What is a Relevant Life Plan?

A relevant life plan is a tax-efficient life insurance policy designed for employees, including directors, who do not have access to a traditional death-in-service benefit. It serves as an alternative to personal life insurance policies, offering coverage for a specific term or until retirement age.

Benefits of a Relevant Life Plan

Put your life cover on expenses with a relevant life plan and enjoy an array of benefits that are bound to make your life easier:

1. Tax Efficiency: Relevant life plans are highly tax-efficient as premiums are paid by the employer and are generally tax-deductible, which means you can enjoy the benefits without worrying about a hefty tax bill.
2. Comprehensive Cover: With a relevant life plan, you can obtain extensive life cover that includes terminal illness benefits. This means that in the event of a terminal diagnosis, you can receive a lump sum payout to alleviate financial burdens during a challenging time.
3. Flexible Options: Relevant life plans offer flexibility in terms of policy duration and coverage amount. You can customise the plan to suit your individual needs, ensuring that your loved ones are protected adequately.
4. Portability: Unlike traditional life insurance policies, a relevant life plan is not tied to your employment. If you change jobs, you can transfer the policy to your new employer or convert it to a personal policy without losing the coverage you've built up.
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How Does a Relevant Life Plan Work?

A relevant life plan functions similarly to a regular life insurance policy, but with added benefits. Here's a breakdown of how it works:

1. Employer Sets Up the Plan: Your employer initiates the relevant life plan on your behalf. They will be responsible for paying the premiums, making it a cost-effective way for you to obtain life cover.
2. Coverage and Term: You decide the coverage amount and the term of the policy, based on your individual circumstances and needs. The plan can be set up to provide cover until a specific age, such as retirement, or for a set number of years.
3. Beneficiary Designation: You can designate a beneficiary who will receive the payout in the event of your death or terminal illness diagnosis. This ensures that your loved ones are financially protected and can cover expenses during challenging times.
4. Tax Efficiency: As mentioned earlier, relevant life plans offer tax advantages. The premiums are generally tax-deductible, providing you with savings while securing your loved ones' future.
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FAQs: Common Questions About Relevant Life Plans

Q: Can self-employed individuals benefit from a relevant life plan?

A: No, relevant life plans are specifically designed for employees and directors who do not have access to a death-in-service benefit. If you're self-employed, you can explore other life insurance options that suit your needs.

Q: What happens if I change jobs?

A: If you change jobs, you can transfer your relevant life plan to your new employer, as long as they offer this benefit. Alternatively, you can convert the plan to a personal life insurance policy to maintain coverage.

Q: Are relevant life plan payouts taxable?

A: In most cases, relevant life plan payouts are tax-free. However, it's always best to consult with a financial advisor or tax professional to understand the specific implications based on your circumstances.

Q: Can I increase or decrease the coverage amount during the policy term?

A: Yes, if there's a wage increase or a change in circumstances you can increase cover, but there is certain criteria and timescales that need to be met. However, you can review and adjust the coverage amount when renewing the policy if you can't do it through servicing with the insurer.

How much can I save?

• The taxman doesn’t treat premiums paid by the employer as a P11D benefit. For a higher rate taxpayer in a small company this can reduce costs by up to a third
• Neither employee nor employer has to pay National Insurance on the premiums
• So long as the premiums are ‘wholly and exclusively for the purpose of trade’ as part of the employee’s remuneration, they can be treated as a trading expense. Though this could be challenged by HMRC.
• Premiums don’t count as part of the annual allowance for pension tax purposes.
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The following comparison for personal cover vs Relevant Life Plan is based on premiums of £50 a month.