Relevant Life Policies
Many employers have key people whose death or illness will impact on the profitability of the business. For such people key person insurance exists to enable the company to provide itself with financial protection at such a difficult time.
But what about the key person’s family and dependants? They will probably also have severe financial challenges to address at such time. For such people help is at hand in the shape of a Relevant Life Policy (“RLP”).
This is a policy which is taken out by an employer on the life of an employee on a single life basis, to an age not exceeding 75 and written in trust for the employee’s family. This means that in the event of the employee’s death, a substantial cash sum can be made available quickly for the employee’s family. And that’s not all – there are considerable tax benefits.
- the employer will usually get tax relief on premium payments because they will be treated as a qualifying trade expense;
- the employee will not be assessed to income tax or National Insurance on the premiums paid;
- the death benefits will be free of income tax and are likely to be paid free of inheritance tax; and
- neither the premiums nor the death benefits will have any impact on the employee’s annual allowance or lifetime allowance for pension purposes
For employers, such an arrangement can also act as a substantial employee benefit for attracting quality employees to a business. The fact that RLPs fall outside the scope of the Lifetime Allowance charge, unlike Death in Service schemes which are formed under pensions rules, can make them particularly advantageous for employees with high earnings and/or large pension funds that would otherwise exceed the Lifetime Allowance (£1.5million from April 2012) on death.
Please call us for more information on this attractive and increasingly popular form of planning.