A Relevant Life Plan allows businesses to offer a ‘death-in-service’ benefit to its employees (including salaried directors), and may bring with it a number of advantages…
Relevant Life Plans are single life plans set up by employers for employees, and are designed to pay out a lump sum to the family of the person covered, should they die across the period of the cover.
A key benefit of this scheme is that it can deliver a death-in-service benefit without the need for a registered group scheme. Additionally, if you are a small business owner, company director, or higher earning employee looking for more life cover, then a Relevant Life Plan may be worth considering as an alternative to a further personal plan.
Of course, do take advice from your accountant if you require further clarification, but a Relevant Life Plan can be a tax-efficient way to secure some all-important life cover.
Even though the company makes the payments, it is not treated as a ‘benefit in kind’, and would therefore not be included in your income tax assessments. This may deliver a significant saving, particularly for a higher or additional rate taxpayer.
Also, the plan will not form part of your lifetime pension allowance, and premiums won’t be included as part of your annual pension allowance.
Additionally, the payments may be an allowable expense for the company in calculating their tax liability, as long as HM Revenue & Customs is satisfied they qualify under the ‘wholly and exclusively’ rules.
More flexible than a group scheme
This plan can even run alongside a group scheme, should there be a need to address ‘multiple of salary’ issues, as a group scheme can be more restrictive, and possibly have an upper cap on earnings. The Relevant Life Plan payout is based on a multiple of remuneration, which would vary across providers, and depend on the age of the individual covered.
As it is written under trust, this provides flexibility when it comes to stopping or changing employment, as the plan can be converted into a ‘personal policy’ should the person leave employment. Although if the ‘life covered’ starts to pay the premiums, then the tax advantages may no longer apply.
If there’s a move to a new employer, and the employer is willing to take on the Relevant Life Plan, and any required change to the trustees, then it can move across.
To set up a Relevant Life Plan there needs to be an ‘employer-to-employee’ relationship. So, whatever your status is, do talk to us to find out if this could be a suitable option for you.
As with all insurance policies, terms, conditions and exclusions will apply.
HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
The Financial Conduct Authority does not regulate trust and taxation advice.