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Death in Service Benefits Explained: What UK Employees Need to Know

· 31 min

Note: The following scenario is fictional and used for illustration.

Emma Richardson, 38, sat at her desk during annual benefits enrollment, scrolling through her company's benefits package. As a finance manager earning £52,000, she discovered she had death in service coverage worth £208,000—four times her salary. Her initial relief was palpable. "My family would be protected," she thought.

Then she started calculating. Her mortgage: £285,000. Childcare for her two children until they were teenagers: at least £150,000. Ten years of household expenses for her family: £300,000. The £208,000 suddenly didn't seem as substantial.

According to GRiD (Group Risk Development), approximately 85% of UK employees have some form of death in service benefit through their employer. Yet many, like Emma, don't fully understand how it works, whether it's sufficient, or what happens if they change jobs.

This guide explains exactly what death in service is, how much your family would receive, the critical tax implications following 2027 changes, and why this valuable employer benefit should be part of—not a replacement for—your comprehensive estate plan.

Table of Contents

What Is Death in Service Benefit?

Death in service benefit is employer-provided life insurance that pays a lump sum to your beneficiaries if you die while employed by the company. The death doesn't need to be work-related—you simply need to be on the payroll when it occurs.

Also known as group life insurance, group life assurance, or employer life cover, this benefit provides financial protection for your family at no cost to you. Your employer pays the premiums as part of your overall compensation package.

The payout is typically 2 to 4 times your annual salary, though some employers offer higher multiples. If you earn £35,000 and your employer offers 3x salary death in service, your beneficiaries would receive £105,000.

James, a 42-year-old teacher earning £45,000, receives death in service protection through the Teachers' Pension Scheme. His coverage provides 3 times his salary—£135,000—automatically as part of his pension enrollment, plus additional short-term benefits for his family.

Industry data shows the median death in service benefit offered by UK employers is 3.5 times salary. In 2023, the group risk industry paid out a record £2.49 billion in claims, equivalent to £6.82 million every single day.

According to GRiD's claims data, the average death in service payout in recent years was £116,414, reflecting the combination of varying salary levels and different employer multiples across the UK workforce.

Eligibility is generally automatic for all employees on payroll, though some employers require pension scheme enrollment. Most schemes include no medical underwriting—unlike personal life insurance, you won't face health questions or medical exams.

Example Payouts at Different Salary Levels:

Annual Salary 2x Multiple 3x Multiple 4x Multiple
£25,000 £50,000 £75,000 £100,000
£40,000 £80,000 £120,000 £160,000
£60,000 £120,000 £180,000 £240,000
£80,000 £160,000 £240,000 £320,000

The key characteristic distinguishing death in service from personal life insurance is its direct tie to your employment. While valuable, this connection creates both benefits and significant limitations.

How Does Death in Service Work in Practice?

Unlike personal life insurance where you pay monthly premiums, your employer covers the entire cost of death in service protection. The premiums are a tax-deductible business expense for your employer, and you receive this potentially substantial coverage without any deductions from your salary.

Death in service benefits are held under a discretionary trust structure. This legal arrangement has important implications for how benefits are paid and who controls them.

Under the trust structure, your employer typically acts as the first trustee, though additional trustees should be appointed. These trustees hold legal discretion over how the payout is distributed. While employees nominate beneficiaries through an "expression of wish" form, this nomination is not legally binding—the trustees make the final decision.

When Michael started his job at a financial services firm, he was automatically enrolled in 4x salary death in service from his first day. No forms to complete, no health checks, no waiting period—just immediate protection worth £180,000 based on his £45,000 starting salary.

The trust structure involves three key roles:

The Settlor: Your employer, who establishes the trust and pays the premiums.

The Trustees: Usually your employer plus at least two additional trustees (often family members or solicitors), who control the benefits and decide distribution.

The Beneficiaries: The people who receive the payout, nominated by you but ultimately determined by trustees.

Sarah completed her expression of wish form when she joined her company, nominating her partner Marcus and their two children as beneficiaries. While the trustees typically honor such nominations, they retain final discretion. This discretion exists to handle changing circumstances—if Sarah and Marcus later separated but she never updated her form, trustees could redirect benefits to reflect her actual dependents.

