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Introducing Relevant Life Policies

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Presentation on theme: "Introducing Relevant Life Policies"— Presentation transcript:

1 Introducing Relevant Life Policies

2 WHAT IS A RELEVANT LIFE POLICY?
Defined in Income Tax (Earnings and Pensions) Act 2003 WHAT IS A RELEVANT LIFE POLICY? Life cover only Employer sponsored Single life assured No surrender value Policy ends before age 75 Benefits in trust created at outset (for an individual or charity) Not part of employees annual pension or lifetime allowance Main purpose of the policy must not be tax avoidance Relevant 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.

3 4.85 million SMEs in the UK THE OPPORTUNITY
A great employee benefits package for SMEs with low buying power to provide employee benefits SMEs that are too small for ‘death in service’ benefits Company directors looking to save on tax Flexible cover - reward specified employees or provide variable cover High earners – Relevant Life Policies do not count towards Lifetime Allowance Which 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 UK A quick reminder about where the opportunity is for RLP.

4 WHO ELSE CAN BENEFIT? A Relevant Life Policy is suitable in many situations, not just SMEs looking for life cover or an employee benefits package Company directors Directors 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 cover A 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 earners The 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).

5 BIG 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 engaged take less time off more productive On 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).

6 VITALITY PLUS AND OPTIMISER CLIENT BENEFITS
Tax efficient – a tax deductible business expense and no National Insurance contributions A great employee benefit for small businesses, life cover and a healthy living rewards programme that can help attract and retain the best people More affordable cover – An upfront discount on the protection premium of between 5 – 20% for fixed term cover with Vitality Optimiser Your clients could receive up to £100 cashback each year with Vitality Plus or Vitality Optimiser depending on how much their employees engage with Vitality Fitter, healthier, more engaged employees that take less time off and are more productive Available to companies of all sizes on an individual basis Can be used as a ‘top-up’ to death in service benefit Clients can save nearly 50% tax (compared to an ordinary Life Policy) when they take out a Relevant Life Policy with VitalityLife.

7 BENEFITS FOR YOUR CLIENTS EMPLOYEES
Cash lump sum payment for terminal illness as well as death Reward your client’s employees with our healthy living rewards programme Access to a range of discounts and rewards to encourage your client’s employees to look after their health Tax efficient – no National Insurance contributions On 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 continues It doesn’t count as a retirement benefit so won’t affect their Lifetime Pension Allowance

8 Discounts and Rewards with VitalityLife
Monthly cost Upfront discount Cashback for employer each year Premium discount for employer each year Discounts and savings for employees Additional rewards for employees including 50% off monthly gym fees and a cinema ticket every week Healthier, fitter, more engaged and more productive employees Vitality Optimiser £3.30* Vitality Plus £4.50* Vitality FREE Commentary 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

9 Vitality: incentivising behavioural change
Reward and discount partners Vitality Plus and Vitality Optimiser partners

10 Tax saving example This 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.

11 Relevant Life Policy in contrast
Death in Service Personal Cover Variable cover per life assured Y N Minimum members 1 5 Individual applications Employer sponsored employee benefit Tax efficient employer/employee Online application Medical free limits In 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.

12 THREE 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.

13 DOCUMENTATION Mandatory requirements Application and trust form
Recommended Appointment of additional trustees Expression of wishes document Scotland only: Relative size of market for each need We are unable to go on risk until a fully completed trust form has been sent to us.

14 SOME THINGS YOU NEED TO KNOW…
‘Remuneration’ defined as: Salary Bonuses Dividends; and P11d benefits Eligible - if ‘Schedule E’ taxpayer An employee of a: Sole trader Partnership LLP Limited company A shareholding director employed by a limited company Ineligible - if not ‘Schedule E’ taxpayer A sole trader An equity partner An LLP member Our 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 scheme Eligibility It 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.

15 OUR STREGTHS Online application and editable trusts
Indexation option available High cover limits – up to 15 or 20 times remuneration (dependent on age) Three continuation options, all without further underwriting Tax savings calculator Avelo Exchange, Assureweb & Webline portals Large case underwriting assistance Local and specialist support

16 Our Relevant Life Policy literature and tools
RLP Tax Saving Calculator Vitality for Business pitchbook RLP with Vitality technical article RLP FAQs RLP pitchbook RLP client sales aid RLP tax-saving sales aid RLP letter templates RLP Adviser and Client Guides Business Protection client sales aid RLP application form Vitality Calculator

17 Editable 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.)

18 Thank you


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