Relevant Life

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The employer pays for a Relevant Life Plan to provide an individual death-in-service benefit for an employee.  Only employers should apply for it and the employer must complete the Relevant Life Policy Trust request.  This will help meet the legislative requirements for the policy and lessen inheritance tax.  Relevant life plans are covered by the same legislation that deals with group schemes.  It provides cover through a Trust.  Although the company is the proposer, it does not own the policy.  The trustees own the policy.  Therefore, proceeds go directly to them.  The trustees can choose the beneficiaries and decide how much each one will get.   

Under the trust, the employee can and should complete a nomination form.  The employer will always be the first trustee. The trust form allows for the appointment of other trustees.   It normally includes an independent person or a member of the employee’s family.  The trustees will decide who will receive the benefits after the death of the employee.  The trust contains the employee’s wishes to his trustees.  The policy does not have surrender value or investment element.  It does not fall under pensions legislations.  

The plan will pay a lump sum if an employee dies within the term of the policy.  It will also pay out if the employee gets diagnosed with a terminal illness at any time during the cover.  The beneficiaries will receive a lump sum as long as they meet the insurer’s requirements.  

The policy allows the employer to provide a tax efficient benefit for an employee.  Premiums must qualify under the ‘wholly and exclusively’ rules, so that the employer can claim tax relief on the premiums. To qualify, premiums should be treated as part of the employee’s remuneration.  If it meets legislative requirements, the company can claim the premiums as a cost.  The employer does not have to pay National Insurance Contributions on the premiums.

On the other hand, Relevant Life Plan is not seen as a benefit in-kind for the employee.  Therefore, the employee does not have to pay the premiums from their already taxed income.  The employee also does not have to pay National Insurance Contributions.  Relevant life plans are ideal for people with high earnings and big pension funds. It allows the higher rate taxpayer to make significant savings.  The death benefit, including the terminal illness benefit, will not form part of the employee’s pension lifetime allowance.  The premiums will not form part of their annual allowance.  

If the employee moves to a new company, the employee can choose to move it to the new employer.  The employee does not need to provide further medical evidence or underwriting.  The employee can also choose to convert their Relevant Life Plan to a personal plan.  However, the plan does not belong to the employee.  Therefore, it does not form part of their estate.  Hence, it helps lessen inheritance tax.  

Small businesses that do not have enough employees for a group life scheme will benefit from a Relevant Life Plan.  People with high earnings and big pension fund will also benefit from it.  Members of a group life scheme who want to top up their existing group life benefits can take advantage of it.  

If you own a small business, you should consider getting a Relevant Life Plan.  It is a tax-efficient way for company owners to take out life insurance.  Relevant Life Plan costs much less than taking out a personal policy.   Instead of setting up a group life scheme, you can set up a Relevant Life Plan.  You can use it as a recruitment tool when hiring to entice people to join your company.  You can also use it to retain your valued employees, because it can provide financial support when they get ill.  It will help with the expenses, so your employee can focus on their recovery.  

The Right Cover can help you choose the best plan for you.  You can speak to a qualified adviser to find out more about it.  Just click on the ‘Get A Free Quote’  button, so we can assist you.   You can also call 02380 170 850 .

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