How business owners can help provide for their employees

It’s rare we talk specifically about products, but this is an occasion that could be of interest to many smaller companies.

Many employers establish schemes that encourage employee loyalty and one of the most popular of these is Death in Service cover. Unfortunately, due to this type of arrangement being targeted at employers with high employee numbers, companies with fewer employees have frequently not considered establishing cover; but things have changed.

The Relevant Life Plan (RLP) was introduced to the market a few years ago and is now offered by a number of product providers. Put simply, RLP is a term assurance policy that is taken out by an employer on behalf of an individual employee and is paid for by the business. The employee is insured for a fixed amount that is paid out as a lump sum in the event of their death during the term of the policy. It is placed into a specially designed trust, much the same as Death in Service cover.

The costs associated with a RLP are treated as an allowable business expense, so they technically qualify for Corporation Tax relief. Under current legislation there is no Income Tax or National Insurance to pay by the employee, because the premiums payable are not treated as a Benefit in Kind. If the costs are paid by the employer and a conventional life assurance policy is used, the premiums would be treated as a benefit in kind and subject to Income Tax (via P11D benefits) at the employee’s marginal rate of tax, plus National Insurance.

An additional benefit of RLP is that the sum assured doesn’t form part of the lifetime allowance for pensions, whereas the benefits from a Death in Service arrangement usually would be, so a RLP could be of particular benefit if the employee already has significant existing pension benefits in place.

So if you are a director and/or an employee of a small limited company, there could be significant cost savings by taking out life cover in this way.

Contact your accountant or Financial Planning Consultant at any of our 15 office locations for further assistance.

If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletter


Get in touch

To find out more about how we can help you or your business, call us on 0808 144 5575 and speak to a member of our team. Alternatively use our contact form to send us a message or arrange a callback.

CALL 0808 144 5575


Contact Us

All content © 2015 Armstrong Watson. All Rights Reserved. Website by Simon Pighills.

Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Armstrong Watson Accountants, Business & Financial Advisers is a trading style of Armstrong Watson LLP. Armstrong Watson LLP is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.

Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales No. 8800970. Registered office: 15 Victoria Place, Carlisle, CA1 1EW

Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 542122. Registered as a limited company in England and Wales No. 7208672. Armstrong Watson Financial Planning & Wealth Management is a trading name of Armstrong Watson Financial Planning Limited. Registered Office: 15 Victoria Place, Carlisle, CA1 1EW