THE HOME OF THE
PROFESSIONAL ADVISER
Relevant Life Plans – Put Life Cover On
Expenses
Legal & General
RELEVANT LIFE
PLAN.
PUT LIFE COVER ON
EXPENSES.
This is not a consumer advertisement. It is intended for professional use only
and should not be relied upon by private individuals or any other persons.
3
LEARNING OUTCOMES.
1
Understand consumer awareness levels of Relevant Life
Plans.
2
Understand the criteria for a relevant life plan and how these
policies are structured in a tax efficient manner.
3
Identify the target market and eligible customers who are
able to benefit from a Relevant Life Plan.
4
Understand the potential savings a customer can achieve
through writing a Relevant Life Plan.
5
Identify the opportunities for writing Relevant Life Plans and
the potential additional opportunities for these customers.
4
BUSINESS PROTECTION.
Pension Schemes
Group Life
Employee Benefits
Relevant Life Plans
Group Income protection
Auto-Enrolment
Protect the Business
Key people, loan protection & share holders
5
BUSINESS PROTECTION.
Key Person - Profit Protection
The policy proceeds are paid directly to the business to be used to help replace
a Key Person and help cover the loss of profits that may occur. The policy
proceeds could help the business to continue trading.
Key Person - Business Loan Protection
The policy proceeds are used to help pay off any outstanding loans the business
may have..
Share Protection
On the death of a business owner the policy proceeds are paid to the remaining
owners to buy the share of the business from the deceased's estate.
Relevant Life Plan
A tax efficient single life Death in Service benefit for employees or Directors of a
business. The policy proceeds are paid to the Trustees (employer) and the
benefit is written under Trust for the life assured’s beneficiaries.
6
THE ESTIMATED BUSINESS
PROTECTION GAP.
£223 billion - Corporate debt
£683 billion - Shareholder protection
£439 billion - Key person cover
Source: Legal & General SME research, January 2013
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KEY PERSON.
Source: Legal & General SME research, January 2013
8
TYPES OF CORPORATE DEBT.
Source: Legal & General SME research, January 2013
9
WHAT WOULD HAPPEN IF ONE OF THE
BUSINESS OWNERS DIED?
Shareholders would buy the shares continues to
grow – up from 28% in 2009
Source: Legal & General SME research, January 2013
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11
QUESTION?
When dealing with your commercial clients do you
include Business Protection?
1
Always – it’s essential for a business to consider
this
2
Most of the time as businesses should be protected
3
Following this session I will now
4
This is not an area of the market I deal with
12
RELEVANT LIFE PLAN
Just 37% have ever heard of a Relevant Life Plan.
Source: Legal & General SME research, January 2013
13
WHAT IS A RELEVANT LIFE PLAN?
A single life assurance policy which provides ‘death
in service’ benefits for an individual to a maximum
age of 75.
It’s designed to provide a lump sum benefit payable
either on death or the diagnosis of a terminal illness
of an employee during their employment, within the
length of the plan.
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THE CRITERIA FOR A RELEVANT LIFE
PLAN.
• Provides a Death benefit .
• No other benefits (other than Terminal Illness during
employment).
• The policy must cease before age 75.
• No surrender value to the policy.
• The benefits are payable to an individual or charity (or a trustee
for an individual or charity)
• Tax avoidance is not the main purpose
• Provisions set out in ITEPA 2003, Part 6, Chapter 2 and sections
481 and 482 of ITTOIA 2005 – (Queen’s Counsel’s Opinion)
15
ELIGIBILITY.
Eligible to be a life assured:
• Employees (including directors)
• “Salaried partners”
Not eligible to be a life assured:
• Equity partners
• Members of an Limited Liability Partnership
• Sole traders
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HOW IT WORKS.
Company
Insures employee
Relevant Life Plan in trust
Employee dies during the term
or is diagnosed with a terminal illness (except in the last 12 months of the plan)
Trustees make a successful claim
Pay out to individual or charity
17
WHY ARE THEY TAX EFFICIENT?
• Premiums will not be a benefit in kind/ taxable remuneration for the
individual employee.
• The lump sum benefits are paid free of income tax and do not count
towards the individual’s pension lifetime allowance.
• Any premiums paid do not count towards the individual’s annual
pension allowance.
• The benefits are written under a discretionary trust and should be free
from Inheritance Tax.
We recommend you contact your local inspector of taxes before
deciding if the premiums may qualify as a deductible business
expense.
18
COMPARING THE COST OF A LIFE
POLICY TO A RELEVANT LIFE PLAN.
