Relevant Life Policy?

[CEL]

anyone have one?
it's a life policy that Ltd companies can be taken out for employees. Used to be only the large companies with groups of employees, but changes in about 2006 changed that. Seemingly not that well known about.

I'm thinking of taking one out, but was wanting to find some independent verification / reassurance about certainty of the arrangement regarding risk of it being taxed if need to pay out.

Cheers.

[Greg@CapitalCity]

Yes

Yes a Relevant Life Policy is a tax efficient way of providing personal life insurance benefits for company directors. The cost is tax deductible for the company, and there are no P11D impacts on the Director.

I believe there are four companies that now offer the policy: Bright Grey, Scottish Life, Zurich, and Prudential.

[psychocandy]

Yes a Relevant Life Policy is a tax efficient way of providing personal life insurance benefits for company directors. The cost is tax deductible for the company, and there are no P11D impacts on the Director.

I believe there are four companies that now offer the policy: Bright Grey, Scottish Life, Zurich, and Prudential.

Interesting.....

Would any payout be paid into the company (and possibly liable to CT) or to the Directors named recipient?

[northernladuk]

Interesting.....

Would any payout be paid into the company (and possibly liable to CT) or to the Directors named recipient?

Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.

[JamJarST]

Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.

Ooh harsh but fair

[ASB]

Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.

And without research probably come up with the wrong answer

You could infer from Gregs reply that benefit was payable to the director and premiums payable by the company but not a BIK. It goes further than that however.

- Tax deductible for the employer not assessable on the Employee
- Not assessable to income tax when paid to director (or estate)
- Not assessable to IHT when paid to the estate of the director
- Can usually be paid on diagnosis of terminal illness.

If the overall rates are similar to traditional life policies then it is a good deal tax wise.

However a caution would be that if term assurance is bought and the company is subsequently wound-up then the individual may require to acquire the same or similar cover. When older the rates etc could be more difficult to manage. This sort of policy is not expected to provide cover after an employee leaves employment.

fwiw my employer provides these foc for employees, provided they opt in.

Link:

https://www.pruprotect.co.uk/pdfs/li...ient_guide.pdf
https://www.pruprotect.co.uk/pdfs/li...iser_guide.pdf

[Jonny1974]

My brother is a financial planning manager at Natwest and he sent me this through a couple of days ago:

Relevant Life Policies

What are they?
a stand alone single life policy to provide death in service benefits similar to a group life scheme but for one member eg for a small company
unlike most large employer provided schemes they are 'non–registered' so do not fall under pensions legislation

What do they do?
RLPs provide life cover for the benefit of employees and directors' dependants paid through a discretionary trust
provide life cover in a tax efficient way, compared to employees paying for benefits personally from their net income
they are taken out on the life of an employee and paid for by the employer

Who is allowed to have one?
an employee of a business, including directors, the business can be a limited company
'salaried' partners who are taxed as schedule E can be covered

What is the target market?
small companies who have too few members for a group scheme
high earners who do not want their group death-in-service lump sum benefits to be amalgamated with their lifetime pension allowance
employees who are looking to top up the benefits they receive from their employer’s scheme

Why are they tax efficient?

Premiums
premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee
for a higher rate taxpayer in a small company this can reduce costs by up to a third
there are no National Insurance implications on either the employee or the employer
subject to the company's accountant/local tax inspector they may be treated as a business expense (allowable deduction)
premiums do not count as part of the annual pension allowance for tax purposes
Benefits
benefits are payable free of income tax
benefits are normally free of inheritance tax
unlike lump sums paid under a registered scheme, RLP benefits do not form part of the employee’s lifetime allowance for pensions

Are there any restrictions?
it must provide life cover only (including terminal illness) no critical illness benefits are allowed
the term cannot exceed the 75th birthday of the employee
no surrender value is allowed
benefits must be payable via a discretionary trust
it must not be set up for tax avoidance purposes

How much cover can be provided?
for cases where the sum assured is greater than £1m
20 x remuneration for employees aged below 40
15 x remuneration for employees aged 40-59
10 x remuneration for employees aged above 60
remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind

How to apply
Level Protection Plan (LPP) application completed by employee
Life of Another form with the employer as the policy owner (Company, Partnership, Sole trader) and employee as Life Assured
RLP Trust Deed
RLP Nomination Form completed by employee to be held by trustees
submit the trust before the plan issues, the Life policy cannot go on risk before the trust is effected
tick the box in the life assured section on the application form; is the life assured also the plan owner, no
tick the box in the adviser section on the application form that the policy is to be in trust

[psychocandy]

Ooh harsh but fair

How come whenever NLUK posts theres always a follow-up by JamJar agreeing with him?

Are NLUK/JamJar the same person or you romantically involved or something?

[psychocandy]

My brother is a financial planning manager at Natwest and he sent me this through a couple of days ago:

Relevant Life Policies

What are they?
a stand alone single life policy to provide death in service benefits similar to a group life scheme but for one member eg for a small company
unlike most large employer provided schemes they are 'non–registered' so do not fall under pensions legislation

What do they do?
RLPs provide life cover for the benefit of employees and directors' dependants paid through a discretionary trust
provide life cover in a tax efficient way, compared to employees paying for benefits personally from their net income
they are taken out on the life of an employee and paid for by the employer

Who is allowed to have one?
an employee of a business, including directors, the business can be a limited company
'salaried' partners who are taxed as schedule E can be covered

What is the target market?
small companies who have too few members for a group scheme
high earners who do not want their group death-in-service lump sum benefits to be amalgamated with their lifetime pension allowance
employees who are looking to top up the benefits they receive from their employer’s scheme

Why are they tax efficient?

Premiums
premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee
for a higher rate taxpayer in a small company this can reduce costs by up to a third
there are no National Insurance implications on either the employee or the employer
subject to the company's accountant/local tax inspector they may be treated as a business expense (allowable deduction)
premiums do not count as part of the annual pension allowance for tax purposes
Benefits
benefits are payable free of income tax
benefits are normally free of inheritance tax
unlike lump sums paid under a registered scheme, RLP benefits do not form part of the employee’s lifetime allowance for pensions

Are there any restrictions?
it must provide life cover only (including terminal illness) no critical illness benefits are allowed
the term cannot exceed the 75th birthday of the employee
no surrender value is allowed
benefits must be payable via a discretionary trust
it must not be set up for tax avoidance purposes

How much cover can be provided?
for cases where the sum assured is greater than £1m
20 x remuneration for employees aged below 40
15 x remuneration for employees aged 40-59
10 x remuneration for employees aged above 60
remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind

How to apply
Level Protection Plan (LPP) application completed by employee
Life of Another form with the employer as the policy owner (Company, Partnership, Sole trader) and employee as Life Assured
RLP Trust Deed
RLP Nomination Form completed by employee to be held by trustees
submit the trust before the plan issues, the Life policy cannot go on risk before the trust is effected
tick the box in the life assured section on the application form; is the life assured also the plan owner, no
tick the box in the adviser section on the application form that the policy is to be in trust

Remuneration? Salary only or dividends?

Otherwise a low salary could restrict the max cover a bit....

[JamJarST]

How come whenever NLUK posts theres always a follow-up by JamJar agreeing with him?

Are NLUK/JamJar the same person or you romantically involved or something?

Yep, it is one of those two, lol. Actually I think he is a rude plonker but, damn him, he makes sense most of the time