Pension Practitioner
The SSAS Experts

Relevant Life Plans tax saving

A Relevant Life Plan is insurance for a Director or employee  in case of death in service.  It’s a plan paid into by the employer, which is designed to pay a lump sum if the employee dies or is diagnosed with a terminal illness.

Relevant Life Plans take advantage of pension legislation from A Day in 2006 and because of the way the life insurance was set up under trust and because the limited company paid for the policy no benefit-in-kind issues affected the employee or director.

“Very few people have heard of the plan, so the uptake of the policy is very small compared to the number of people who could benefit and save”

Who should consider these policies?

Directors wishing to provide their own individual ‘death in service’ benefits without taking out a scheme for all employees

High-earning employees where ‘death in service’ does not form part of their ‘lifetime allowance’ (1.25 Million 2014/15)

Who shouldn’t?

Relevant life plans are not available where there isn’t an employer-to-employee relationship. For example: sole traders, equity partners of a partnership or equity members of a Limited Liability Partnership

To whom are these relevant life policies aimed at?

The majority of company directors have some personal life insurance. But nearly all of these are paying for their life insurance either personally through pre-taxed income or through their company and getting a P11D benefit-in-kind penalty for this. Up until recent years, getting the limited company to pay for personal life insurance was only possible for companies that took group life insurance, often these type of policies were only possible for companies wishing to insure 10 or more employees.

“A higher-rate taxpayer can save 49 per cent by paying for their personal life insurance via a relevant life plan. For a basic-rate tax payer the saving is around 36 per cent”

How much cover can you have?

Like a traditional death in service policy, the sum assured with a relevant life policy is also based on a multiple of remuneration. For a company director the definition of remuneration is based on salary plus dividends plus bonuses etc. The multiples vary from provider to provider and depend on the age of the director being insured. These range from 10 times remuneration to 25 times remuneration

Overview of the Benefits

Directors of limited companies can enjoy valuable tax benefits if the premiums for life insurance are paid for by your company instead of from personal income after tax.  You could make up to nearly 50% tax savings

The premiums are a tax deductible business expense and there isn’t any National Insurance contributions payable. This is a tax efficient way of arranging life cover for you as the director and or your employees and offset the cost as a business expense

Cash lump sum payment for terminal illness as well as death

On payout, the cash lump sum is not subject to Income Tax or Inheritance Tax

The level of Cover   won’t affect you or your employees Lifetime Allowance (1.25 Million 2014/15)

Who offers the policy?

You can obtain more information on the providers of these contracts via David Nicklin our SSAS Consultant. David as well as providing guidance and solutions to our SSAS Trustees is also a specialist in the provision of business protection advice to Limited Company Directors  with Sapphire Financial Solutions Limited who are an Appointed Representative of Network Direct Limited who are authorised and are regulated  by the Financial Conduct Authority.

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