Rivals refuse to follow Aviva on group protection gap

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Rivals refuse to follow Aviva on group protection gap
BySimon Allin

Providers have refused to follow Aviva's lead in committing to immediately cover the potential gap in group income protection provision caused by the raising of the state pension age.

In July, Aviva pledged to pay GIP benefits for the 39 to 47-year-olds who will have to work until the age of 68, after the government announced it intended to bring forward a proposed change originally due to be made in 2044.

The insurer said the additional cost would be absorbed within its current pricing.

But a number of other providers contacted by FTAdviser would not commit to following suit – despite calls for clarity from a major advice firm.

Legal and General declined to comment on the matter.

Ellipse would not provide a detailed comment, but said: “We are looking closely at this issue and will be in a position to confirm our approach very soon.”

Other firms were able to give a clearer indication of their stance, but said they would not act right away.

Canada Life stated the company would not change its policies yet as the legislation had not yet been given parliamentary approval.

However Paul Avis, marketing director at the firm, gave assurances cover would be provided up to the new state pension age once the legislation had been passed.

Mr Avis said: “While I applaud Aviva’s proactive stance, we would prefer to base our policies on legislation that is in place rather than prospective legislation that could be subject to change.”

A Zurich spokesperson said its approach would be similar to Aviva’s, but like Canada Life it would not apply any change until the new state pension age became law.

An Unum spokesperson said policies linked to the state pension age will be automatically updated when the proposal becomes legislation.

"Employees who are not currently claiming benefit under group income protection will have their cover cease age extended in line with the new timetable.”

Unum said it had also launched a “dynamic State Pension Age option” to help customers future-proof against changes to the state pension age, which is due for review every six years.

Nadeem Farid, employee benefits consultant at financial advice firm Drewberry, said: “With less than a fortnight having passed since the announcement on the state pension age we’re still waiting to see how the other providers react. 

“So far there’s been no statement of intent from the other insurers and no one has been reaching out from these companies to let us know what's coming. Not surprisingly, this has caught most providers off guard and they are still considering their options.