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Canada Life clarifies NIC approach for Group Income Protection clients from April 2022

  • If employer’s NI contributions are insured, the cover will include the higher rate and the new Health and Social Care Levy from April 2023
  • Unit rates remain unchanged for schemes within their rate guarantee periods
  • The costing for schemes based on total benefit will change as the change in NICs will affect the total benefit insured

In a bid to help fund health and social care costs, the Government recently announced that National Insurance contributions will rise by 1.25% from 6 April 2022. This increase will then be separated out as an additional Health and Social Care Levy from 6 April 2023. These changes will impact both current and future Group Income Protection schemes where the employer’s liability for NICs is insured as a supplementary benefit.

Dan Crook, Protection sales director at Canada Life:

“This change to NICs and the additional levy being introduced in 2023 will not only impact employees but equally will result in the employer paying more too. We wanted to clarify how this will impact both current and future Group Income Protection schemes, and to that end, we can confirm we will insure the liabilities moving forward where NICs are already insured as a supplementary benefit.”

What this means for clients:

Unit-rate schemes

Firstly, there will be no change to the unit rate for schemes within their rate guarantee period. Most of the schemes we insure use a unit rate based on salary roll and we’re pleased to confirm there will be no change to annual premiums for these schemes.

A small number of schemes are priced on total benefit rather than total salary. The premiums for these schemes will increase by a small amount as the additional NICs benefit will increase the total benefit roll on which the price is based.

We’ll apply unit rates that reflect the increase in NICs benefits for schemes that go through a rate review or go on risk on or after 6 April 2022.

Single premium schemes

Our single premium schemes are priced by applying a rate to each member’s benefit. Although premium rates will not increase due to the change in NICs, single premium accounts due on or after 6 April 2022 will have slightly increased premiums that reflect the increase in NICs benefits.

Claims in payment

Any NICs benefit in payment will reflect the liability applicable at the end of the deferred period. If the claim is already in payment, we will not change the NICs benefit on 6 April 2022, or thereafter, whilst the claim is being paid. If the end of the deferred period is on or after 6 April 2022, the increased NICs amount will be used to calculate the benefit. If the end of the deferred period is on or after 6 April 2023, then the new NICs and Health and Social Care Levy will be used to calculate the benefit.