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Relevant Life Policy?

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    Relevant Life Policy?

    anyone have one?
    it's a life policy that Ltd companies can be taken out for employees. Used to be only the large companies with groups of employees, but changes in about 2006 changed that. Seemingly not that well known about.

    I'm thinking of taking one out, but was wanting to find some independent verification / reassurance about certainty of the arrangement regarding risk of it being taxed if need to pay out.

    Cheers.

    #2
    Yes

    Yes a Relevant Life Policy is a tax efficient way of providing personal life insurance benefits for company directors. The cost is tax deductible for the company, and there are no P11D impacts on the Director.

    I believe there are four companies that now offer the policy: Bright Grey, Scottish Life, Zurich, and Prudential.
    2012 CUK Reader Awards - '...Capital City Accountancy, all of whom were outside the top three yet still won compliments from CUK readers for their services' - well, its not an award, but we'll take it! - Best Accountant (for IT contractors) category
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    Comment


      #3
      Originally posted by GregCapitalCity View Post
      Yes a Relevant Life Policy is a tax efficient way of providing personal life insurance benefits for company directors. The cost is tax deductible for the company, and there are no P11D impacts on the Director.

      I believe there are four companies that now offer the policy: Bright Grey, Scottish Life, Zurich, and Prudential.
      Interesting.....

      Would any payout be paid into the company (and possibly liable to CT) or to the Directors named recipient?
      Rhyddid i lofnod psychocandy!!!!

      Comment


        #4
        Originally posted by psychocandy View Post
        Interesting.....

        Would any payout be paid into the company (and possibly liable to CT) or to the Directors named recipient?
        Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.
        'CUK forum personality of 2011 - Winner - Yes really!!!!

        Comment


          #5
          Originally posted by northernladuk View Post
          Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.
          Ooh harsh but fair

          Comment


            #6
            Originally posted by northernladuk View Post
            Think about it a little. Use your own situation as an example. Apply a bit of common sense and basic logic and you might actually work this one out.
            And without research probably come up with the wrong answer

            You could infer from Gregs reply that benefit was payable to the director and premiums payable by the company but not a BIK. It goes further than that however.

            - Tax deductible for the employer not assessable on the Employee
            - Not assessable to income tax when paid to director (or estate)
            - Not assessable to IHT when paid to the estate of the director
            - Can usually be paid on diagnosis of terminal illness.

            If the overall rates are similar to traditional life policies then it is a good deal tax wise.

            However a caution would be that if term assurance is bought and the company is subsequently wound-up then the individual may require to acquire the same or similar cover. When older the rates etc could be more difficult to manage. This sort of policy is not expected to provide cover after an employee leaves employment.

            fwiw my employer provides these foc for employees, provided they opt in.

            Link:

            https://www.pruprotect.co.uk/pdfs/li...ient_guide.pdf
            https://www.pruprotect.co.uk/pdfs/li...iser_guide.pdf

            Comment


              #7
              My brother is a financial planning manager at Natwest and he sent me this through a couple of days ago:

              Relevant Life Policies

              What are they?
              a stand alone single life policy to provide death in service benefits similar to a group life scheme but for one member eg for a small company
              unlike most large employer provided schemes they are 'non–registered' so do not fall under pensions legislation

              What do they do?
              RLPs provide life cover for the benefit of employees and directors' dependants paid through a discretionary trust
              provide life cover in a tax efficient way, compared to employees paying for benefits personally from their net income
              they are taken out on the life of an employee and paid for by the employer

              Who is allowed to have one?
              an employee of a business, including directors, the business can be a limited company
              'salaried' partners who are taxed as schedule E can be covered

              What is the target market?
              small companies who have too few members for a group scheme
              high earners who do not want their group death-in-service lump sum benefits to be amalgamated with their lifetime pension allowance
              employees who are looking to top up the benefits they receive from their employer’s scheme

              Why are they tax efficient?

