deceased's estate for Inheritance Tax purposes and can usually be paid to beneficiaries quickly, without needing to wait for probate.