Relevant Life For financial advisers only

Agenda 1.What is relevant life? 2.Target market 3.Legislation 4.Taxation of premiums and benefits 5.Tax saving example 6.Death in service (DIS) registered schemes 7.How to calculate the cover 8.The trust 9.Leaving employment 10.The process 11.Why Aegon?

What is relevant life? A relevant life policy is an employer funded life assurance policy written on the life of an employee and which, provided it meets certain legislative requirements, benefits from favourable tax treatment.

Target market  Certain high earning employees  Small businesses  Members of group life schemes who want to top up benefits

Legislation  A relevant life policy is defined in S393B(4) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)  Tax treatment -Do premiums constitute a taxable benefit in kind? -Are payments in the event of death or terminal illness subject to income tax? -Are gains on the policy subject to income tax under Chapter 9 Part4 ITTOIA 2005 (chargeable event legislation) in the event of a death or terminal illness claim? -Do the payments of the premiums qualify for tax relief?

Legislative requirements  The policy must only provide a lump sum death benefit payable before age 75  No surrender value  Benefits only payable to an individual or a charity  The benefits paid must be capital in nature  The main purpose of the policy must not be tax avoidance  Terminal illness benefit is only payable whilst the employee is in the employment of the employer

Taxation  No P11d benefit for employee  No NIC on employee or employer  Corporation tax relief/Income tax relief on employer premiums  No tax implications for employer or employee on payment of death or terminal illness benefit A relevant life policy attracts beneficial tax treatment when compared to an ordinary life policy which the employer funds on behalf of an employee.

Tax saving example – 20% Assuming monthly premium of £1,000, 20% taxpayer and corporation tax relief at 20% Non-relevantRelevantLife Cost of premiums1,0001,000 PAYE Employee NICs Employer NICs Tax relief for employer (335) (200) Total cost£1,339 £800

Tax saving example – 40% Assuming monthly premium of £1,000, 40% taxpayer and corporation tax relief at 20% Non-relevantRelevantLife Cost of premiums1,0001,000 PAYE Employee NICs 34 - Employer NICs Tax relief for employer (392) (200) Total cost£1,570 £800

Tax saving example – 45% Assuming monthly premium of £1,000, 45% taxpayer and corporation tax relief at 20% Non-relevantRelevantLife Cost of premiums1,0001,000 PAYE Employee NICs 38 - Employer NICs Tax relief for employer (429) (200) Total cost£1,718 £800

Death in service (DIS) registered scheme Advantages Company pays No P11D charge or NICs Normally corporation tax relief Generally tax free benefits under trust Free underwriting Current/Group costing Disadvantages Not available for small companies Not available on a single life Inflexible Pension scheme rules Lifetime allowance trap

Relevant life versus Death in service (DIS) registered scheme Relevant LifeDeath in Service registered scheme Company pays No P11D charge or NICs Normally corporation tax relief Generally tax free benefits under trust Available for small companies  Available on a single life  No lifetime allowance trap  Not subject to pensions scheme rules  Flexible 

How to calculate the cover There are no limits to the level of cover set out in legislation. Up to age 2925 times salary Ages 30 – 4520 times salary Ages 46 – 5515 times salary Age 56 and over10 times salary

The trust  Our ‘Declaration of trust for a relevant life policy’ is a discretionary trust  The trustees have powers to appoint the trust fund to anyone within the class of discretionary beneficiaries, which also includes the employee  The employee is included as a beneficiary, so that the policy can be assigned to them in the event that they leave the employment of the employer  Our trust is flexible – the employer can choose not to be trustee

Leaving employment There are three options 1.The employee could choose to let the policy lapse 2.The life policy could be maintained by the employee personally. However, under the terms of the policy, the terminal illness cover will terminate. 3.The employee’s new employer could pay the premiums

The process  Business protection quote on portals or direct to us  Quote for level, increasing or decreasing life protection  Business protection menu application form  Separate plan/application for each life  Underwriting  Relevant life policy discretionary trust

Why Aegon?  Protection specialists  Multiples of cover  Financial underwriting limits  Redesigned trust form – shorter/easier to complete  Terminal illness  Portability  Large sum assured (LSA) experience  Immediate cover facility (ICF)  Counsel Opinion

Support from us  Supporting information and documentation on our websitewebsite  Business protection toolkit/online -  Business protection underwriting helpline -Ask to speak to a large sum assured underwriter

Important information This communication is for financial advisers only. It mustn’t be distributed to, or relied on by, customers. This information is based on our understanding of current legislation, taxation law and HM Revenue & Customs practice, which may change. The value of any tax relief depends on the individual circumstances of the investor. Scottish Equitable plc provides pure protection. Benefits are only payable in the event of a valid claim during the chosen term. In the absence of a claim there’s no cash value. Full details are contained in the policy conditions – please ask if you’d like a copy.

20 Thank you Contact name Contact details Aegon is a brand name of Scottish Equitable plc. Scottish Equitable plc, registered office: Edinburgh Park, Edinburgh EH12 9SE. Registered in Scotland (No ). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number An Aegon company. © 2013 Aegon UK aegon.co.uk