              Premiums
              premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee
              for a higher rate taxpayer in a small company this can reduce costs by up to a third
              there are no National Insurance implications on either the employee or the employer
              subject to the company's accountant/local tax inspector they may be treated as a business expense (allowable deduction)
              premiums do not count as part of the annual pension allowance for tax purposes
              Benefits
              benefits are payable free of income tax
              benefits are normally free of inheritance tax
              unlike lump sums paid under a registered scheme, RLP benefits do not form part of the employee’s lifetime allowance for pensions

              Are there any restrictions?
              it must provide life cover only (including terminal illness) no critical illness benefits are allowed
              the term cannot exceed the 75th birthday of the employee
              no surrender value is allowed
              benefits must be payable via a discretionary trust
              it must not be set up for tax avoidance purposes

              How much cover can be provided?
              for cases where the sum assured is greater than £1m
              20 x remuneration for employees aged below 40
              15 x remuneration for employees aged 40-59
              10 x remuneration for employees aged above 60
              remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind

              How to apply
              Level Protection Plan (LPP) application completed by employee
              Life of Another form with the employer as the policy owner (Company, Partnership, Sole trader) and employee as Life Assured
              RLP Trust Deed
              RLP Nomination Form completed by employee to be held by trustees
              submit the trust before the plan issues, the Life policy cannot go on risk before the trust is effected
              tick the box in the life assured section on the application form; is the life assured also the plan owner, no
              tick the box in the adviser section on the application form that the policy is to be in trust

              Comment


                #8
                Originally posted by JamJarST View Post
                Ooh harsh but fair
                How come whenever NLUK posts theres always a follow-up by JamJar agreeing with him?

                Are NLUK/JamJar the same person or you romantically involved or something?
                Rhyddid i lofnod psychocandy!!!!

                Comment


                  #9
                  Originally posted by Jonny1974 View Post
                  My brother is a financial planning manager at Natwest and he sent me this through a couple of days ago:

                  Relevant Life Policies

                  What are they?
                  a stand alone single life policy to provide death in service benefits similar to a group life scheme but for one member eg for a small company
                  unlike most large employer provided schemes they are 'non–registered' so do not fall under pensions legislation

                  What do they do?
                  RLPs provide life cover for the benefit of employees and directors' dependants paid through a discretionary trust
                  provide life cover in a tax efficient way, compared to employees paying for benefits personally from their net income
                  they are taken out on the life of an employee and paid for by the employer

                  Who is allowed to have one?
                  an employee of a business, including directors, the business can be a limited company
                  'salaried' partners who are taxed as schedule E can be covered

                  What is the target market?
                  small companies who have too few members for a group scheme
                  high earners who do not want their group death-in-service lump sum benefits to be amalgamated with their lifetime pension allowance
                  employees who are looking to top up the benefits they receive from their employer’s scheme

                  Why are they tax efficient?

                  Premiums
                  premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee
                  for a higher rate taxpayer in a small company this can reduce costs by up to a third
                  there are no National Insurance implications on either the employee or the employer
                  subject to the company's accountant/local tax inspector they may be treated as a business expense (allowable deduction)
                  premiums do not count as part of the annual pension allowance for tax purposes
                  Benefits
                  benefits are payable free of income tax
                  benefits are normally free of inheritance tax
                  unlike lump sums paid under a registered scheme, RLP benefits do not form part of the employee’s lifetime allowance for pensions

                  Are there any restrictions?
                  it must provide life cover only (including terminal illness) no critical illness benefits are allowed
                  the term cannot exceed the 75th birthday of the employee
                  no surrender value is allowed
                  benefits must be payable via a discretionary trust
                  it must not be set up for tax avoidance purposes

                  How much cover can be provided?
                  for cases where the sum assured is greater than £1m
                  20 x remuneration for employees aged below 40
                  15 x remuneration for employees aged 40-59
                  10 x remuneration for employees aged above 60
                  remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind

                  How to apply
                  Level Protection Plan (LPP) application completed by employee
                  Life of Another form with the employer as the policy owner (Company, Partnership, Sole trader) and employee as Life Assured
                  RLP Trust Deed
                  RLP Nomination Form completed by employee to be held by trustees
                  submit the trust before the plan issues, the Life policy cannot go on risk before the trust is effected
                  tick the box in the life assured section on the application form; is the life assured also the plan owner, no
                  tick the box in the adviser section on the application form that the policy is to be in trust
                  Remuneration? Salary only or dividends?

                  Otherwise a low salary could restrict the max cover a bit....
                  Rhyddid i lofnod psychocandy!!!!

                  Comment


                    #10
                    Originally posted by psychocandy View Post
                    How come whenever NLUK posts theres always a follow-up by JamJar agreeing with him?

                    Are NLUK/JamJar the same person or you romantically involved or something?
                    Yep, it is one of those two, lol. Actually I think he is a rude plonker but, damn him, he makes sense most of the time

                    Comment

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