26 Jan 2015
Steven Ritchie, Independent Financial Adviser, looks at Relevant Life Cover.
If you are a small business owner then there is a smarter way to buy life insurance for yourself and your key employees.
A Relevant Life Policy is a term assurance plan which is applied for by the employer on the life of the employee. The plan can only provide lump sum death benefits and must be written under trust from commencement. This provides death in service cover without the need for a group life scheme for the benefit of the employee’s family.
Relevant Life Policies provide life cover for the benefit of employee's and director’s dependants and all benefits are paid through a discretionary trust. The plan must be taken out and paid for by the employer.
Any employee of a business, including directors. The business can be a limited company, a limited liability partnership, a partnership, a charity or a sole trader.
With a Relevant Life Plan the business pays the premiums, not the person who’s covered. This means it’s highly tax efficient for the business because the payments are normally tax deductable. And its highly tax efficient for the people covered because the tax man doesn’t consider the payments a benefit in kind.
Cover can be level, increasing or decreasing.
All benefits are payable free of Income Tax and relevant life policy benefits do not form part of the employee's lifetime allowance for pensions.
To qualify as a Relevant Life Policy and become eligible for the associated tax benefits there are certain legislative requirements:
Life Cover is an important consideration for small businesses, and one which requires careful assessment of the types of cover and the key benefits. Speaking to an expert advisor is the best way to make the right choices.