Net relevant life policies
Written on 10/08/2018

Legislation targeting employee benefit trusts has been introduced, but Net Relevant Life has not changed.

A relevant life policy is a term assurance policy taken out by an employer on the life of an employee. Premiums are paid for by the employer.

The purpose must be to give a benefit on death before age 75, if tax exemptions are to be retained.

Relevant life policies benefit from tax relief because they provide 'excluded benefits', and the features must include the following:

  • No surrender value
  • A lump sum on death before the age of 75
  • Benefit must be paid to an individual – life offices will provide a discretionary trust so that the benefits can then go to heirs.
  • The main purpose of the policy must not be tax avoidance – as ever there is a general anti-avoidance rule.
  • If ill health benefit is included, this can apply only during employment. If a plan fails to qualify then tax is due on the premiums.

The benefits include:

  • Tax relief on the premiums for the employer
  • Does not affect Annual Allowance for registered pensions.
  • No National Insurance Benefits do not count towards the employee's pension Lifetime Allowance.
  • Death benefit normally arise free of inheritance tax.

So get out there now and sell more life insurance. The IFA industry has been hooked on the 1% for too long. It is time to look at some of the benefits of life insurance planning through companies. These plans can only be used by employers who are applying for a new plan on the life of an employee. The term 'employee' does not include a partner in a partnership, a member of an LLP or a sole trader.

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