Just for big companies?
For many businesses, a Relevant Life policy can be a smart way to plan, but it is a fact that their benefit and even their existence is less than well known or appreciated.
We believe that Relevant Life is something that smaller businesses should actively consider because the tax advantages can make it unbeatable!
Pulse is a specialist in small and medium sized group business because of its ability to tailor cover to a company’s needs.
What is Relevant Life?
A Relevant Life Policy is a term life insurance policy enabling employers to offer an individual death in service benefit to an employee. It pays a lump sum if the employee dies whilst employed during the period of cover. The key point is that the employer pays for the policy. Relevant Life Policies are similar to other types of life cover but they can provide a tax efficient benefit because they are provided by the employer for the employee.
If we take the example of “Daphne” a 60 year old company director with heart problems needing £250,000 of life cover. Monthly premium might be £100, but the real cost after taking tax and national insurance costs into account would be very different, in fact a relevant life policy can be nearly 40% less expensive than an individual policy.
You can see an example of how the number work below. The level of tax-efficiency you may be able to achieve does depends on if you pay Higher Rate Tax, but a benefit is still there even for lower rate tax payers.. You may also save on National Insurance contributions.
Finally, placing the policy into a suitable Trust for the benefit of your family, it does not have to not form part of your estate for Inheritance Tax purposes.
Why are companies wise to consider Relevant Life cover?
There are many reasons beyond the pure financial that Relevant Life can be beneficial to both the company and the family of each insured person at what is inevitably a difficult time.
Most companies run to tight margins and rely on key staff. The loss of anyone impacts a tight-knit team emotionally and the business suffers the loss of skills, knowledge and relationships. The desire to want to help the deceased’s family can be very strong, but without something like Relevant Life, the ability to do so materially can be difficult.
If it is one of the company director who passes away, this can bring significant heartache and even jeopardise the business. For example, if one of two business partners dies, the remaining partner may be unable to buy out the deceased partners share. This can become a nightmare for both family who cannot sell the share easily and the business and partner who are trying to survive such a loss.
A Relevant Life policy that provides the funds for the business to “buy out that share” can meet everyone’s needs.
How does a Trust work and won’t it be expensive to set up?
The Employer will be the initial Trustee. The Trustee(s) decide who (from the classes of Beneficiary specified in the Trust) should benefit from the Trust fund and when.
The Trust terms provide that the benefits could be paid to any one or more of a wide class of Beneficiaries including the insured employee’s family and dependents.
Relevant Life policies are an excellent way of providing life insurance for employees and directors, which can be payable to their family and dependents on their death. To ensure that the desired tax treatment is secured the Policy must be effected subject to a Relevant Life Policy Trust.
Pulse is able to provide its Pulse Relevant Life Trust document, which will need to be in place before the cover can commence.
If you are interested in discussing Relevant Life or are ready to arrange a Relevant Life policy – please call us directly on 01280 841230
You can also begin your enquiry online and we will make contact to help ensure we find the exact cover you want.