What is 'Relevant life'?

A Relevant life policy is a form of death in service benefit that is set up and paid for by a company as an allowable business expense. The benefits are paid directly to the employee's or director's nominated beneficiaries on the death of the insured. 

A Relevant Life policy is similar to a traditional life insurance policy as a lump sum payment will be paid on the death or terminal illness of the insured. The individual premium is based on how much cover is required, their health, age and lifestyle and the individual can specify the amount they require. 

Who can benefit from a relevant life plan?

Employees, directors or business owners can benefit from a relevant life plan. The amount of cover is decided by the company which can be particularly advantageous if a company owner is setting up the plan for themselves as the amount of cover can be determined by them and is usually a multiple of earnings. 

Benefits for Employers

The premiums are paid for by the employer and receive corporation tax relief as long as they are wholly and exclusively for business use. These policies tend to be significantly cheaper than setting up a group life scheme and allows a company owner or director to still be able to cover themselves using their business rather than their own personal income. 

The benefits for employees

The premiums are not treated as a P11D benefit in the same way that group death in service schemes are not treated as a P11D benefit for employees, and the benefits are paid tax free directly to their beneficiaries. The net cost of the plan can be over 24% - 53% cheaper for employees than taking out a personal policy covering the same value.

Another benefit of Relevant Life policies is that they are held in a Discretionary Trust which means the beneficiaries can be modified easily and sit outside of the estate on death for inheritance tax purposes. The final benefit is that any relevant life payments do not count towards the lifetime allowance whereas group life schemes do count towards the LTA which can lead to large tax charges. 

If you want to discuss the issues raised in this article, please contact your normal Dentons Wealth Independent Financial Adviser. 

This article does not constitute advice. We recommend that you seek advice from an Independent Financial Adviser.

Sources:
https://moneytothemasses.com/quick-savings/insurance-2/life-insurance/what-is-relevant-life-insurance-and-should-you-have-it 
https://www.legalandgeneral.com/adviser/protection/doing-business-with-us/tools-calculators/relevant-life-plan-calculator/