Should I Use an Employer Trust or the Insurer’s Master Trust for Group Life Insurance?

I’ve been told that my Group Life Insurance scheme needs a trust before it can go live. However, I’ve been given the choice between setting up our own trust and using the insurer’s master trust, and I’m not sure what the difference in these two approaches is. Can you help?

Question asked by William Richardson

Group Life Insurance pays out on the death of one of your employees, providing a benefit to their loved ones.

You’re correct in that you’ll need a Group Life trust before the policy can go live and cover your staff. There are two types of trust you can use for this: one you, the employer, establishes, or one pre-established by the insurer, known as a ‘master trust‘.

Employer Established Trusts

  • You control an employer-established trust fully. It’s the most bespoke option.
  • You are responsible for all administration relating to the trust including registration with HMRC.
  • You will need to stay up to date with new legislation that could impact your trust.

While this option is the most tailored option, it’s also a lot of additional work and responsibility.

Master Trusts

Alternatively, most insurers already have ‘master trusts’ you can use. These are already set up so you don’t need to implement your own trust.

  • A master trust sees independent scheme trustees take care of trust administration. This includes reporting to HMRC, so you don’t need to worry.
  • The insurer takes care of trust management, including keeping up to date with trust law and dealing with claims.
  • However, this is a less bespoke option. You can’t therefore tailor it to your organisation’s needs.

Before opting for a master trust, we recommend you seek the appropriate legal advice. This is to ensure it’s right for your company given it’s not as tailored to your needs as a trust you establish yourself.

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