THE HOME OF THE

PROFESSIONAL ADVISER

Relevant Life Plans – Put Life Cover On Expenses

Legal & General

RELEVANT LIFE PLAN.

PUT LIFE COVER ON EXPENSES.

This is not a consumer advertisement. It is intended for professional use only

and should not be relied upon by private individuals or any other persons.

1Understand consumer awareness levels of Relevant Life Plans.

2Understand the criteria for a relevant life plan and how these policies are structured in a tax efficient manner.

3Identify the target market and eligible customers who are able to benefit from a Relevant Life Plan.

4Understand the potential savings a customer can achieve through writing a Relevant Life Plan.

5Identify the opportunities for writing Relevant Life Plans and the potential additional opportunities for these customers.

3

LEARNING OUTCOMES.

4

BUSINESS PROTECTION.

Pension Schemes

Relevant Life Plans

Group Income protection

Employee Benefits

Auto-Enrolment

Group Life

Protect the Business

Key people, loan protection & share holders

Share ProtectionOn the death of a business owner the policy proceeds are paid to the remaining owners to buy the share of the business from the deceased's estate.

Key Person - Business Loan Protection The policy proceeds are used to help pay off any outstanding loans the business may have..

Key Person - Profit Protection The policy proceeds are paid directly to the business to be used to help replace a Key Person and help cover the loss of profits that may occur. The policy proceeds could help the business to continue trading.

5

BUSINESS PROTECTION.

Relevant Life Plan A tax efficient single life Death in Service benefit for employees or Directors of a business. The policy proceeds are paid to the Trustees (employer) and the benefit is written under Trust for the life assured’s beneficiaries.

6

THE ESTIMATED BUSINESS PROTECTION GAP.

Source: Legal & General SME research, January 2013

£223 billion - Corporate debt

£683 billion - Shareholder protection

£439 billion - Key person cover

7

KEY PERSON.

Source: Legal & General SME research, January 2013

8

TYPES OF CORPORATE DEBT.

Source: Legal & General SME research, January 2013

9

WHAT WOULD HAPPEN IF ONE OF THE BUSINESS OWNERS DIED?

Shareholders would buy the shares continues to grow – up from 28% in 2009

Source: Legal & General SME research, January 2013

ADD VIDEO ONTO THIS PAGE

11

QUESTION?

When dealing with your commercial clients do you include Business Protection?

1 Always – it’s essential for a business to consider this

2 Most of the time as businesses should be protected

3 Following this session I will now

4 This is not an area of the market I deal with

12

RELEVANT LIFE PLAN

Source: Legal & General SME research, January 2013

Just 37% have ever heard of a Relevant Life Plan.

13

A single life assurance policy which provides ‘death in service’ benefits for an individual to a maximum

age of 75.

It’s designed to provide a lump sum benefit payable either on death or the diagnosis of a terminal illness of an employee during their employment, within the

length of the plan.

WHAT IS A RELEVANT LIFE PLAN?

• Provides a Death benefit .

• No other benefits (other than Terminal Illness during employment).

• The policy must cease before age 75.

• No surrender value to the policy.

• The benefits are payable to an individual or charity (or a trustee for an individual or charity)

• Tax avoidance is not the main purpose

• Provisions set out in ITEPA 2003, Part 6, Chapter 2 and sections 481 and 482 of ITTOIA 2005 – (Queen’s Counsel’s Opinion)

14

THE CRITERIA FOR A RELEVANT LIFE PLAN.

15

ELIGIBILITY.

Eligible to be a life assured:

• Employees (including directors)

• “Salaried partners”

Not eligible to be a life assured:

• Equity partners• Members of an Limited Liability Partnership• Sole traders

16

HOW IT WORKS.

Company

Insures employee

Relevant Life Plan in trust

Trustees make a successful claim

Pay out to individual or charity

Employee dies during the term

or is diagnosed with a terminal illness (except in the last 12 months of the plan)

• Premiums will not be a benefit in kind/ taxable remuneration for the individual employee.

• The lump sum benefits are paid free of income tax and do not count towards the individual’s pension lifetime allowance.

• Any premiums paid do not count towards the individual’s annual pension allowance.

• The benefits are written under a discretionary trust and should be free from Inheritance Tax.

17

WHY ARE THEY TAX EFFICIENT?

We recommend you contact your local inspector of taxes before deciding if the premiums may qualify as a deductible business expense.

COMPARING THE COST OF A LIFE POLICY TO A RELEVANT LIFE PLAN.

