Losing life cover from an employer when your family moves abroad is risky.
Death in Service (DIS) benefits are a valuable but often overlooked part of UK employment packages, typically providing around four times salary as a lump sum to your family if you die while employed. For many, this represents a substantial financial safety net. Often, UK pension schemes offer up to 4 x annual salary- free of income tax if under £1,073,100.
One important advantage of these schemes is that they are usually written under trust. This means the payout typically falls outside of your estate for UK Inheritance Tax (IHT) purposes (Czech tax advice may be needed) , allowing benefits to be paid quickly and tax-efficiently to your chosen beneficiaries.
However, this usually ends the moment you leave your job and cannot be taken with you. For those planning a move abroad, this creates a sudden and potentially dangerous gap in cover.
Increased financial vulnerability
Why this matters becomes much more significant when moving overseas with a family. Your dependents may rely entirely on your income, particularly during the transition period when settling into a new country, job, and cost of living. At the same time, you may be taking on new financial commitments such as housing, schooling, or relocation costs.
Losing a significant level of life cover at precisely this moment increases financial vulnerability. If the worst were to happen, your family could face serious financial strain without the protection that previously existed through your employer.
Life cover abroad may be different
There are also practical risks to consider. Access to life insurance abroad can be more limited, more expensive, or subject to stricter underwriting. Any changes in your health could affect your ability to obtain life cover or increase premiums. In some countries, high levels of cover may not be as readily available as in the UK.
Replacing Death in Service with a personal life policy that is not written in trust could unintentionally bring the payout back into your UK taxable estate.
If you’ve already relocated, consult a qualified financial adviser in your new country as soon as possible to arrange appropriate protection without delay.
Tax considerations for UK expats
There are also important tax considerations for UK expats. If you are still considered UK domiciled or not yet long-term non-resident, your worldwide estate may remain within the scope of UK IHT. Replacing Death in Service with a personal life policy that is not written in trust could unintentionally bring the payout back into your UK taxable estate. This means that without careful planning, you could move from a tax-efficient, trust-based benefit to a less efficient arrangement, potentially increasing the tax burden on your family.
Add life cover to your pre-move checklist
Your priority should be to arrange replacement life insurance before leaving the UK. This allows you to secure cover based on your current health, often with more favourable terms and higher limits. If this is not possible, or you did not take action in the UK, it is essential to consult a qualified financial adviser in your new country as soon as possible to arrange appropriate protection without delay.
It is also important not to rely solely on employer benefits abroad. These may be lower than what you previously had and are unlikely to be portable if you change jobs again.
Summary
In short, moving abroad is an exciting step, but it should not come at the cost of your family’s financial security. Planning ahead and ensuring continuous life cover is one of the most important steps you can take before and immediately after your move.
