I advise on PMI schemes for small groups. With many members in their 60s, what do I need to consider as they approach retirement?
Debbie Kleiner-Gaines, Best Health UK
Most group administrators would not have considered the potential issues for employees approaching retirement, but planning for healthcare needs should be a priority in retirement planning.
As an adviser, you may wish to encourage your client to discuss this with their staff, preferably with your assistance.
Perhaps offer to run a ‘clinic' or prepare an email for your client to send around.
In most cases, the insurer will offer a ‘Continuation Option', which is their agreement to continue cover for any medical conditions.
However, insurers may not offer the same plan with the same benefits and it will most certainly be more expensive.
The group scheme discount will not be available as the insurer will assess risk on an individual basis.
We have seen some group leavers' premiums quadruple, but the benefit of a group leaver option is that pre-existing conditions are likely to be continued.
Key points for the group administrator to consider are: is there an automatic group leaver option? Do you understand the age band increases? Have you spoken to employees about their future PMI plans?
Would you allow your adviser to discuss this with them? Will your insurer give you guidance on likely increases for group leavers? What about the employee soon to retire?
There are many options as long as they are not in the middle of a claim or had recent medical problems.
A specialist adviser would be able to recommend switching cover to a new insurance plan on a continued personal medical exclusions or no worse terms basis.
Brian Walters, Regency Health
A group PMI contract is with the company, not the beneficiaries, so there is no obligation for insurers to offer continuation cover to retirees.
Most insurers do so regardless, although often subject to qualifying criteria. Group leaver continuation policies tend to be expensive, but can be invaluable to members who would otherwise lose cover for their pre-existing conditions.
Group secretaries do not typically prioritise the needs of leavers, but may be reticent to change insurers with members approaching retirement if it would undermine an automatic right of continuation.
Some groups may wish to keep members on the scheme post-retirement age, but this is usually permissible if the premium is still company-paid and the member remains a bona fide employee.
A further consideration is that older members are more likely to claim and small group PMI premiums are increasingly claims-related.
Thus, the inclusion of older members may increase the cost of the scheme overall and, with it, the P11D contributions for the other members.
With small group schemes, there is often a tipping point around retirement age, where the premiums start to exceed the cost of comparable cover in the individual market.
A broker may therefore look to move older members out onto individual policies, although few insurers will take an individual ‘switch' from a group scheme and older clients are not always ideal candidates for new underwriting.
Establishing a company-paid individual policy would require the beneficiary to pay Class 1.