Most death in service schemes are automatic, activating the moment you join the payroll. However, some employers link coverage to pension scheme enrollment. Check your employment contract or benefits documentation, or ask your HR department directly.

One critical advantage of death in service is the absence of medical underwriting. Personal life insurance requires detailed health information, lifestyle questions, and sometimes medical examinations. Death in service accepts all employees regardless of health status, making it particularly valuable for those with pre-existing conditions who might face high premiums or coverage exclusions on individual policies.

Coverage is valid only while you remain on the company payroll. The day you leave your job—whether through resignation, redundancy, retirement, or career change—your death in service protection ends immediately.

How Much Will Your Family Actually Receive?

While standard multiples range from 2 to 4 times salary, actual payouts vary significantly by employer and sector. Understanding what your specific employer offers—and how that compares to your family's financial needs—is essential for proper planning.

Financial services companies often offer the most generous coverage, with multiples ranging from 4 to 8 times salary. Technology companies and professional services firms typically provide 3 to 4 times salary. Public sector schemes generally offer 3 times salary as standard.

Small businesses and some sectors may offer only 2 times salary, or no death in service benefit at all. Always verify your specific coverage rather than making assumptions based on sector norms.

Several factors affect your actual payout amount:

Base salary calculation: Most schemes use your base salary, excluding bonuses, commissions, or overtime. If your total compensation is £60,000 but your base salary is £45,000, your death in service payout will likely calculate from £45,000.

Employer's chosen multiple: This is set by your employer's policy and typically doesn't change unless the company revises its entire benefits package.

Length of service requirements: Rare, but some schemes require a minimum period of employment (such as three months) before coverage begins or reaches its full amount.

Age-related reductions: A few schemes reduce multiples for older employees, though this practice has become less common.

Public sector schemes often include additional benefits beyond the lump sum:

The Local Government Pension Scheme (LGPS) provides a death grant lump sum of 3 times your assumed pensionable pay if you die under age 75 while in service, plus ongoing pensions for spouses, civil partners, eligible cohabiting partners, and eligible children.

The Teachers' Pension Scheme provides a death grant of 3 times your full-time equivalent annual salary, plus a short-term pension equivalent to three months' salary for an adult beneficiary and three months' salary for dependent children, followed by long-term survivor pensions.

These additional benefits can significantly enhance the total value of public sector death in service protection compared to private sector lump-sum-only arrangements.

Reality Check: Coverage vs Actual Needs

Consider this example: David earns £50,000 with 4x death in service, providing a £200,000 payout.

His family's actual financial needs:

  • Mortgage outstanding: £265,000
  • Childcare for 2 children (8 years remaining): £120,000
  • University costs for 2 children: £100,000
  • 10 years income replacement (£30,000/year): £300,000
  • Total need: £785,000
  • Coverage gap: £585,000

While £200,000 sounds substantial, it covers only about 25% of David's family's long-term financial needs. This is why death in service, while valuable, is rarely sufficient as sole life protection.

The average UK household with a mortgage owes approximately £137,510, though this varies significantly by region. In London and the Southeast, outstanding mortgage balances often exceed £200,000 or even £300,000.

According to recent childcare cost surveys, full-time nursery care for a child under two in England costs an average of £238.95 per week—over £12,000 per year. Across a child's early years, childcare costs can easily total £75,000 to £100,000 per child, even accounting for government support.

Tax Treatment of Death in Service Benefits

One of the most valuable aspects of death in service is its favourable tax treatment. Understanding these benefits—and recent legislative changes—helps you appreciate the full value of this employer benefit.

As of 2025, death in service payouts are free from both Income Tax and Inheritance Tax when paid through a discretionary trust. This tax-free status means your beneficiaries receive the full amount without any deductions.

The discretionary trust structure keeps the payout outside your estate for Inheritance Tax purposes. Unlike assets that pass through your estate, death in service benefits transfer directly to beneficiaries without probate. This typically results in faster payment—often within 2 to 4 weeks rather than the months probate can take.

