UK - Ill-health and early retirement benefit costs could soar when new disability discrimination laws come into effect, lawyers warn.
They believe insurance premiums for employees who are deemed higher risk will jump once the new regulations – which will prevent direct discrimination in the workplace – are introduced.
Currently, direct discrimination for a disability is possible if it can be shown that the cost of providing a benefit – such as ill-health early retirement – outweighs the reason for giving it.
But this will no longer be the case when the new regulations come into force in October next year.
Sacker & Partners partner Faith Dickson explained: “With costs of self-insurance becoming more obvious – in the absence of scheme surpluses – and more employers setting up DC arrangements, more schemes are likely to insure death benefits and ill-health benefits with an insurance company.
“Where they can, insurance firms will raise the costs of premiums for employees they think are higher risk, and employers and trustees will have to meet the costs head on.”
Legal & General says that as a rule of thumb, ill-health and early retirement benefits cost around 2% of payroll.
And it dismissed lawyers’ fears that the regulations will have a big impact on rates.
L&G group risk director Jane Dale pointed out that ill-health early retirement cover was generally quoted on a group basis, not through individual contracts, so the cost of providing such cover should not change dramatically.
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