Simply put, a Relevant Life Policy (RLP) is a convenient and alternative way to set up life cover for your employees (including directors) in a tax efficient manner.
What is a Relevant Life Policy?
The RLP is designed to pay a lump sum to the employees’ family if the person covered dies or is diagnosed with a terminal illness during their employment with you.
These plans are proven to be useful not only for employees, but also to business owners & high-earning individuals as the RLP is a tax-efficient alternative in the event where typical death-in-service arrangements may form part of their pension Lifetime Allowance.
What are the Benefits of a Relevant Life Policy?
One of the key differences between a RLP and the more common personal protection policy, is the tax treatment of premiums.
As the policy will be owned by the employer, no income tax or national insurance liabilities arise so long as the premium is incurred ‘wholly and exclusively for the purposed of trade’, and the business may be able to claim corporation tax relief on the premium.
Whilst RLPs are owned by the business’ who take out the policies, the benefits paid on death are distributed through a ‘Relevant Life Policy Trust’ to the family of those impacted.
Some key benefits of a workplace RLP include:
- RLP’s do not form part of the settlor’s estate and are free from inheritance tax
- Tax-efficient vs personal policies
- Covers your entire workforce and also benefits high-earning individuals & business owners
- Ideal for SMEs with a low number of employees
The plans are also life assured, which means that the policy holder will be able to nominate trustees who decide on who the benefits of the trust are paid to in the event of an accident at work. The settlor will also be able to nominate beneficiaries of the policy, although the trustees will ultimately decide on who the proceeds would be distributed to. This will not form part of the settlor’s estate and will be free from inheritance tax.