Life Insurance (Relevant Life Plan)

As a business owner, you can use a tax-efficient policy to provide a financial safety net for your loved ones should the unthinkable happen to you.

Do you have dependants – such as school age children, a partner who relies on your income or a family living in a house with a mortgage that you pay? Life Insurance can provide for them if you die. Such a loss can have a massive impact on your remaining family and their quality of life. The last thing you want is for them to be left with a financial burden.

Only 28%* of businesses have heard of Relevant Life Plans. Now you know, take advantage of the benefits!

Added peace of mind – tax free. Relevant Life Plans offer some very special advantages to directors and employees of small businesses, most notably tax efficiency. Watch our video to find out more and see how you can save up to 50% on your premiums.

 

Life Insurance for your family provides peace of mind with financial security and helps ensure that:

  • The quality of life that they’re used to can be maintained or even enhanced.
  • Bills, educational costs, childcare, mortgage/rent, debts etc. can all be paid for.
  • Unnecessary stress and worry is avoided at a difficult time.

Case Study - for a Director

John Davies is employed as a Managing Director of a manufacturing business in Cardiff. John leads a healthy lifestyle and does plenty of exercise, but worries that someday he may not be around to support his wife, Caroline. The company takes out a Relevant Life Plan, setting his cover at £1 million. John nominates Caroline as a beneficiary.

If the worst does happen and John dies during the term of the policy, the Relevant Life Plan trustees would receive £1 million. This could then be paid, tax free to Caroline, giving her enough money to pay off the mortgage on the family home and hopefully live comfortably for years to come.

The flow chart below shows how it works:

CaseStudy-LifeCov-240px

The importance of Trusts

All Relevant Life Plans must be written in Trust. This is one way of helping to ensure that the policy proceeds are paid to those who you want to receive the money and without unnecessary delays.

  • Beneficiaries can receive the money at the right time tax efficiently
  • Probate is avoided.
  • Intestacy law is avoided
  • Inheritance Tax (IHT) liability can be avoided/reduced

Save up to 50% – Let the taxman help pay for your personal Life Cover

Example:

Andrew Dukes is Managing Director of a furniture design business in London. He already has a Life Insurance policy but with him and his wife about to have their third child, he wants to increase his cover to help make sure his family would be financially secure if he dies. His existing plan doesn’t allow him to increase his cover, so he decides to take out more cover with a new Life Insurance policy.

Andrew’s Protection Adviser at Vita presents two options to highlight the differences and he doesn’t hesitate to choose the Relevant Life Plan. You can see the sums below that made his decision easy.

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The Relevant Life Plan is particularly beneficial for Andrew because he’s employed as a salaried director and is also a shareholder of the business, so all of the savings go to him. If he were to pay for his Life Insurance personally it would cost £1,570 every year. By his company using a Relevant Life Plan to provide cover, it only costs £800 each year. That’s a saving of almost 50%.

Details for you and your Accountant

There are lots of good reasons to choose a Relevant Life Plan. But it all boils down to tax-efficient Life Insurance for directors and employees, and what business doesn’t want that?

Our partners at Royal London have produced a guide all about Relevant Life Plans, which explains some of the finer detail that you or your Accountant may like to know. You’re welcome to download and email the guide if you like.

Royal London RLP Guide (2016) (71 downloads)

 

Frequently Asked Questions

What exactly is a Relevant Life Plan?

– An individual ‘Death in Service’ Life Insurance policy available for employees of the company, which can include directors.

– Your business pays regular premiums based on the level of cover.

– The plan pays a fixed lump sum if the person covered dies or is diagnosed with a terminal illness whilst in employment during the policy term.

– The plan is specifically designed to meet certain legislative requirements, which means your premiums and benefits should be treated tax efficiently.

Am I eligible for a Relevant Life Plan?

You must be an employee of a UK business, which can include company directors who are salaried.

A Relevant Life Plan is not available to Sole Traders, equity partners of a Partnership, equity members of an LLP or anyone else who is not an employee.

Who pays the premiums?

The business pays the premiums. It’s likely that the premiums will be treated as a trading expense and in turn help to reduce any corporation tax bill.

Can I really put my Life Insurance as a business expense?

Yes. Relevant Life Plans are a cost-effective way of offering Life Insurance to you and your employees. Its tax efficient and premiums can be treated as an allowable business expense by HMRC. With Corporation tax relief available and no additional income tax or NI to pay, it’s a fantastic option for both you and your employees.

Are premiums treated as a P11D benefit in kind?

No. The taxman doesn’t treat the premiums paid by the business as a benefit in kind. This means employees don’t pay income tax on the premiums.

Note for Accountants: Relevant Life Plans are non-registered arrangements and replace the old unapproved schemes.

Does the Relevant Life Cover count towards my lifetime pension allowance?

No. The premiums or benefit don’t form part of your annual allowance. So you can still make full use of your annual allowance to contribute to a registered pension scheme.

How much cover should I have? And for how long?

We don’t do off-the-shelf. We genuinely care about getting the right cover for you. Your circumstances may be similar to someone else’s, but never identical. Our consultative approach means that you’ll feel listened to and understood. Also, you’ll get a solution that’s tailored to your personal needs.

Our friendly Business Protection Specialists are available to answer your questions, provide expert advice and make recommendations – so please call us on 0800 988 36 37 – or you can request a call back.

 

*Research from Legal & General’s ‘State of the Nation’s SMEs’ report, 2015.