Your employer also benefits from tax advantages. Premiums paid for employee death in service coverage are a tax-deductible business expense, meaning no Corporation Tax liability on these costs.

Important 2027 Inheritance Tax Changes

In October 2024, the Chancellor announced that unused pension funds and most pension death benefits would become subject to Inheritance Tax from 6 April 2027. This represented a major change to long-standing pension tax treatment.

However, following technical consultation, HMRC specifically excluded death in service benefits from these changes. This exclusion is significant and provides certainty for employees and their families.

According to HMRC guidance published in 2025: "Death in service benefits payable from both discretionary and non-discretionary registered pensions schemes will be excluded from Inheritance Tax. This applies to benefits paid in respect of a member who, immediately before death, was in employment."

This means death in service benefits will remain Inheritance Tax-free even after April 2027, when other pension death benefits become taxable as part of the estate.

An important caveat: benefits that are payable both in service and in deferment will not qualify for the exclusion. Only "pure" death in service benefits—those payable exclusively while you're employed—remain IHT-free. A defined contribution pension pot payable on both death in service and death after leaving employment would be subject to the new IHT rules.

This also means death in service benefits from non-discretionary pension schemes (such as NHS and other public sector schemes), which are currently in scope of Inheritance Tax, will be brought out of scope from 6 April 2027. This represents a tax improvement for public sector employees.

For context, current Inheritance Tax thresholds are £325,000 (nil-rate band) and £175,000 (residence nil-rate band when leaving property to direct descendants), providing a potential combined allowance of up to £500,000 per person or £1 million for married couples. These thresholds remain frozen until 2030-31.

The fact that death in service benefits sit outside these calculations—and will continue to do so—makes them an increasingly valuable component of estate planning, particularly for higher earners with substantial pension savings that will now face IHT charges.

How to Nominate Beneficiaries (And Why It Matters)

Completing and maintaining your beneficiary nomination is one of the most important administrative tasks related to death in service. Despite the critical importance, many employees either never complete the form or complete it once and never update it.

The form goes by several names: "expression of wish," "nomination of benefit," or "death benefit nomination." Request it from your employer's HR department or pension scheme administrator when you start employment.

This document informs trustees of your wishes regarding who should receive the death in service payout. However, it's crucial to understand that your nomination is not legally binding. Trustees retain final discretion over distribution.

Trustees typically honor your nomination unless circumstances suggest it's outdated or inappropriate. They might override your wishes if you nominated an ex-spouse after remarriage but didn't update the form, or if you nominated someone who is no longer dependent on you while failing to mention a new child or partner.

You can nominate a wide range of beneficiaries:

  • Spouse or civil partner
  • Unmarried partner (must be explicitly nominated—they don't automatically qualify)
  • Children or other dependents
  • Other family members
  • Multiple beneficiaries with specified percentages
  • Charities or trusts (depending on scheme rules)

Robert nominated his wife Claire in 2010. They divorced in 2018, and Robert started a relationship with his partner David in 2020. Robert died in 2024 without updating his nomination form. The trustees had discretion to pay the benefit to David (Robert's actual dependant at the time of death) rather than Claire (his ex-wife), but Robert's failure to update his nomination created unnecessary delay, complexity, and potential family conflict during an already difficult time.

Life Events Requiring Form Updates:

You should review and update your nomination after every major life event:

  • Marriage or civil partnership
  • Divorce or separation
  • Birth or adoption of children
  • Death of a nominated beneficiary
  • Relationship changes (new partner, estrangement from family member)
  • Significant changes in dependents' financial circumstances

If you don't complete a nomination form, trustees will decide based on intestacy-like principles—typically prioritising spouses, civil partners, dependent children, then parents and other relatives. This process may cause delays while trustees investigate your family circumstances and could result in unintended recipients.

Best Practice Checklist:

  • Complete expression of wish form when you start employment
  • Review and update after every major life event
  • Keep a copy with your will and estate planning documents
  • Tell your nominated beneficiaries they've been named
  • Review every 2-3 years even if no life changes occur

For unmarried couples, completing this form is particularly critical. Unlike married spouses who have certain legal rights, unmarried partners have no automatic entitlement to death in service benefits. Without an explicit nomination, trustees might distribute benefits to adult children or parents instead of your long-term partner.

