Grid has added its voice to the warning that many businesses are not prepared for the upcoming ‘A-day' deadline for group life schemes.
Research from the group risk trade body revealed that half of companies plan to take no action and a third are undecided about what to do when the pre A-day rules expire.
This inactivity could leave employers risking potentially huge uninsured liabilities on an employee's death.
Under previous tax rules schemes were subject to the old HMRC limits (e.g. 4 times "salary" for lump sum death benefits).
Additionally, the Earnings Cap (notionally set at £123,600) was introduced in 1989 to set a further limit on the salary that could be used to calculate benefits.
However, on 6 April 2006 (A-day) a single tax regime was introduced to simplify the eight previous ones, with a five year transition period attached.
The research questioned businesses which have maintained the status quo so far, and found that 9.8% will put a salary cap back into their scheme from this April, while a similar 9.2% plan to remove the earnings cap.
But, the body said, these figures are dwarfed by the 47.9% who will take no action, and the 32.1% who are still undecided.
"Within companies that plan to take no action, the percentage gets smaller with larger companies, suggesting that better planning is taking place when companies have a bigger workforce, possibly because these companies can better afford advice.
"This leaves four in five companies either unsure, or taking no action and open to potentially crippling uninsured liabilities," it added.
Katharine Moxham, spokesperson for Grid, was worried by the revelation and very concerned by the potential damage to businesses.
"The research suggests that companies felt like they were able to put off the decision indefinitely, but this is clearly not the case," she said.
"It's crucial for the relevant decision makers within companies to take action before the cut off date. Otherwise, they risk potentially crippling uninsured liabilities on an employee's death as the Earnings Cap is removed and the Lifetime Allowance of £1.8 million generally comes into play as the amount that will be applied as the maximum lump sum payable on an employee's death in service.
"The potential uninsured liabilities for dependants' death in service pensions are even greater as they fall outside of the Lifetime Allowance and thus will be completely unconstrained unless action is taken. Group Risk specialists can advise on the best action to take in time for the deadline," she added.
As reported by COVER, Canada Life began the effort to draw scheme trustees' attention to the problem earlier this week.
