What is a Relevant Life Plan?
Relevant Life Plans are a financially effective way for a company to provide life insurance for its employees. It is tax efficient for both the employer and the employee and will pay out the employees’ family or financial dependents.
The Relevant Life Plans that we put in place for our clients are put in a Trust at the start. This allows for the quick payment of the policy upon death and ensures that the payout is not subject to inheritance tax.
Relevant Life Plans are designed to pay a lump sum to the employee’s family if the employee dies when employed, while the plan is in place. It will also payout if the employee, whilst employed and covered by the plan, is diagnosed with a terminal illness, with life expectancy of less than 12 months, that meets the insurer’s definition. Premiums are paid, and the policy is owned, by the employer. It also offers continuation options if the employee leaves or changes employment.
Who can be covered by a Relevant Life Plan?
The person covered must be a UK resident and employed by a UK business.
- A UK-resident employee will usually include company directors (on PAYE) and salaried partners. Members of a Limited Liability Partnership (LLP) and sole traders (as owners of their own business) are not eligible to be covered under a Relevant Life Plan.
- A UK-resident business can be a Limited company, a Limited Liability Partnership (LLP), a traditional English partnership, a charity or even a sole trader.
In most cases it will be clear whether a person is employed or self-employed from the way that they are taxed each year on their earnings, however, occasionally it may not be as clear, and specialist advice may be required. That is where our advisors can help.
