Relevant Life Policies
Relevant Life Policies
Presented by:
Your name, position
Date (month, year)
Relevant Life Policies
An introduction to relevant life policies (RLPs)
• Non registered
• Single life
• Death in service policy
• Provides a lump sum benefit on death.
The information in this presentation is based on Scottish Provident's present understanding of current law and practice and does not constitute legal and/or taxation advice.
Relevant Life Policies
Where do RLPs sit within the legislation?
Group life cover
Registered
The normal employee
group life scheme*
Non registered
Relevant life
policies
S393B(4) (b) ITEPA 03
-single life
-group life*
*Scottish Provident does not offer group life
X
Employer
Financed
Retirement
Benefit
Schemes
Unattractive tax regime
40% charge on claim
Relevant Life Policies
What do relevant life policies do?
• Provide employer sponsored life cover
• Available for an employee on a stand-alone basis
• Tax efficient.
Relevant Life Policies
How are they tax efficient?
• Premiums paid by the employer
•
No P11D charge on the employee (S247 FA 04)
•
No NIC charge on employee or employer
•
Possible tax relief on premiums (subject to wholly and exclusively rules)
•
Do not form part of pension annual allowance.
• Benefits paid
•
Usually tax free under a discretionary trust
•
Do not form part of pension lifetime allowance.
Relevant Life Policies
How much could be saved?
Premium
Employee owned plan
Relevant life policy
£1,000
£1,000
Company gross cost
Income Tax @ 40%
£690
Employee’s National Insurance @ 2%
£34
Employer gross cost
Employer’s National Insurance contribution @ 13.8%
Total gross cost
£238
£1,962
£1,000
£392
£200*
£1,570
£800*
Company net cost
Corporation Tax relief @ 20%
Total net cost
* For the purpose of the example, it has been assumed that corporation tax relief at 20% has been granted under the ‘wholly and
exclusively’ rules. Also assumes 40% tax payer. Tax rates correct as at 2013/14.
Relevant Life Policies
What are the restrictions?
The policies must:
•
Only provide for a lump sum death benefit payable before age 75
•
Only be payable to an individual or charity (required to be paid into
discretionary trust).
The policies must not:
•
Provide any other benefit
•
Be capable of having a surrender value
•
Be used mainly for the purpose of tax avoidance.
Relevant Life Policies
How does the relevant life policy trust work?
Relevant life policies must be written in trust
•
Paid to dependants at the discretion of the trustees
•
Nomination form can be used
•
No income tax for the employee
•
Normally no IHT
•
Possible 10 year and exit charge if claim paid into trust close to 10th anniversary and
benefit not distributed immediately.
Relevant Life Policies
How much cover?
Scottish Provident would normally cover up to 15X annual
salary for individuals aged 40 and older.
Up to 20X annual salary is the maximum sum assured for
individuals aged up to 39.
•
This can include salary, regular dividends paid in lieu of salary and
taxable benefits in kind.
Relevant Life Policies
Do we have a replacement policy option?
• We do not need one as it is a single life policy
• The trustees just appoint and assign the policy back to
the employee. We can provide a specimen form
• Better and cheaper than most group scheme options.
Relevant Life Policies
Can the policies be transferred
to a new employer?
• Yes – the new employer just pays the premiums
• We would suggest a change of trustees. We can
provide a specimen form to change trustees.
Relevant Life Policies
Who is it aimed at?
• High earning employees or directors
•
Who have substantial pension funds
•
Who do not want their death in service benefits forming part of their lifetime pension
allowance.
• Smaller businesses
•
Where there are too few employees to warrant a group life scheme.
• Members of group life schemes
•
To top up their benefits beyond the scheme rules.
Relevant Life Policies
Is it just aimed at limited companies?
No – but the person covered must be an employee of a:
•
Sole trader
•
Partnership
•
Limited liability partnership
•
Limited company
•
Charity.
Relevant Life Policies
How do I submit the business?
• Self Assurance Term Business quote for level or
increasing Death Benefit
• Self Assurance Term Business application form (online
submission available)
• Separate plan/application for each life
•
Cannot incorporate other benefits
• Relevant life policy trust form.
Relevant Life Policies
Where are the sales opportunities?
• Do you have clients who are directors of their own
business?
• Do they have dependants?
• Do they have Life Cover?
• How are they paying for it?
• Could you sell them up to 49%* discount on that cover?
*Assumes 40% tax-paying employee and 20% Corporation Tax paying company and payment is acceptable to local tax inspector as trading expense
Tax rates correct as at 2013/14.
Relevant Life Policies
Support for you and your client
We have placed all of our relevant life policies
information in one toolkit to help you with every
step of the relevant life recommendation.
The toolkit includes our relevant life policies
guide, business generation letters to introduce
the tax benefits of relevant life policies, a client
facing sales aid, a question and answer
document, a relevant life policy calculator and
an application checklist.
All of our literature can be ordered
or downloaded from:
www.scottishprovident.co.uk/businessprotection
If you want to find out more, contact:
Name
Contact telephone number
Thank you.
Important information
Scottish Provident is a division of the Royal London Group which consists of The Royal London Mutual
Insurance Society Limited and its subsidiaries. The Royal London Mutual Insurance Society Limited is
authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and
Prudential Regulation Authority. The firm is on the Financial Services Register, registration number
117672. It provides life assurance and pensions and is a member of the Association of British Insurers and
the Association of Financial Mutuals. Registered in England and Wales number 99064. Registered office:
55 Gracechurch Street, London, EC3V 0RL.
SCPR6030 MAY13