Death in service benefit: what it pays and whether it is enough

It's life cover from your employer, with a payout linked to your salary. It usually pays a lump sum to your nominated beneficiaries (the people you name to receive it). Less often, it pays a taxable pension to someone who relied on you financially, or both.

Insurers call it group life assurance (see life assurance vs life insurance for how the names differ). It's the most common employer-sponsored protection benefit in the UK. In 2023 the group risk market insured 11,158,083 people for death benefits.

Not all employers offer death in service, and the benefit may differ from one workplace to another. Depending on how it's offered, you need to be actively employed, and some employers only cover you if you join their pension scheme.

The cover is normally free for you. It isn't underwritten (assessed against your health) unless your benefit goes over a limit set by your employer.

Many employers take out group risk insurance (cover an employer buys for its staff) for some or all of their liability for death benefits. Your employer is generally the policyholder and pays the premiums. Any claim is generally paid to the employer or the pension scheme trustees.

Most group life policies run under HMRC's rules for a registered occupational pension scheme. Some employers use an excepted group life policy instead. That's a trust set up outside a registered pension scheme, and it pays out only if you die in service before retirement age.

Death in service usually pays a multiple of your basic salary, which could be 2 to 8 times pay. Your employer chooses the multiple, and some offer more after a certain number of years' service or for jobs with extra responsibilities.

HMRC uses 4 times salary as a common example of a lump sum paid when an employee dies. Tax rules don't cap how much a scheme can pay, though the scheme's own rules may.

Which salary does it use?

The payout is usually worked out on your basic salary: what you earn before tax and National Insurance, without bonuses or overtime. On a £25,000 salary with a benefit of four times salary, the payout would be £100,000. Public sector schemes use their own measure, such as pensionable earnings (the pay your pension is worked out on).

What is the average payout?

The average new group life claim in 2025 was £143,436, according to Group Risk Development (GRiD), the industry body for group risk. Cancer was the main cause of claims (33%), followed by ischaemic heart disease (15%).

Your own payout depends on your pay and your employer's multiple, so it may be far from the average. For personal policies, see average life insurance payout.

It usually goes to the person you name on your nomination form, but the scheme trustees or providers have the final say. Tax rules don't limit who can be paid, though your scheme's rules may.

How nomination and expression of wish forms work

Many pension providers ask you to fill in an expression of wish or nomination form naming who should receive the money. In most UK schemes these forms aren't legally binding: HMRC calls them letters of wishes. The trustees usually follow your wishes unless there's a strong reason not to.

Your death in service nomination form is separate from your pension beneficiary form, so it's worth checking both are filled in and up to date. Without a nomination form, the trustees try to choose someone who was financially dependent on you, and it might take longer to sort out.

Death in service is normally tax free if you die before 75 and the lump sum is paid within two years. The two years run from when the scheme first knew of your death, or should reasonably have known.

Income Tax while you work and when it pays out

You don't pay Income Tax on the cover while you work. By law, no Income Tax arises when your employer provides a death benefit for you, under a registered pension scheme or otherwise. The premiums your employer pays generally aren't a benefit in kind (a workplace perk you pay tax on).

Since 6 April 2024, when the Lifetime Allowance was abolished, your lump sum and death benefit allowance has usually been £1,073,100, unless you hold a protected allowance. It's the most you or your beneficiaries can take as tax-free lump sums from all your pension schemes. Tax-free cash you take when your pension starts (a pension commencement lump sum) uses up some of it.

If a payout from a registered pension scheme goes over your remaining allowance, the excess is taxed at the recipient's marginal rate (their highest rate of Income Tax). Your legal personal representative (the person who deals with your estate) is responsible for telling HMRC about the charge.

The whole lump sum is taxable if you were 75 or older when you died, or if it's paid outside the two-year window. An individual then pays Income Tax on it as pension income. If it's paid to a 'non-qualifying person', such as a company, a personal representative or a trustee (other than a bare trustee), a special charge of 45% applies instead.

Inheritance Tax and the April 2027 change

Most pension and excepted group life death benefits are paid at the trustees' discretion, so they aren't part of your estate or chargeable to Inheritance Tax. From 6 April 2027, most unused pension funds and death benefits come into Inheritance Tax. Death in service benefits payable from a registered pension scheme stay excluded from your estate.

A payout does fall into your estate if it's paid to the estate as of right, or if you made a binding nomination. If your employer doesn't use a trust-based scheme, the money might be paid into your estate instead. A personal policy on your own life is part of your estate unless it's written in trust: see life insurance in trust and life insurance beneficiary rules.

