Relevant Life Policy: case study

We were approached by a company, as their Managing Director was about to cease membership of their firm-wide death in service scheme. He had passed the retirement age of the scheme, but was not intending on retiring soon.

As he was not intending to retire, the company wanted to provide him with the same level of life cover that he was entitled to under the death in service scheme. For various reasons, he was not able to simply re-join the death in service scheme as a discretionary member, and the company weren’t prepared to increase the retirement age of said scheme. 

When asked if there was anything we could recommend for them in this instance, we suggested the company could take out a Relevant Life Policy for the director, until he intended to retire, at age 75, for the same level of cover he had under the death in service scheme. 

A Relevant Life Policy provided several advantages for both the company and the Managing Director: 

  • The benefit won’t form part of the employee’s lifetime pension allowance.
  • The premiums paid won’t form part of the employee’s annual allowance (the amount that can be contributed by, or on behalf of, an individual to any registered pension scheme with the benefit of tax relief). Therefore, the employee is still able to make full use of their annual allowance to make contributions to a registered pension scheme.
  • Premiums paid by employers are not normally assessable for employer or employee National Insurance contributions.

This policy is set up using a discretionary trust, which means the benefits should be free of inheritance tax and do not form part of the employee's estate. 

Within these plans, the company is the 'owner' of the plan, and the individual is the 'life assured'. Due to the age of the client, and the sum assured, there was a requirement by the insurer for medical underwriting. Once this was completed, the plan was placed at risk, and the director now has life cover until his 75th birthday. 

For more details on Relevant Life Policies, please don't hesitate to contact a member of our team.