Relevant Life Plan Information

A Relevant Life Plan is a personal Life insurance policy that can be treated as an allowable business expense. This means the business would benefit from Corporation Tax relief and there is no additional Income Tax or National Insurance contributions to pay.

The Financial Conduct Authority does not regulate tax planning and trusts.  Tax treatment varies according to individual circumstances and is subject to change. 

The Financial Conduct Authority do not regulate employee benefits and trusts.


If you run a small business, an excellent way to recruit and retain staff is to offer good employee benefits such as a Relevant Life Plan. 

WPP Financial Services, Rochester, Medway, Kent, could help with this


Use our relevant life calculator to see how much you could save.

One way to offer employee benefits is with a Relevant Life Plan (RLP), which is a type of life cover that an employer can provide for its staff. The family can be protected rather with this form of life insurance policies that is paid for by the business and can cover both directors and employees. This is a good employee benefit, providing individuals and their families with the same insurance benefits. Life insurance is one of the cheapest forms of insurance you can buy.

A Relevant Life Plan is a Life Insurance Policy

A Relevant Life Plan is a life insurance policy that is paid for by the business. If the insured person dies, rather than the business receiving the pay out, the family will instead. This type of insurance is also sometimes known as a “death-in-service” benefit. For smaller businesses, perhaps employing just a few people, it isn’t always possible or cost effective to set up a “group scheme” that covers all of the staff. However, a Relevant Life Plan will only cover those who take a salary from the business. 

If you are a sole trader, or a partner, you are not eligible for this type of insurance policy. This does not stop you buying regular life insurance out of your own income in the normal way and WPP Financial Services, Rochester, Kent can advise you on the right solution. A Relevant Life Plan policy can be used to cover company directors and those who own their own business, provided it is registered as a company in the UK and they take a PAYE salary from the enterprise.

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Other benefits of a Relevant Life Plan suggested by WPP Financial Services, Rochester, Kent

A Relevant Life Plan offers a number of other benefits.

  1. It is separate from pension contributions. Most group life schemes are governed under pension legislation so any payouts are considered as part of your total pension pot. If you’ve already accumulated substantial pensions you may exceed the lifetime limit. If pensions breach the limit, this means that savers could be hit with significant tax charges. A Relevant Life Plan allows people to ensure they have adequate life cover for their family without affecting pension contributions.

 

2. Individual cover that you can take with you. If a director or employee leaves a small business, they can keep the policy going by simply taking over the responsibility for paying the premiums, without needing a new application, medical or underwriting. With other large company “group schemes”, if an individual leaves their employment, they have to arrange their own cover. This will mean completing medical questionnaires and, if they are older or have had previous health problems, could push up costs significantly.

3. More extensive cover. With a Relevant Life Plan you can insure up to thirty times your earnings, depending on your age and insurance provider of choice. Compare this with most death-in-service cover schemes where the pay out is three or four times an employee’s salary. Crucially, it is your total remuneration that is taken into account here. This may be important for many business owners who take a smaller salary but larger dividends, depending on how well their business is performing.

Further information can be provided by WPP Financial Services Rochester, Kent.

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The benefit in Tax Relief that a Relevant Life provides results from the fact that a Relevant Life Plan being a personal life insurance that can be treated as an allowable business expense. This means the business would qualify for Corporation Tax Relief. In addition, there is no Income Tax or NI to pay. The savings that can be made with a Relevant Life Plan compared to a Non-Relevant Life Plan can be seen using the Relevant Life Calculator. A Relevant Life Plan is a term assurance plan that can be used by employers to provide lump sum benefits should an employee that is covered by the plan be diagnosed with a terminal illness or die while in employment during the term. A Relevant Life Plan is paid for by the employer. Like all insurance plans, limitations and exclusions apply. Relevant Life Plans are suitable for:

  • High earning individuals who wish to have lump sum benefits without affecting their Pension Lifetime allowance.
  • Directors wishing to provide their own individual ‘Death in Service’ benefits in a tax efficient way.
  • Small businesses with just a few employees that wish to provide lump sum benefits but for which it is not beneficial to set up a group scheme.

30% of Companies had heard of Relevant Life Plans. WPP Financial Services will clearly explain the benefits of Relevant Life Plans and the tax savings that can be made. From the companies that has not heard of Relevant Life Plans, 73% were receptive to the product after it was explained to them. Only 9% said they would definitely not take out the cover. 

RELEVANT LIFE PLAN TRUST A Relevant Life Plan is designed to be written in a discretionary trust at outset, with the employee’s family and dependants as beneficiaries. If the plan is not placed in trust at outset, your client should seek expert legal and tax advice on the consequences of this.

References:

  1. Business Protection, State of the Nation’s SMEs Report, Fifth Edition, Legal & General Assurance Society Ltd.
  2. The Rough Guide to Business Protection, First edition, Emma Simon, Rough Guides Ltd, 80 Strand, London WC2R 0RL, September 2016 in partnership with Legal & General.

Other Information that could help Protect your Business:

Key Person Insurance | Partnership Protection  | Shareholder Protection

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