31 Mar 2026

Is the employer-only group life trust becoming outdated?

Many HR and benefits teams are finding the traditional standalone life trust model increasingly unwieldy and difficult to maintain.

Group life assurance continues to be one of those benefits that employees truly value even if it doesn’t always get the spotlight it deserves. It gives families financial security at the worst possible time, and it sends a strong message that an employer genuinely cares.

But behind the scenes, the way organisations run these benefits is changing fast. And that shift is cropping up regularly in conversations with HR and benefits teams.

For decades, the go-to model was simple: set up your own employer-only registered or excepted trust and run everything in-house. It worked until governance pressures grew, documentation became harder to maintain, and expectations around compliance increased.

More and more organisations from SMEs to enterprise clients are moving towards insurerrun master trusts. Clients want solutions that are simple, scalable, and far easier to manage.

Demand has risen sharply, and it’s showing no signs of slowing down.

The traditional model: Control comes with commitment

Under a standalone employer trust, organisations appoint trustees, manage compliance, maintain documentation, and oversee discretionary decisions all while navigating evolving tax and trust legislation.

This model offers:

Full control over trustee decisions
Flexibility in scheme design
Familiarity for organisations with established governance frameworks

However, the model relies heavily on internal resources and comes with ongoing administrative commitments that many HR and benefits teams are finding increasingly challenging to maintain.

The hidden risks of running your own group life trust

Many employers continue to run their own group life trusts and process death-in-service claims internally. While this can work well, we frequently see six common risks that can cause delays, compliance issues, or unintended consequences:

1. Out-of-date or missing trust documentation: Trust deeds established many years ago may no longer align with current tax or trust legislation. Without regular reviews and updates, trustees may unknowingly operate outside the latest requirements. In some cases, this can place the trust at significant risk, including situations where the original signed trust document cannot be located and is effectively lost. When this happens, there is uncertainty over the validity of the trust and the trustees’ authority to act, which can delay or even prevent a death claim from being processed, as the correct scheme rules cannot be applied. It may also lead to disputes among potential beneficiaries, compliance issues for trustees, and the need for legal advice to reconstruct or replace the trust.

2. No segregated trustee bank account: Insurers will usually only pay claim proceeds into a dedicated trustee bank account or directly to beneficiaries, not the employer’s account. If this account doesn’t exist, setting it up can delay payments when beneficiaries need them most.

3. Unintentional promises to potential beneficiaries: Many people assume benefits automatically go to next of kin or the person named on an Expression of Wish form, and employers sometimes reinforce this without realising. In practice, trustees must consider all relevant circumstances before making a fair and informed decision.

4. Inadequate or undocumented decision-making: Trustee decisions are generally upheld when the correct processes are followed. However, problems can arise when the wrong individuals make decisions, key information is overlooked, or documentation is incomplete. Changes in the personnel responsible for establishing or managing the trust can further compound these issues, often leading to disputes, confusion, or complaints.

5. Insufficient investigation of personal circumstances: An Expression of Wish helps guide trustees, but it doesn’t determine the final outcome. Trustees still need to make reasonable enquiries identifying potential beneficiaries, reviewing the will, and understanding any changes in the employee’s circumstances since the form was completed.

6. Missing HMRC registration: Registered group life schemes must be formally registered with HMRC. If this step is missed, it can create avoidable tax consequences for both employers and beneficiaries.

The rise of the insurer master trust

Insurer master trusts are quickly becoming the preferred option for organisations looking to simplify the way they run group life benefits. Instead of setting up and managing their own trust with all the governance, paperwork, and decision-making that comes with it, employers can simply join a readymade, fully compliant structure.

In most master trust arrangements, the insurer appoints an independent third-party trustee to oversee the trust. This independent trustee carries out all legal, governance, and discretionary responsibilities, ensuring decisions are impartial, compliant, and professionally managed. For HR and Benefits teams, this shift removes a significant amount of risk and administrative pressure.

Why this model is gaining so much traction

The significant traction this model is gaining can be attributed to the following potential benefits:

Rapid implementation: No need to draft trust deeds, select trustees, open bank accounts, or set up governance processes. Joining is quick and straightforward.
Minimal ongoing governance: The independent trustee not the employer handles day-to-day trust duties. No trustee meetings, no training requirements, no compliance headaches.
No trust setup or deed maintenance: Legislation changes all the time. In a master trust, the independent trustee manages all documentation updates centrally.
Centralised compliance, managed by experts: The insurer and independent trustee work together to monitor legal changes, maintain governance standards, and protect the integrity of the trust. HR teams are no longer responsible for interpreting tax or trust rules.
Reduced administrative and legal risk: With professional trusteeship comes professional risk management. Employers significantly reduce the likelihood of errors, delays, or disputes.

Why demand is rising so rapidly

We’re seeing strong growth in master trust adoption especially among SMEs, scaleups, and organisations where governance resource is limited. These employers still want robust benefits, but without:

The administrative load
The legal exposure
The requirement to make sensitive discretionary decisions
The need to keep trust documentation continuously updated

Master trusts provide exactly what these organisations need: a compliant, low- maintenance, future- ready way to offer group life assurance.

Are standalone employer trusts still needed?

With so many employers moving to insurer master trusts and with strong demand continuing to grow it’s easy to assume the traditional employer-only trust is becoming obsolete. But that isn’t the full story.

Standalone trusts absolutely still have a place, and for some organisations, they remain the most appropriate solution.

Where standalone trusts still make sense

They continue to be a strong option for:

Large or complex organisations: Where bespoke governance processes and tailored benefit structures are already well established.
Employers wanting full decision-making control: including how discretion is applied, how evidence is gathered, and how beneficiaries are selected.
Groups managing multiple insurers under one umbrella trust: where consolidation offers strategic or operational advantages.
Organisations with mature governance infrastructure: The internal capacity to handle ongoing compliance, documentation updates, and trustee duties.

In these situations, a standalone trust can provide valuable flexibility and alignment with an organisation’s broader governance framework.

Where does that leave the market?

For many employers, particularly those with limited governance resource or a focus on operational efficiency, the master trust model now offers a more practical and future-ready solution.

However, for some organisations, especially larger or more complex businesses, a standalone trust still plays an important strategic role.

Ultimately, it is not about one model replacing the other. It is about choosing the structure that best fits your organisation’s needs, capacity and appetite for governance.