Binding nominations are most often seen in non-UK schemes and some statutory schemes. Where the payout is part of your estate, the spouse or civil partner exemption applies where appropriate. In the NHS Pension Scheme, the lump sum isn't normally included in an Inheritance Tax assessment if it's paid to your legal spouse or civil partner. It normally is if it's paid to a nominated person, a qualifying scheme partner or your estate.

The four public sector schemes below pay between 2 and 4 times your pay, each measured its own way. Each also sets who gets the money if you haven't nominated anyone.

Other rules differ from scheme to scheme:

• Armed Forces (AFPS 05 and AFPS 15): Opting out, and your membership circumstances, can affect whether the lump sum is paid. A separate adult survivor pension is normally 62.5% of your pension entitlement: see military life insurance.
• Local Government (LGPS in England and Wales): You're covered from the day you join, however long you've been a member. The scheme also pays a pension to an eligible spouse, civil partner, cohabiting partner and eligible children.
• NHS Pension Scheme: Cover starts from the day you join and continues after retirement. Lump sums go to your nominees without waiting for probate (the legal right to deal with someone's estate). They must be paid within two years of the scheme being told, or an HMRC tax charge of up to 45% applies. You can nominate one or more people, or one organisation such as a charity or a Trust. Bank workers and freelance GP locums who aren't actually at work when they die aren't covered for in-service benefits. Instead, the scheme pays as if they'd died within 12 months of leaving.
• Teachers' Pension Scheme: You can't nominate a Trust or a charity for the death grant. On sick leave, you only count as being in pensionable service while you get at least half your usual gross salary. If you die within 12 months of leaving all pensionable service because you were too ill to work, an in-service death grant is still paid: see teachers' life insurance.

Your death in service cover usually stops straight away when you leave your employer. That's the case whether you switch jobs, retire or take a career break. You can't take the cover with you or keep paying into it yourself.

That can leave your family with less cover during a gap between jobs or if you become self-employed. A new employer might also offer a lower multiple, or only cover pension scheme members.

If you leave a public sector scheme with a deferred pension (one you've built up but haven't started taking), a lump sum may still be paid. In the NHS Pension Scheme, it's based on your built-up annual pension. In the LGPS in England and Wales, if you left after 31 March 2008 and die before taking your pension, it's five times your deferred annual pension.

Increasing a personal policy when you lose workplace cover

Some personal life policies let you increase your sum assured (the amount paid out) without full health underwriting if you lose workplace cover when you change jobs. Two examples are Forester Life's Personal Insurance and Zurich's Personal Protection. Zurich's premiums go up to reflect the extra cover, and Forester Life recalculates yours on its standard terms.

You might, if your workplace payout wouldn't cover your mortgage, debts and living costs. Group life assurance is often the only life cover low to middle earners have. Yet an employer's multiple might not stretch to a mortgage, childcare and everyday bills.

You can hold workplace cover and a personal policy at the same time. Aviva says many people take out their own policy so they're covered wherever they work: see is life insurance worth it?.

Insurers may cap the total cover you can take out across your policies, and an application may ask whether you already have a policy with another insurer. See more than one life insurance policy.

With term life insurance, you choose a fixed term such as 5, 10 or 25 years. Writing it in trust keeps the payout outside your estate, so it can be paid outside probate and Inheritance Tax. If covering everything costs more than you can afford, decide what matters most or choose a lower level of cover. A broker will call to go through quotes with you.

• Term life insurance: personal cover for a fixed number of years
• Life insurance calculator: estimate how much cover your family might need
• More than one life insurance policy: how workplace cover and personal policies fit together
• Life insurance for the self-employed: options when you have no employer cover

Each employer's benefit is different, and a missing nomination form can mean a longer wait for the people you leave behind.

1. Check you have cover Not all employers offer death in service, and some only cover employees who join their workplace pension scheme.
2. Check the multiple and the pay it uses Find out what multiple your scheme pays and which pay it uses. That's usually basic salary without bonuses or overtime; public sector schemes use their own measure of pensionable pay.
3. Fill in both nomination forms Your death in service nomination form is separate from your pension beneficiary form, so check both are filled in. It's worth completing a form for each pension you hold too.
4. Update your nominations when life changes Review your named beneficiaries if your circumstances change, such as after a marriage, a divorce or the birth of a child.
5. Check what happens if you leave or are off sick Workplace cover usually ends as soon as you leave. Rules for sick leave and for bank or locum work depend on the scheme.