What is Relevant Life?
WHY RECOMMEND RELEVANT LIFE INSURANCE?
Relevant Life Insurance is applied for and paid for by the business. It is written into trust, so, it pays out a lump sum to the employee or their beneficiaries if they die or are diagnosed with a terminal illness while employed during the policy term. It complies with relevant life insurance legislation that makes it tax-efficient for the employer and employee; as a consequence, it provides pure life insurance only, and no other financial benefits.
WHO IS RELEVANT LIFE SUITABLE FOR?
- Those who run or work for a business that does not provide a group life insurance scheme (perhaps because it is too small to qualify for one), but would like the business to arrange life insurance as an employee benefit in a tax-efficient manner for themselves or another individual employee;
- Those who run or work for a business which does provide a group scheme, but would like to arrange additional life insurance that doesn’t count towards any annual or lifetime pension allowances (this may be of particular interest to high-earning employees who may be near their pension limits);
- Those who otherwise want the business to top up the life insurance benefits employees get from their group scheme: a group scheme usual only covers up to 4 x salary, whereas some product providers can cover up to to 35 x salary, depending on age.
WHAT ARE THE ADVANTAGES?
It’s tax-efficient for the employee as HMRC usually views the premiums as an allowable business expense for the employer and not a benefit-in-kind for the employee. The employee, therefore, does not have to pay income tax or national insurance on the premiums – for a higher or additional rate taxpayer, this can be a significant saving.
It’s tax-efficient for the beneficiaries as any payout will be received free of income tax and, usually, inheritance tax liability because the policy is written into a split trust. In addition, any payout does not count towards the employee’s lifetime pension allowance as it is a “non-registered” arrangement.
It’s tax-efficient for the business as the employer can claim tax relief on the premiums, as long as, the local inspector of taxes is happy that the premiums are “wholly and exclusively for the purpose of trade” as part of the employee’s remuneration. In addition, the benefits are written into trust on behalf of the employee so, they are not viewed or taxed as business assets.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.