Companies provide peace of mind to employees, with RLPs
This article explains what a Relevant Life Plan is, when it would be used and by whom. You’ll find this information useful if you’re studying for any of the CII R04, R05, R06 or AF5 exams.
From the October 2015 AF5 Exam
The October 2015 AF5 exam asked a question about a company setting up life cover on behalf of an employee for the benefit of their family.
If this is not done through a group life scheme because the company is too small, for example, then life cover set up in this way is known as a Relevant Life Plan (or relevant life cover). It seems to be something mentioned more and more, not just in the CII world, but also in the real world.
What is a Relevant Life Plan?
A Relevant Life Plan (RLP) is basically a term assurance plan offering a tax efficient way of providing death in service benefits to employees; there has to be an employer/employee relationship so is not available to sole traders, partners or limited liability partnerships.
An RLP is an individual policy with the employer as policyholder and the employee as the life insured. The sum insured, like traditional death in service policies, is set up as a multiple of salary – most providers offer up to 25 times remuneration for younger lives with multiples reducing as age increases. The policy is then written under a discretionary trust meaning money is paid quickly without probate to the correct people whilst also avoiding IHT. On the death of the employee during employment the sum insured is paid to the trustees and this in turn is paid to the named beneficiaries.
The premiums are paid for by the employer and the benefit of that is that they are usually treated as a business expense by HMRC.
As far as the employee is concerned, the benefit paid won’t count towards the pension lifetime allowance and premiums aren’t taxed as a benefit in kind on the employee either.
A Good Solution for Small Business and High Earners
All in all, RLPs are often a good solution for a small business wishing to provide life cover to their employees (and directors) without going to the full expense of operating a group life scheme as well as for higher earning individuals concerned with the pension lifetime allowance.
Grab the resources you need!
If you’re studying for your CII R04 exam, and you’re feeling overwhelmed with worry, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself. Click the link to download the R04 mock exam taster now!
Over to You…
Do you feel this a good way for a small business to provide meaningful benefits to its employees?