A relevant life policy is a single life insurance policy. It only insurance one person or policyholder. It is a death in service benefit policy. The plans are governed by the same rules that deals with group schemes, however as these are non registered and therefore do not fall under the pensions legislation.

Any employee of a business can have a relevant life policy, this also includes the directors. The business can be a limited company, partnership, charity or sole trader. However the policy cannot be used to cover directors or equity partners where they are taxed under schedule D. Salaried partners who are taxed under schedule E can be covered.

A relevant life policy is taken out by the company. The policy covers an employee , normally a director. The policy is written in discretionary trust and any claim made would be paid direct to the insured’s dependants.

Small companies who have too few employees to warrant a group life policy are particularly suited to relevant life plans. In addition high earners who do not want their death in service benefit under a group scheme to form part of their pension life time allowance. Employees who want to top up the benefits they already get from a group scheme could also use this cover.

Premiums are paid for by the employer and are not classed as a P11 D benefit. For a higher rate tax payer this can mean a saving of up to a third. There are no National Insurance issues for either employee or employer. Subject to the company’s accountant/local tax inspector accepting that the premiums are ‘wholly and exclusively for the purpose of trade’ as part of the remuneration of the employee, then they may be relievable as a trading expense.

The relevant life policy has several restrictions: BR> First the policy is limited to a multiplier of the employees pay. This includes basic pay plus dividends, P11 D benefits can also be added in. The amount of the multiplier varies from provider to provider. However we have broken this down in another article that compare relevant life policy providers.

The plan must be set up under trust. Normally a discretionary trust form is used beneficiaries include spouse and family although common law partners can be added. In exceptional circumstances a periodic charge could be levied on any assets in the trust on any of the 10-year anniversaries. For this to happen death would have to take place very close to this anniversary leaving the trustees no time to pay the benefits out. The charge would be a maximum of 6% of the assets in the trust. If the 10-year charge applies then there could also be an exit charge when assets are paid out. In theory this could also be up to 6% if the assets remain in the trust for the next 9-plus years, however assuming benefits are paid out just after the anniversary the charge will be insignificant. It is unlikely that these charges will apply in the vast majority of cases.

The first provider of a relevant life policy was Bright Grey, however due to the significant take up of the cover other providers including Zurich, PruProtect and Scottish Provident have now launched relevant life plans.