•  

•  

18

NON-RELEVANT LIFE PLAN POLICY

Premium £1,000 PA

Employee tax

National Insurance contribution (assuming 2%)

£34.48

Income Tax (assuming 40%)

£689.65

Employer tax

National Insurance contribution

(assuming 13.8%)

£237.93

Less Corporation Tax (assuming 20%)

- £392.41

Total cost £1,569.65

RELEVANT LIFE PLAN

£1,000 PA

-

-

-

- £200*

£800

A saving of £769.95, which is a saving of almost 50%.

* Any employer that wishes to treat Relevant Life Plan premiums for its directors, or employees, as an allowable business expense, must seek advice and clarification from its local inspector of taxes, either directly or via its accountant. This example is fictitious and provided for illustration purposes.

RELEVANT LIFE PLAN.

SALES OPPORTUNITIES.

IDENTIFYING SALES OPPORTUNITIES.

20

More business owners are looking for tax efficient ways to protect themselves and their business.

• Directors wanting personal life cover, tax efficiently• Businesses with small numbers of employees who are not eligible

for a group life scheme • Key individuals – employee benefit• Death in service schemes where benefits based on salary only.• High earning individuals - Pension Fund liquidity• Professional connections - working with accountants.

A Relevant Life Plan (RLP) is an easy way to start discussions which could then lead to other business protection opportunities.

21

RELEVANT LIFE PLAN.

LEGAL & GENERAL’S PLAN.

FEATURES, BENEFITS AND OPTIONS.

• Term assurance (1 year to 40 year term)

• Policy must end before 75th birthday

• Life Cover and Terminal Illness Cover only

• Indexation (RPI – 1% to 10%)

• Guaranteed Insurability Options

• Option to continue cover on leaving employment*

• Monthly or annual premiums

• RLP Discretionary trust

• Reviewed by Queen’s Counsel

22

* Terms and conditions apply.

AMOUNT OF COVER.

h

Maximum cover available:

• Age 17 to 49  - up to 25 x remuneration  • Age 50 to 59  - up to 20 x remuneration  • Age 60 to 73  - up to 15 x remuneration

Remuneration includes salary, bonuses, benefits in kind and regular dividends from shares in the employer’s company or company within the employer’s group of companies.

Evidence of earnings:

• Not required until benefit exceeds £3.5 million.

23

Family protection cover - Aim is to provide a lump sum to replace the lost income.

WHAT IF THE INDIVIDUAL LEAVES SERVICE,OR THE BUSINESS IS SOLD?

•  

•  

There is an option to continue the policy on a “personal basis” with the individual paying the premiums themselves, subject to:

• The individual exercising this option within 30 days of leaving service. • There would be no additional medical information required.

• The original premium would remain the same as the original premium.

• The original level of cover and term of the plan must be maintained.

• Some forms would be required to change the paying Bank Account and

also to change the Trustees of the Trust.

24

25

QUESTION?

Are Relevant Life Plans an area of business you include in discussion with your commercial clients?

1 Always – it’s essential for a business to consider this

2 Most of the time as businesses should be protected

3 Following this session I will now

4 This is not an area of the market I deal with

SUPPORT FROM LEGAL & GENERAL.

27

Business protection website - www.legalandgeneral.com/business

SUPPORT FROM LEGAL & GENERAL.

28

Business protection website - www.legalandgeneral.com/business

SUPPORT FROM LEGAL & GENERAL.

Best Business Protection

Provider

Technical trainingWorkshopsWebinars

• Business Protection online application

• Business Protection website including

- Business Protection Fact find

- Online calculators

- Marketing and seminar support material

- Technical guides

- Relevant Life Plans

• Client facing and claimant videos

29

QUESTION?

Would you be interested in further training or materials relating to the Business Protection market?

1 I am already active in this market and do not require

2 I would like additional training to help develop in this area

3 I would like additional support to move into this market in the future

4 This is not an area of the market I deal with

Relevant Life Plans

Put Life Cover on Expenses

Learning outcomes

• Understand consumer awareness levels of Relevant Life Plans.• Understand the criteria for a relevant life plan and how these policies

are structured in a tax efficient manner.• Identify the target market and eligible customers who are able to benefit

from a Relevant Life Plan. • Understand the potential savings a customer can achieve through

writing a Relevant Life Plan.• Identify the opportunities for writing Relevant Life Plans and the

potential additional opportunities for these customers.

Thank you for your time – Legal & General