Relevant Life Policies

The KEY issue… making corporate life cover available to all

Registered Group Life Schemes are normally only put in place for companies with more than 5 members, and form part of an employee’s P11D benefits. For high-earning individuals, it’s also worth noting that any lump payments on death will form part of the lifetime pension allowance with any excess taxed at 55%.

Relevant Life Policies are designed to provide a lump sum on death for an individual, without the need for the employing company to set up a registered group life scheme.

Key advantages

  • For high-earning employees, Relevant Life Policies will not affect their lifetime pension allowance since they do not affect an employees P11D entitlement

  • Relevant Life Policies can be transferred to another employer if the insured leaves. The trustees can appoint benefits back to the employee, who can then keep the policy as a personal one. Plans can also transfer between companies since all that would need to change are the names of the trustees.

  • Relevant Life Policies save money for both employer and employee. No income tax or national insurance liabilities arise, since the employer is the one who has taken out the plan and the employee is not responsible for making payments.

  • Premiums may be treated as an allowable expense for the employer in calculating their tax liability. Provided that the local inspector of taxes is satisfied they qualify under the 'wholly and exclusively' rules.

  • Provided the benefits are payable through a discretionary trust, the trust will be subjected to normal inheritance tax rules for discretionary trusts. This means the benefits will be paid free of inheritance tax in most cases*, and the payment is not part of the employees estate.