How relevant life plans can help future-proof your business

UK inflation is higher than it has been for decades, with some predicting it could hit 18 per cent. Markets are jittery and people are conserving their funds. All of this has an impact on investment values and consequently on advice fees.

So what can you do, as a financial adviser, to recoup your losses? Preferably something that adds value, protects clients and might help you reduce costs.

RLPs are a valuable extra benefit that can be used alongside, or instead of, a group life insurance scheme. 

One thing you might consider is setting up relevant life plans (RLPs). These are particularly useful for clients with small limited companies who often pay for their life insurance directly from their net income. 

A small limited company can pay life insurance directly, and, if it is set up correctly, a relevant life plan can be very tax-efficient and reduce the overall costs to both companies and their directors. 

What is an RLP?      

An RLP is an insurance policy that a business can take out to provide life insurance for an individual employee, including employed directors. In this way, RLPs allow employers to provide all their employees with tax-efficient death-in-service benefits.

They can be particularly attractive for high-earning employees or directors who have substantial pension funds and who do not want their benefits to form part of their pensions lifetime allowance.

RLPs comply with all the relevant life insurance legislation, which makes them tax-efficient for the employee, their beneficiaries and the business.

The primary purpose of the RLP is to provide a benefit on death before the age of 75. However, other benefits in respect of ill-health, disablement and death by accident may also be payable if the life assured is still in employment.

The policy is applied and paid for by the business and is written into trust from the outset. It pays out a lump sum to the employee if they are diagnosed with a terminal illness while employed during the policy term – or to their beneficiaries if they die.

RLPs comply with all the relevant life insurance legislation, which makes them tax-efficient for the employee, their beneficiaries and the business. This makes RLPs a valuable extra benefit that can be used alongside, or instead of, a group life insurance scheme. 

How does a plan qualify as an RLP?

RLPs benefit from favourable tax treatment. However, to qualify as an RLP, certain conditions must be satisfied, as follows: