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.

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