Death in Service vs Personal Life Insurance: Key Differences

Many employees wonder whether they need personal life insurance if they already have death in service through their employer. Understanding how these two forms of protection differ helps you make informed decisions about your financial planning.

The following table compares the key features:

Feature Death in Service Personal Life Insurance
Who provides it Employer You purchase individually
Who pays premiums Employer (free to employee) You pay monthly or annual premiums
Payout amount Fixed multiple of salary (2-4x) You choose amount based on needs
Coverage duration Only while employed Chosen term (10, 20, 30 years) or whole of life
Portability Ends when you leave job Stays with you regardless of employment
Medical underwriting No health questions Health and lifestyle questions required
Control over beneficiaries Trustees have final discretion You control exactly who receives payout
Tax treatment IHT-free via trust IHT-free if written in trust
Flexibility No control over amount or terms Full control over coverage amount, term, add-ons

Portability Is the Biggest Difference

Death in service provides zero coverage the day after you leave your job. Whether you resign, face redundancy, take a career break, start a business, or retire, your protection vanishes immediately.

Sophie, 35, earned £45,000 with 3x death in service, providing £135,000 coverage. When she left corporate employment to start her own business, her death in service coverage disappeared instantly. She had a £220,000 mortgage and two young children. Without personal life insurance already in place, her family would have faced potential financial disaster if something happened during her transition to self-employment.

Needs-Based vs Salary-Based Coverage

Life insurance allows you to calculate your family's actual financial needs—mortgage, debts, childcare costs, income replacement, education expenses—and purchase coverage that matches those needs. You might determine your family requires £500,000 of protection.

Death in service provides a salary multiple regardless of your needs. If your employer offers 3x salary and you earn £40,000, you receive £120,000—even if your mortgage alone is £250,000. You have no ability to increase coverage to match your obligations.

Employer Discretion vs Personal Control

With life insurance, you decide the coverage amount, term length, and beneficiaries (particularly if the policy is written in trust). With death in service, your employer chooses the multiple, and trustees retain discretion over beneficiaries despite your nominations.

Coverage Gaps Throughout Life

Death in service creates gaps during:

  • Before first employment (university, early career)
  • Career breaks (maternity/paternity leave may continue coverage temporarily, but sabbaticals, extended travel, or retraining periods typically don't)
  • Job changes (gap between leaving one employer and starting another)
  • Self-employment or freelancing
  • Retirement (coverage ends exactly when mortality risk increases)

Personal life insurance fills these gaps. A 25-year term policy purchased at age 30 provides continuous coverage until age 55, regardless of employment changes during that period.

When Each Is Most Valuable

Death in service shines when:

  • You're employed with a generous employer
  • You have health conditions that make personal life insurance expensive or difficult to obtain
  • You want free baseline protection
  • You value no-underwriting automatic coverage

Personal life insurance shines when:

  • You need coverage tailored to specific financial obligations
  • You want protection that continues through career changes
  • You're self-employed or planning to be
  • You need coverage into retirement
  • You want complete control over beneficiaries

The reality is that most people benefit from having both: death in service as valuable free protection while employed, and personal life insurance as comprehensive, portable protection throughout life.

Why Death in Service Alone Is Rarely Enough

Financial advisers consistently recommend death in service as a valuable foundation, not a complete solution. Multiple critical gaps exist when relying solely on employer-provided coverage.

Gap 1: Coverage Disappears When You Change Jobs

The average UK worker changes jobs 11 to 12 times over their career. Each transition creates a coverage gap. Even if your new employer offers death in service, you might face several weeks or months between roles, or discover the new employer offers a lower multiple or no coverage at all.

Redundancy creates the same vulnerability. If you lose your job, you lose your life cover precisely when financial stress is highest and securing new coverage may be difficult.

