Category: Group life · Reviewed by Simon Temme, Account Executive · Last reviewed 2026-06-10
The lump sum payable under a group life insurance scheme is a defined cash sum payable on the death in service of an insured employee, typically expressed as a multiple of pensionable salary (most commonly four times). The sum is paid to discretionary trustees who exercise their discretion to distribute it to the deceased’s nominated beneficiaries.
Category: Group life Also known as: Group life lump sum, lump sum DB Typical multiple: 2x – 6x salary Related concepts: Death in service benefit, Lump sum death benefit, Group life trust, Group life nomination
The lump sum is the primary cover under a group life scheme. Some schemes pay only the lump sum; others combine it with a dependants’ pension or spouse’s pension. The lump sum is calculated by reference to a defined earnings base — basic salary, pensionable salary, P11D earnings — multiplied by the scheme multiple.
The lump sum is governed by the policy and trust deed. For a registered group life scheme, the lump sum is tested against the lump sum and death benefit allowance under the Finance Act 2004 as amended by the Finance Act 2024. For an excepted group life policy, no allowance test applies because the policy is outside the registered pension regime, but the policy and trust must satisfy the conditions of s.480 ITTOIA 2005.
A typical lump sum benefit is calculated from the employee’s basic annual salary at the date of death, multiplied by the scheme multiple. The benefit is paid to the trustees within weeks of the death certificate being produced; the trustees then exercise their discretion to pay the benefit to the deceased’s nominated beneficiaries.
An employee earning £55,000 dies in service. The scheme provides 4× salary lump sum cover. The trustees receive £220,000 from the insurer; reviewing the deceased’s expression of wish form (which names her spouse and two children), the trustees pay £176,000 to the spouse and £22,000 to each child’s bare trust account.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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