Relevant Life

For intermediaries only

Relevant life is a life insurance policy available to employers to provide an individual death-in-service benefit for an employee. It can help smaller businesses attract and retain high-calibre staff by offering them attractive benefits packages that are also tax efficient. It can also be a tax-efficient way for shareholder directors to take out life insurance (although it shouldn't be used for business succession planning).

The following information is based on our understanding of current legislation, taxation law and HM Revenue & Customs (HMRC) practice, which may change.

Tax benefits

There can be tax benefits for both the employer and employee.

Employer benefits:

  • Corporation tax relief (so long as the premiums are wholly and exclusively for the purposes of the business).
  • No National Insurance Contributions to pay on the policy payments paid to fund the relevant life policy.

Employee benefits:

  • No National Insurance Contributions to pay on the policy payments paid to fund the relevant life policy.
  • Can benefit from their employer making the policy payments and these aren't subject to tax as a benefit in kind or remuneration.
  • Policy payments and benefits don’t count towards annual or lifetime pension allowances.
  • Can generally provide their family with a tax-free lump sum if the worst happens to them.

Also, the claim amount isn’t subject to any income tax, corporation tax or capital gains tax implications, where the relevant life policy is held in a trust.

Trustee flexibility

The employer should arrange for the relevant life policy to be written in trust for the benefit of the employee’s family. This will help to fulfill the legislative requirements for a relevant life policy and also in most cases, it should help to mitigate inheritance tax.

We offer the ability for the employer to act as a corporate trustee, which can bring some benefits. We appreciate that whether or not being a trustee brings benefits, depends on how your client’s business is set up. That’s why we offer the choice.

Being a trustee – If the employer chooses to act as trustee, should the worst happen, the employer can make sure that the employee’s wishes are carried out as they’d intended. It’s a small, easy step for employers to take, but it could make a real difference to the employee’s family and help them to retain loyal staff. 

Choosing not to be a trustee – There are reasons why the employer may choose not to be a trustee. For example, if your client is the sole director with a 100% shareholding in the business, and the business is the sole trustee, if they die another director will have to be appointed to act on behalf of the business as corporate trustee. This could result in a significant delay in claiming and receiving death benefits. To avoid this, we don’t insist on the employer being a corporate trustee.

Portability

Our Relevant Life cover is portable, so the insured person can take it with them if they move jobs. They can then either continue making the policy payments themselves, or ask their new employer to take over this payment as part of their benefits package. Any employer who makes the payments on their employee’s behalf may be eligible for corporation tax relief on the payments.

Immediate cover facility

Imagine you have a client with a healthy employee. They want cover in place as soon as possible and are happy with the policy payment - but underwriting is required due to the level of cover. What can you do to get the cover in place quickly?

Our immediate cover facility (PDF)(Opens new window) is designed for just this reason. We can provide immediate cover for the first 60 days while we request any necessary medical information. For us to consider this, we’ll need a completed application form with no adverse disclosures, a fully completed Direct Debit Instruction, payment for the first 60 days' policy payments by cheque or Direct Debit, and all financial evidence.

More than just financial support

Relevant Life customers will have access to our protection support services at no extra cost. Our key person replacement service (PDF)(Opens new window), provided by our partners Cazden, can help policyholders replace key personnel on either a temporary or permanent basis. While our health and wellbeing service (PDF)(Opens new window), provided by our partners Heath Assured, can offer confidential help and support on a wide range of issues to both the policyholder and insured person. What’s more, they don’t need to make a claim to use these services – they can be accessed throughout the life of the policy.

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