NON-RELEVANT
LIFE PLAN POLICY
RELEVANT LIFE
PLAN
£1,000 PA
£1,000 PA
National Insurance
contribution
(assuming 2%)
£34.48
-
Income Tax
(assuming 40%)
£689.65
-
National Insurance
contribution
£237.93
-
- £392.41
- £200*
£1,569.65
£800
Premium
Employee tax
•
•
Employer tax
(assuming 13.8%)
Less Corporation Tax
(assuming 20%)
Total cost
A saving of £769.95, which is a saving of almost 50%.
* Any employer that wishes to treat Relevant Life Plan premiums for its directors, or employees, as an
allowable business expense, must seek advice and clarification from its local inspector of taxes, either
directly or via its accountant.
This example is fictitious and provided for illustration purposes.
RELEVANT LIFE
PLAN.
SALES
OPPORTUNITIES.
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IDENTIFYING SALES OPPORTUNITIES.
More business owners are looking for tax efficient ways to
protect themselves and their business.
• Directors wanting personal life cover, tax efficiently
• Businesses with small numbers of employees who are not eligible
for a group life scheme
• Key individuals – employee benefit
• Death in service schemes where benefits based on salary only.
• High earning individuals - Pension Fund liquidity
• Professional connections - working with accountants.
A Relevant Life Plan (RLP) is an easy way to start discussions
which could then lead to other business protection opportunities.
21
RELEVANT LIFE
PLAN.
LEGAL & GENERAL’S
PLAN.
22
FEATURES, BENEFITS AND OPTIONS.
• Term assurance (1 year to 40 year term)
• Policy must end before 75th birthday
• Life Cover and Terminal Illness Cover only
• Indexation (RPI – 1% to 10%)
• Guaranteed Insurability Options
• Option to continue cover on leaving employment*
• Monthly or annual premiums
• RLP Discretionary trust
• Reviewed by Queen’s Counsel
* Terms and conditions apply.
23
AMOUNT OF COVER.
h
Family protection cover - Aim is to provide a lump sum
to replace the lost income.
Maximum cover available:
• Age 17 to 49 - up to 25 x remuneration
• Age 50 to 59 - up to 20 x remuneration
• Age 60 to 73 - up to 15 x remuneration
Remuneration includes salary, bonuses, benefits in kind and regular
dividends from shares in the employer’s company or company within
the employer’s group of companies.
Evidence of earnings:
• Not required until benefit exceeds £3.5 million.
24
WHAT IF THE INDIVIDUAL LEAVES
SERVICE,OR THE BUSINESS IS SOLD?
There is an option to continue the policy on a “personal basis” with the
individual paying the premiums themselves, subject to:
• The individual exercising this option within 30 days of leaving
service.
•
• There would be no additional medical information required.
•
• The original premium would remain the same as the original premium.
• The original level of cover and term of the plan must be maintained.
• Some forms would be required to change the paying Bank Account and
also to change the Trustees of the Trust.
25
QUESTION?
Are Relevant Life Plans an area of business you include
in discussion with your commercial clients?
1
Always – it’s essential for a business to consider
this
2
Most of the time as businesses should be protected
3
Following this session I will now
4
This is not an area of the market I deal with
SUPPORT FROM
LEGAL & GENERAL.
27
SUPPORT FROM LEGAL & GENERAL.
Business protection website - www.legalandgeneral.com/business
28
SUPPORT FROM LEGAL & GENERAL.
•
Business Protection online application
•
Business Protection website including
- Business Protection Fact find
- Online calculators
- Marketing and seminar support material
- Technical guides
- Relevant Life Plans
•
Client facing and claimant videos
Best
Business Protection
Provider
Technical training
Workshops
Webinars
Business protection website - www.legalandgeneral.com/business
29
QUESTION?
Would you be interested in further training or materials
relating to the Business Protection market?
1
I am already active in this market and do not require
2
I would like additional training to help develop in this
area
3
I would like additional support to move into this
market in the future
4
This is not an area of the market I deal with
Relevant Life Plans
Put Life Cover on Expenses
Learning outcomes
• Understand consumer awareness levels of Relevant Life Plans.
• Understand the criteria for a relevant life plan and how these policies
are structured in a tax efficient manner.
• Identify the target market and eligible customers who are able to benefit
from a Relevant Life Plan.
• Understand the potential savings a customer can achieve through
writing a Relevant Life Plan.
• Identify the opportunities for writing Relevant Life Plans and the
potential additional opportunities for these customers.
Thank you for your time – Legal & General