What is a relevant life plan?
Company directors love relevant life plans. Why? You save money! A relevant life insurance policy is taken out by a business to provide life insurance cover for an individual employee. It’s an alternative means for an employer to provide death-in-service benefits to their employees outside a company life insurance scheme.
Relevant life insurance policy is that it is paid for by your business. The premiums are tax deductible as a trading expense and are not seen as a P11D benefit. There is also no national insurance hassle and the benefit paid is not registered with HMRC, therefore it does not form part of your pensions allowance.
Why choose relevant life cover?
It’s this simple – as relevant life insurance is paid for by the employer, it is a tax-efficient way for small businesses to provide attractive employee benefits.
Both the employer and the employee can take advantage of tax benefits from a relevant life insurance policy.
Employers can benefit from corporation tax relief, providing the premiums are solely for business purposes, plus payments to the policy are exempt from National Insurance. Employees can benefit from National Insurance exemption on their policy payments, plus any payments will not be taxed as a benefit in kind and they do not count towards an annual or lifetime pension allowance.
How does a relevant life plan work?
Relevant life cover pays a set amount of money to the employee’s family should the employee die within the term of the policy, or they are diagnosed with a terminal illness.
A policy provides life insurance cover only, with no other financial benefits.
Who is suitable for a relevant life plan?
If a business does not provide a company life insurance scheme but an employee wishes to access life insurance as a benefit, a relevant life plan is ideal.
If an employee wants to arrange additional life insurance with their company scheme that does not count towards their annual or lifetime pension allowance, the relevant life policy will also be perfect.
It also might be helpful for those more senior employees earning larger sums of money who are close to their pension limit.