2WHAT IS A RELEVANT LIFE POLICY? Defined in Income Tax (Earnings and Pensions) Act 2003WHAT IS A RELEVANT LIFE POLICY?Life cover onlyEmployer sponsoredSingle life assuredNo surrender valuePolicy ends before age 75Benefits in trust created at outset (for an individual or charity)Not part of employees annual pension or lifetime allowanceMain purpose of the policy must not be tax avoidanceRelevant Life Policies are a tax-efficient way of providing death-in-service benefits on an individually variable basis to company directors and other company employees, no matter how small a business is.They are tightly defined in ITEPA 2003, and since the demise of pension term assurance in 2006 have become the favoured way for small employers to provide tax efficient life cover to their staff. Unlike pension term, the premiums do not count towards the annual pension allowance, and payment of the SA cannot impact the lifetime allowance. As well as this they can provide top-up benefits to senior personnel, whereas conventional DIS is normally one size fits all.In essence we are talking about simple life cover with tax advantages.
34.85 million SMEs in the UK THE OPPORTUNITY A great employee benefits package for SMEs with low buying power to provide employee benefitsSMEs that are too small for ‘death in service’ benefitsCompany directors looking to save on taxFlexible cover - reward specified employees or provide variable coverHigh earners – Relevant Life Policies do not count towards Lifetime AllowanceWhich of your corporate clients:Would like to reward their top employees?Would like to be able to offer a benefit to retain their top people?Would like to make their recruitment package more attractive?4.85 million SMEs in the UKA quick reminder about where the opportunity is for RLP.
4WHO ELSE CAN BENEFIT?A Relevant Life Policy is suitable in many situations, not just SMEs looking for life cover or an employee benefits packageCompany directorsDirectors of limited companies can enjoy valuable tax benefits if the premiums for life insurance are paid by one company instead of from personal income after tax.Flexible coverA Relevant Life Policy can provide individually calculated cover levels so are suitable where companies only want to reward several employees or provide variable cover.High earnersThe benefits of Relevant Life Polices do not count towards the current Lifetime Allowance of £1.25 million, above which tax is currently charged at 55% tax (on death).
5BIG BUSINESS BENEFITS FOR SMALL BUSINESSES Relevant Life Policies from VitalityLife allow you the chance to offer your clients a benefits package for their employees.Not only does that help with recruitment and retention but healthy employees are:more engagedtake less time offmore productiveOn top of all that, if your clients take out Vitality Plus or Vitality Optimiser, they can also get cashback (based on how much their employees engage with Vitality).
6VITALITY PLUS AND OPTIMISER CLIENT BENEFITS Tax efficient – a tax deductible business expense and no National Insurance contributionsA great employee benefit for small businesses, life cover and a healthy living rewards programme that can help attract and retain the best peopleMore affordable cover – An upfront discount on the protection premium of between 5 – 20% for fixed term cover with Vitality OptimiserYour clients could receive up to £100 cashback each year with Vitality Plus or Vitality Optimiser depending on how much their employees engage with VitalityFitter, healthier, more engaged employees that take less time off and are more productiveAvailable to companies of all sizes on an individual basisCan be used as a ‘top-up’ to death in service benefitClients can save nearly 50% tax (compared to an ordinary Life Policy) when they take out a Relevant Life Policy with VitalityLife.
7BENEFITS FOR YOUR CLIENTS EMPLOYEES Cash lump sum payment for terminal illness as well as deathReward your client’s employees with our healthy living rewards programmeAccess to a range of discounts and rewards to encourage your client’s employees to look after their healthTax efficient – no National Insurance contributionsOn payout, the cash lump sum is not subject to Income Tax or Inheritance Tax. If they leave the company, we’ll make it easy for them to take the policy with them, so they can ensure their cover continuesIt doesn’t count as a retirement benefit so won’t affect their Lifetime Pension Allowance
8Discounts and Rewards with VitalityLife Monthly costUpfront discountCashback for employer each yearPremium discount for employer each yearDiscounts and savings for employeesAdditional rewards for employees including 50% off monthly gym fees and a cinema ticket every weekHealthier, fitter, more engaged and more productive employeesVitality Optimiser£3.30*Vitality Plus£4.50*VitalityFREECommentary about how all three versions of Vitality allow you to overcome the main hurdle in a commoditised market such as RLP: price.NOTE – V+ premium discounts – how explain this.*prices applicable from 1st February 2015
9Vitality: incentivising behavioural change Reward and discount partnersVitality Plus and Vitality Optimiser partners
10Tax saving exampleThis slide clearly demonstrates the savings that can be made.This example is for illustrative purposes only and is based on VitalityLife’s understanding of the law and HM Revenue & Customs practice as at December 2014.
