Protection site

L&G group protection to cover NI rise and social care tax

Legal & General said its group protection product will cover the incoming National Insurance hike for employers as well as the government’s new ‘health and welfare tax’ for individuals.

From April 6 this year, National Insurance rates will be increased by 1.25 percentage points.

And from 6 April 2023 this will be replaced by a 1.25% ‘health and social care levy’ to fund the government’s social care reforms, which is also levied on those who do not do not normally pay AI, such as people who have reached their state’s retirement age.

L&G said its group protection policy will automatically follow the National Insurance rate increase and will also cover the new levy for new and existing customers.

“While the impact on employees has been well documented since the government announced the change to National Insurance contributions and the introduction of the Health and Social Care Levy in 2023, the impact on employers arguably has not been the case,” said Colin Fitzgerald, director of distribution. at Legal & General Protection of the Group.

“With this announcement, we hope to reassure our customers – current and future – and our channel partners on our approach, insofar as the new levy will be automatically counted.”

Legal & General’s group protection policy is still within its rate guarantee period, which means its premium rate will not be affected by any of the tax changes.

For new claims, the Social Security rates and thresholds applicable in the event of the employee’s absence will apply throughout the claim.

But if a claim is already being paid, Legal & General will not apply any adjustments for National Insurance rate and threshold changes.

Legal & General is not the first insurer to do so. Last December, Canada Life clarified that if an employer’s national insurance contributions are insured, their coverage will include the higher rate and the new payroll tax.

Like Legal & General, Canada Life said there would be no change to the plans’ unit rate during their rate guarantee period.

But he also said a “small number of plans” that are priced based on total benefits rather than total salary will see a premium increase of “a small amount”, and that single-premium accounts due on or after April 6 “will have slightly increased premiums”.

The National Insurance hike will, according to the government, be spent on the NHS, health and social care, as will the new levy.

ruby.hinchcliffe@ft.com