We were approached by a company whose 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.
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 the scheme.
We were asked if there was anything we could recommend in this instance. Our recommendation to the company was to take out a relevant life policy to age 75 for when the Managing Director intended to retire. This provided the same level of cover he had under the Death-in-Service scheme.
A relevant life policy had a number of advantages for 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). So 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.
- The 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.
In regards to 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 on risk, and the Managing Director now has life cover until he turns 75.
For more details on Relevant Life Policies, please don't hesitate to contact a member of our team.