What are the conditions in order for a relevant life plan to be effective?

This is detailed in the Income Tax (Earnings and Pensions) Act 2003 Section 393B(4).

  • The policy must only pay a lump sum death benefit before the age of 75
  • The benefits must be capital in nature and not deemed income
  • The employer can’t specify under which conditions the benefits are paid.  The benefits must be paid only  as set out in the policy conditions.
  • The policy mustn’t be capable of having a surrender value.
  • Critical illness, total permanent disability or income protection benefits can’t be included.
  • The benefits must only be paid to an individual or a charity.  Although a trust can be set up to receive the benefits, the trustees must pay these benefits to an individual or a charity.
  • The main purpose of the policy mustn’t be tax avoidance.