Definition
Death in service benefit is a tax-free lump sum payment, typically 2-4 times your salary, that your employer provides to your nominated beneficiaries if you die while employed.
For many workers, this represents their only life cover, potentially worth £100,000-£200,000 or more.
What Does Death in Service Benefit Mean?
Death in service is an employee benefit provided by your employer at no cost to you. It's group life insurance that pays out if you die while employed, whether at work or elsewhere. Typical payouts are two to four times your annual salary. These benefits are held in trust under the Trustee Act 1925, meaning they pass outside your estate and avoid Inheritance Tax. Death in service benefits from registered pension schemes remain IHT-exempt even after the April 2027 pension reforms.
You nominate beneficiaries using an Expression of Wish form. However, these nominations aren't legally binding—scheme trustees have discretion over who receives the benefit, though they typically follow your wishes. Emma earns £40,000 as a teacher with 3x salary cover, meaning her nominated partner would receive £120,000 tax-free if she died. Unlike personal life insurance, Emma pays no premiums and needs no medical underwriting. The catch? Her cover ends when she leaves her job.
Coverage gaps when changing jobs create significant risk. James earned £55,000 with £220,000 cover. His old employer's cover ended on his last day, but his new employer has a three-month probationary period. If he'd died during this gap with a £180,000 mortgage and two young children, his family would have received nothing.
Keeping nominations updated is critical. Sarah nominated her ex-husband 18 years ago but never updated the form after divorcing and remarrying. When she died aged 42, trustees paid her £340,000 benefit to her ex-husband despite her will leaving everything to her current husband. This demonstrates that wills don't control death in service benefits—only nomination forms do.
Common Questions
"Does death in service only pay out if you die at work?" No. The benefit pays out if you die while employed, regardless of where or how. You could die at home, on holiday, or from illness—the benefit still pays as long as you were an active employee.
"Is death in service benefit the same as life insurance?" No. Death in service is employer-provided at no cost, but you lose it when you leave. Life insurance is a policy you arrange yourself, stays with you when you change jobs, and lets you choose the cover amount.
"Do I need to include death in service benefits in my will?" No. Death in service benefits pass directly to your nominated beneficiaries outside your will. You must complete an Expression of Wish form with your employer and keep it updated after major life changes.
Common Misconceptions
Myth: Death in service only pays out if you die at work or in a work-related accident.
Reality: The benefit pays out if you die while employed, regardless of where or how. Research by HR Magazine found 43% of UK workers wrongly believe it only covers work-related deaths. The term "death in service" suggests a workplace connection, leading people to assume it's similar to workers' compensation.
Myth: My will controls who gets my death in service benefit.
Reality: Your will has no control over death in service benefits because they're held in trust and pass outside your estate. Trustees decide based on your Expression of Wish form, not your will. While they usually follow nominations, they have discretion. Most people assume their will controls all money paid after death, but death in service benefits pass entirely outside the estate.
Related Terms
- Life Insurance: Death in service is employer-provided life insurance that ends when you leave, while personal life insurance fills coverage gaps.
- Expression of Wish: The form used to nominate beneficiaries, though not legally binding on trustees.
- Beneficiary: People nominated to receive the benefit, who should be updated after major life events.
- Pension: Many death in service benefits are provided through pension schemes with similar tax treatment.
- Nomination Form: Alternative term for Expression of Wish form.
Related Articles
- Do I Need a Will in My 20s or 30s?: You need a will to control assets and appoint guardians even with death in service cover.
- Inheritance Tax Planning for £500k-£2M Estates: Death in service benefits remain IHT-exempt after 2027 pension reforms.
- Charitable Giving in Your Will (IHT Benefits): Nominate charities on Expression of Wish forms, not in your will.
- When to Update Your Will (and How Often): Update death in service nominations after major life events like divorce.
- Does Your Pension Form Part of Your Estate?: Both death in service and pension benefits pass outside your estate via nominations.
Need Help with Your Will?
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Legal Disclaimer: This glossary entry provides general information about UK legal terminology and does not constitute legal advice. For advice specific to your situation, consult a qualified solicitor.