Could a relevant life policy be relevant for you?

If you are a senior employee or company director then a relevant life policy would be a far more tax efficient way of providing you with additional personal life assurance and/or to replace existing single life family protection policies.

What are the advantages?
  • The premiums can be paid by the company without creating a taxable benefit in kind.
  • Corporation tax relief is available on the premiums in the company’s accounts.
  • In the event of a claim, the sum assured is paid free of tax to your nominated beneficiaries.
  • The death benefit does not count towards the pension lifetime allowance.
  • The premiums are not counted towards the pension annual allowance.
  • There is no need to establish a group scheme for all employees.
  • A way of providing the benefit for selected directors/employees.
  • A way of providing insurance if there are insufficient employees for a group scheme.
So what is a relevant life policy?
  • It is a policy which provides individual life assurance.
  • It is provided for the individual and paid for by the company.
  • The level of life cover can be selected at any level up to a maximum of typically 15 x remuneration.
What are the terms and conditions?
  • There must be an employer / employee relationship.
  • The term of the policy can only be to age 75.
  • The plan can only provide a lump sum death benefit.
  • The policy should be written under a discretionary trust which is provided free of charge by the insurance company.
So what are the savings
Personal Insurance paid by you Employer funded relevant life policy
Monthly premium paid from post-tax income £200.00 Monthly premium paid by your employer £200.00
Pre-tax income needed to fund £200 assuming income tax at 40% and employee National Insurance (NI) at 2% £344.83 No income tax, employee’s or employer’s NI contribution £0
Employer’s NI contributions at 13.8% on this amount of salary paid by the company £47.59 No employer’s NI contribution £0
Total cost to company and director £392.42 Total cost to company and Director £200.00
Less corporate tax at 20% as an allowable deduction. Salary, income tax and NI are allowable expenses against corporation tax £78.48 Less corporation tax at 20% as premium is an allowable deduction £40.00
Total cost to you and the company £313.94 Total cost to you and the company £160.00
A total saving of over 49% or £153.94 per month on a monthly premium of £200

For more information, please contact James Springham.