11Relevant Life Policy in contrast Death in ServicePersonal CoverVariable cover per life assuredYNMinimum members15Individual applicationsEmployer sponsored employee benefitTax efficient employer/employeeOnline applicationMedical free limitsIn summary of this comparison:For companies large enough and willing to fund the substantially higher costs of DIS, such a scheme may have the sole advantage of a free cover limits. In reality with the average company employing just 5 people in the UK, many enterprises are ineligible for a formal DIS arrangement.
12THREE CONTINUATION OPTIONS All without further underwriting…Replacement policy - replace with a personal protection policy (if not yet reached 65th birthday)Corporate - taken over by new employer (no age limit)Personal - personally take over the policy on the same terms and conditions (no age limit)Finally, probably the most frequently requested improvement. We now have a choice of 3 options should a individual leave service of their sponsoring employer.The first is our existing option: the leaver can take out a new policy with no further underwriting provided the level of cover remains the same. They can also add extra covers such as SIC and get access to Vitality if they wish. Premiums are charged at their current age.Corporate continuation: when an employee leaves one employer to go to a new employer and wants to take RLP with them. We can help the employers facilitate this (effectively a change of trustee from one to the other and new DDI form).Personal continuation : when an employee leaves employer and either goes it alone or new employer doesn’t offer RLP. This option allows them to continue the plan on as simple life cover and no age-rating of premiums.In reality, the exercise of continuation options is very low, but we are aware that competitors were raising it as an objection with advisers so this removes that obstacle.
13DOCUMENTATION Mandatory requirements Application and trust form RecommendedAppointment of additional trusteesExpression of wishes documentScotland only:Relative size of market for each needWe are unable to go on risk until a fully completed trust form has been sent to us.
14SOME THINGS YOU NEED TO KNOW… ‘Remuneration’ defined as:SalaryBonusesDividends; andP11d benefitsEligible - if ‘Schedule E’ taxpayerAn employee of a:Sole traderPartnershipLLPLimited companyA shareholding director employed by a limited companyIneligible - if not ‘Schedule E’ taxpayerA sole traderAn equity partnerAn LLP memberOur underwriting income multiples are based on total remuneration not just on salary. This approach allows significant family benefits to be provided that are in excess of the normal salary multiples provided by death in service schemeEligibilityIt is important to understand who and who cannot have an RLP. It is important that the individual is on the payroll of a company and taxed through PAYE. Those who are self employed or taxed as, like partners, do not qualify.
15OUR STREGTHS Online application and editable trusts Indexation option availableHigh cover limits – up to 15 or 20 times remuneration (dependent on age)Three continuation options, all without further underwritingTax savings calculatorAvelo Exchange, Assureweb & Webline portalsLarge case underwriting assistanceLocal and specialist support
16Our Relevant Life Policy literature and tools RLP Tax Saving CalculatorVitality for Business pitchbookRLP with Vitality technical articleRLP FAQsRLP pitchbookRLP client sales aidRLP tax-saving sales aidRLP letter templatesRLP Adviser and Client GuidesBusiness Protection client sales aidRLP application formVitality Calculator
17Editable trust documents Across our entire range trusts, we’ve launched editable pdfs and this is the RLP variant. The Business Trust, Discretionary trust and Absolute Trust as well as other related forms will all now be editable.This has the benefit of providing a professional and always legibly finished document, which also offers detailed completion guidance notes by hovering over certain areas. The changes can be saved – if anyone has issues, ask them to check they are using a recent version of Adobe(NB. They will still have to print, sign and send – THEY CANNOT SCAN.)