Gap 2: Amount Is Based on Salary, Not Your Actual Needs

Calculating real family financial needs reveals the insufficiency of salary multiples:

A £120,000 death in service payout (3x £40,000 salary) might cover the mortgage and funeral costs, but leaves children's future needs completely unfunded.

Gap 3: Employer Chooses the Multiple, Not You

You have no control over your employer's death in service offering. A 2x salary multiple might be entirely inadequate for your family's needs, but you cannot request an increase. You cannot add critical illness cover, income protection riders, or other enhancements available with personal policies.

If your financial responsibilities increase—larger mortgage, additional children, ageing parents who depend on you—your death in service coverage doesn't automatically adjust unless your salary increases proportionally.

Gap 4: Doesn't Cover All Life Stages

Before securing your first professional job, you have no coverage. During university, early career, or career transitions, death in service doesn't exist.

Retirement represents another critical gap. Coverage ends when you retire—exactly when mortality risk increases significantly. Most people retire in their 60s, but life expectancy means many live another 20 to 30 years. If you die at 70, your family receives nothing from death in service.

Gap 5: One-Time Payout, Not Ongoing Income

A lump sum requires careful management to last. Without professional financial advice, beneficiaries may exhaust funds too quickly. There's no ongoing income stream to replace your salary year after year, unlike income protection insurance or dependant's pensions.

Financial planning experts typically recommend life insurance coverage of 10 to 12 times your annual income to adequately protect a family with children and a mortgage. Death in service at 3 to 4 times salary provides a foundation, but falls far short of this benchmark.

When Death in Service Might Be Sufficient:

Death in service alone may adequately protect:

  • Single individuals with no dependents
  • Those with minimal debts and substantial savings or investments
  • Those without mortgages
  • Adult children who are financially independent
  • High earners with very generous multiples (8x salary) and modest financial obligations

For most working families, however, death in service should be the starting point of life protection, supplemented by personal life insurance tailored to actual needs.

How to Claim Death in Service Benefits

When death occurs, beneficiaries or family members must navigate the claims process. Understanding the steps in advance helps ensure timely payment during an already difficult period.

Step 1: Notify the Employer and Scheme Administrator

Report the death to the employer's HR department or pension scheme administrator as soon as possible. Provide the original death certificate or a certified copy, along with proof of identity for the person making the claim.

Prompt notification starts the claims process and the two-year payment deadline clock.

Step 2: Complete Claims Documentation

The scheme administrator will provide a claim form requiring:

  • Death certificate
  • Proof of beneficiary identity and relationship to deceased (marriage certificate, birth certificates, civil partnership certificate)
  • Proof of financial dependence if applicable (bank statements showing financial support, shared bills, tenancy agreements)
  • Coroner's report if an inquest was required

Gather all documents before submitting the claim to avoid delays from piecemeal submissions.

Step 3: Trustee Review

Trustees review the expression of wish form (if the employee completed one), assess family circumstances, and may request additional information about dependents and financial situations. Trustees exercise their discretion to make the final distribution decision.

If multiple potential beneficiaries exist or family circumstances are complex, trustees may take longer to investigate before deciding.

Step 4: Payout

Once trustees make their decision, the benefit is paid as a lump sum directly to beneficiaries. Because the payment comes from the trust rather than the deceased's estate, no probate is required. This typically enables payment within 2 to 4 weeks if all paperwork is complete.

Timeline Expectations:

  • Best case: 2 to 4 weeks from notification to payout when documentation is complete and circumstances straightforward
  • Typical case: 4 to 6 weeks if minor documentation delays occur
  • Complex case: 2 to 6 months if an inquest is required, paperwork is missing, or disputes exist among potential beneficiaries

Critical Legal Requirement:

Any lump sum must be paid within 2 years of the date the scheme was first notified of the member's death. After 2 years, the lump sum becomes subject to a tax charge—taxed at the recipient's marginal rate of tax, which could be as high as 45% for higher earners. This penalty ensures schemes process claims promptly.

