WHAT KIND OF CLIENT CONVERSATIONS ARE YOU HAVING?

Relevant Life

Relevant life covers are a tax efficient way for companies to provide a death in service benefit if they have too few employees to offer a group life scheme. This type of cover doesn’t come under pensions legislation unlike most Group Life schemes. If you have clients who are directors of their own business, who pay for their life cover out of their post-tax income, and have dependants, you could save them up to 49% by using relevant life cover. Relevant life policies must be put in trust to achieve the benefits of tax savings. Trusts are not always the best option so you should seek expert advice.

GET MORE VOLUME

Check your database for clients who are employees or directors of limited companies, partnerships or sole traders. If they haven’t got life cover already, talk to them about the benefits of relevant life. And if they do have life cover, discuss the potential savings you can offer them with relevant life cover.

GET MORE VALUE

Once you’ve sold your client on the benefits of relevant life cover, the next step is to show them how it can sit alongside a traditional benefits package for other key employees.

BUILD LIFETIME ENGAGEMENT

Use relevant life policies with your high net worth and pensions and investments clients to work alongside their current investments – or if your client base doesn’t look like that, network with professional connections and work alongside them to show the benefits of relevant life cover.

CASE STUDY

Lou has a small design business, Harlow Designs Ltd, specialising in framed prints for the home and office. She makes £2.00 profit on every frame she sells and she is a higher rate tax payer. Lou is a single mum to 5 year old Archie.

LOU'S PROTECTION NEEDS

Lou’s £500,000 life cover costs her £500 a year. £500 net for Lou’s cover costs the company £981 – Lou pays the £500 premium through her business from her post-tax earnings. In this scenario, we show how a relevant life policy could help Lou save on her cover.

HOW CAN A RELEVANT LIFE PLAN HELP?

If Harlow Designs Ltd pays the £500 premium, the cover can be written under a relevant life policy:

  Personal life policy Relevant life policy
Annual Premium £500 £500
Employee's national insurance at 2% £17 £0
Income tax at 40% £345 £0
Employer's national insurance 13.8% £119 £0
Net cost to company £981 £500
Less Corporation tax relief at 19% £186 £95
Grand Total £795 £405
A total saving of
49% or £390
(that’s 192 fewer frames that Lou has to sell)
Based on current tax rates for 2018/2019.

Conversation Tips

  • Ask your client if they want to save up to 49% on their life cover… Ok, that’s not a new angle but it’s a very powerful one! If you have clients in your existing database who are company directors and they're paying for their life cover from their own post-tax earnings, you could save them up to 49%.

  • Talk about an alternative to group life schemes with your small business owner clients.

  • Search your client base for people with high earnings and big pension funds who don’t want their death-in-service benefits to form part of their lifetime allowance.

  • Dividends or bonuses can be included when calculating an overall multiple of earnings for relevant life cover.

  • In most cases the benefits are paid free of inheritance tax – provided they’re payable through a discretionary trust. If you’re having inheritance tax planning conversations with your clients, discuss whether relevant life cover may be right for them.

  • Relevant life policies can be portable too, so if your clients are offering these policies as additional benefits to their employees, there is the possibility to allow the cover to be ported to a new employer.

WHAT NEXT ?

Relevant Life Cover

Read the terms and conditions of our relevant life cover on our adviser extranet

Find out more >

See savings you could offer your client

Relevant life calculator >

Watch our webinar on tax planning with protection insurance

Watch here >

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