Common Delays and How to Avoid Them:

  • Missing expression of wish form: Complete and keep updated throughout employment
  • Outdated beneficiary nomination: Review after major life events to ensure nominations remain current
  • Incomplete paperwork: Submit all required documents together rather than piecemeal
  • Coroner's inquest: Cannot be avoided when death is sudden or unexplained, but can delay claims 3 to 12 months
  • Disputes among family members: Clear, updated nominations reduce potential for conflict

What Beneficiaries Should Do:

  1. Gather all employment and pension documents of the deceased
  2. Contact employer HR and scheme administrator immediately
  3. Provide death certificate as soon as it becomes available
  4. Complete all claim forms thoroughly and promptly
  5. Keep copies of all documentation submitted
  6. Follow up weekly if you don't hear back within 4 weeks
  7. Seek legal advice if the claim is denied or delayed beyond 6 months

Tax Implications for Beneficiaries:

The payout itself is tax-free—no Income Tax or Inheritance Tax applies when paid from a discretionary trust. However, any investment income earned from the payout after you receive it becomes taxable as normal investment income.

Beneficiaries receiving large lump sums should consider seeking independent financial advice on managing the money to ensure it lasts and is invested appropriately for long-term family needs.

Integrating Death in Service with Your Will and Estate Plan

Death in service is valuable protection, but it represents only one component of your overall estate. A comprehensive will remains essential even when you have generous employer death benefits.

Why You Still Need a Will

Death in service covers only a portion of your total assets. Your will governs:

  • All other assets: savings accounts, investments, property equity, pensions, personal possessions
  • Guardianship of minor children (death in service provides money but doesn't name who will raise them)
  • Executor appointments to manage your estate administration
  • Specific gifts and charitable bequests
  • Funeral wishes and other personal instructions

Death in service sits outside your estate because it's paid through a discretionary trust rather than passing through probate. It's not governed by your will and not subject to intestacy rules if you die without a will.

However, your will should account for the fact that your family will receive this additional payout when planning the distribution of other assets.

Coordinating Nominations with Your Will

Ensure your expression of wish form aligns with your will's overall intentions. If you nominate your spouse for the full death in service payout, your will should consider they'll have these additional funds when you're allocating other assets.

For blended families, coordination becomes particularly important. Lisa has two children from her first marriage and a new husband, Tom. Her death in service is £180,000. She nominates Tom for 50% (£90,000) and her children for 25% each (£45,000 each) on her expression of wish form. In her will, she leaves her house (£300,000 equity) to her children and her savings (£50,000) to Tom. This thoughtful coordination ensures both her husband and children are provided for, with total distributions roughly balanced between her current and former family units.

What to Include in Your Will When You Have Death in Service

  1. Guardian appointments for minor children—death in service provides financial resources but doesn't specify who will care for your children daily
  2. Executor appointments to manage your estate, pay debts, file tax returns, and distribute assets according to your will
  3. Distribution of all other assets beyond death in service: property, savings, investments, pensions (which may have separate nomination forms), personal possessions, vehicles, collectibles
  4. Trusts for minor children if you want death in service payouts (and other assets) managed professionally until children reach a specified age rather than receiving lump sums at 18
  5. Funeral wishes and burial or cremation preferences

Letter of Wishes Alongside Your Will

Consider preparing a letter of wishes (a non-binding document that provides guidance to executors and trustees) that:

  • Explains your nomination choices for death in service
  • Provides guidance to trustees on your family circumstances and dependents' needs
  • Clarifies any complex family situations: stepchildren, estranged relatives, special needs dependents, unmarried partners
  • Explains your thinking behind asset distribution decisions

This letter helps trustees exercise their discretion appropriately and helps executors understand the full context of your estate planning decisions.

Common Estate Planning Mistakes:

  • Assuming death in service replaces the need for a will (it doesn't—they serve different purposes)
  • Failing to coordinate beneficiary nominations across death in service, pension death benefits, and will bequests
  • Not updating will and nomination forms together after life events, creating misalignment
  • Leaving children under 18 without named guardians (death in service provides money but not caregivers)
  • Not establishing trusts for minor children (lump sums paid to children's guardian without formal structure for management)

Action Steps for Comprehensive Planning:

  1. Review your death in service beneficiary nomination form
  2. Create or update your will to account for this benefit and govern all other assets
  3. Appoint guardians for minor children in your will
  4. Consider establishing trusts for managing money for young beneficiaries
  5. Coordinate all beneficiary designations across death in service, pensions, and life insurance
  6. Store your expression of wish form with your will documents
  7. Inform your executor where to find employment and benefits information

Death in service and your will work together to provide comprehensive protection. Death in service delivers immediate cash to beneficiaries tax-free and outside probate. Your will ensures that all your other assets are distributed according to your wishes, your children have named guardians, and your executor has clear legal authority to manage your affairs.

Frequently Asked Questions About Death in Service

Q: What is death in service benefit in the UK?

A: Death in service benefit is a type of employer-provided life insurance that pays a lump sum to your beneficiaries if you die while employed. The payout is typically 2-4 times your annual salary, paid tax-free through a discretionary trust. It's also known as group life insurance and is offered as part of many employee benefit packages.

Q: How much does death in service pay out?

A: Death in service typically pays between 2 to 4 times your annual salary, though some employers offer higher multiples (up to 8x in rare cases). For example, if you earn £40,000 annually with a 3x multiplier, your beneficiaries would receive £120,000. The exact multiple depends on your employer's policy.

Q: Is death in service benefit taxable?

A: No, death in service benefits are not subject to Income Tax or Inheritance Tax when paid from a discretionary trust. Following government reforms in July 2025, death in service benefits will remain exempt from Inheritance Tax even after April 2027 when pension death benefits become taxable.

Q: What happens to death in service when you leave your job?

A: Death in service cover ends immediately when you leave your employer. You lose all protection unless your new employer offers the benefit. This is a key difference from personal life insurance, which continues regardless of employment status. If you rely solely on death in service, you face coverage gaps during career changes.

Q: Do I need life insurance if I have death in service?

A: Most financial advisers recommend having both. Death in service is a set multiple of salary that may not cover your mortgage, childcare costs, or long-term family needs. It also disappears when you leave employment. Personal life insurance provides tailored coverage that continues throughout your life and adjusts to your specific financial obligations.

Q: How long does it take to receive a death in service payout?

A: Death in service benefits typically pay out within 2-4 weeks if all paperwork is complete. However, claims can be delayed by missing documentation or inquests into the cause of death. By law, payments must be made within 2 years of the scheme being notified of death, or the benefit becomes subject to a tax charge of up to 45%.

Q: Can I choose who receives my death in service benefit?

A: You can nominate beneficiaries by completing an 'expression of wish' form provided by your employer. However, this is not legally binding. The scheme trustees (usually your employer) have final discretion over who receives the payout, though they typically honor your wishes. Keep your nomination form updated after major life events like marriage, divorce, or having children.

Conclusion

Death in service is a valuable employer benefit that provides meaningful financial protection for your family—often without you even realizing the full extent of coverage you have. Understanding exactly what you've got is the essential first step.

Key takeaways:

  • Check your employment contract or ask HR about your death in service benefit—know the multiple, understand the nomination process, and verify whether it's automatic or requires pension enrollment
  • Complete your expression of wish form and update it after every major life event including marriage, divorce, having children, or relationship changes
  • Calculate your actual coverage needs by adding mortgage balance, outstanding debts, childcare costs, and income replacement requirements—then compare to your death in service payout to identify gaps
  • Consider personal life insurance to fill coverage gaps during career changes, provide tailored protection matching your specific obligations, and ensure continuous coverage throughout your life
  • Create or update your will to govern all assets beyond death in service, appoint guardians for children, name executors, and ensure your complete estate plan works cohesively

Death in service is designed as a foundation, not a complete solution. By understanding exactly what you have, filling the gaps with appropriate personal life insurance, and ensuring your will and beneficiary nominations work together seamlessly, you create comprehensive protection that continues throughout your life rather than ending the day you leave your employer.

Need Help with Your Will?

Death in service benefits provide valuable protection, but they work alongside—not instead of—a properly drafted will that appoints guardians for your children and ensures all your assets are distributed according to your wishes.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete will (legally binding when properly executed and witnessed) plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

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