Director RLP
A relevant life plan arranged by the company for a company director. The most common structure. Funded by company premiums, paid into a discretionary trust on death.
A relevant life plan is a death-in-service benefit arranged by an employer for an individual employee or director. Premiums are paid by the company, and when structured correctly, they can be a tax-efficient way to provide life cover outside of a registered pension scheme.
Important: Relevant life plans must meet HMRC requirements to qualify for tax relief. The policy must be written in a suitable discretionary trust. Tax treatment depends on individual circumstances and is subject to change. Always seek independent advice from a qualified tax consultant and your solicitor before proceeding.
A relevant life plan is a specific type of employer-arranged life assurance. Its structure is prescribed by HMRC to qualify for the available tax treatment. Not sure what you need? Take our free 2-minute protection review.
The company arranges the policy on the employee's or director's life. The employer is the policyholder and pays the premiums from company funds.
Premiums are paid by the company and may be treated as a deductible business expense. Subject to HMRC requirements being met, premiums should not be treated as a benefit-in-kind for the employee. Professional tax advice should confirm this for each arrangement.
The policy must be written in a suitable discretionary trust. On death, the payout is made to the trust, not directly to the estate, and distributed to beneficiaries by the trustees. This keeps the proceeds outside the estate for inheritance tax purposes and enables faster payment without waiting for probate.
Because a relevant life plan sits outside a registered pension scheme, the payout does not count against the individual's pension annual allowance. It provides a separate life cover facility funded by the employer.
Relevant life plans are particularly well-suited to certain individuals and business structures.
Small businesses that do not qualify for group life insurance schemes, which typically require a minimum number of employees, can arrange individual relevant life plans for each director or key employee.
For individuals who want significant life cover funded by their employer without the payout affecting any pension arrangements, a relevant life plan is a distinct and separate vehicle.
Funding life cover through a relevant life plan rather than paying the individual a salary to fund personal premiums can be more cost-effective, subject to HMRC requirements being met and professional advice being taken.
A sole director of a limited company may be able to arrange a relevant life plan for themselves, provided they are employed by the company. This is a commonly used arrangement but requires careful setup and professional advice.
We compare relevant life plan products from all major providers to find the most appropriate cover at a competitive cost.
A relevant life plan arranged by the company for a company director. The most common structure. Funded by company premiums, paid into a discretionary trust on death.
A relevant life plan arranged for a key employee rather than a director. Forms part of a competitive benefits package and provides individual death-in-service cover outside a group scheme.
A relevant life plan for a sole director of a limited company who is employed by that company. Requires careful structuring to meet HMRC requirements. Professional advice is essential.
All relevant life plans must be written in a suitable discretionary trust to qualify for the available tax treatment. We ensure the policy and trust are properly structured and documented.
A fixed sum assured throughout the policy term. Provides certainty of the death benefit from day one. Suitable where the life cover need remains consistent over the policy term.
The sum assured increases each year, typically in line with inflation or a fixed percentage. Helps ensure the real value of the cover is maintained over a long policy term.
A relevant life plan can be arranged for any employee, including company directors who are also employees of their own company. The individual must be employed by the company arranging the plan. It is not available to partners in traditional partnerships or sole traders. HMRC rules set out the eligibility criteria and the policy must meet specific conditions to qualify for the available tax treatment.
Premiums paid by the employer may be treated as a deductible business expense and, subject to HMRC requirements being met, should not constitute a benefit-in-kind for the employee. This means neither the company nor the individual pays tax on the premiums in the same way they might with other forms of company-funded benefit. However, the tax treatment depends on individual circumstances and professional tax advice should be obtained.
When the policy is written in a suitable discretionary trust, the proceeds are paid to the trust rather than to the individual's estate. This means they should fall outside the estate for inheritance tax purposes. The trust can then distribute the funds to beneficiaries, typically the employee's family, without the proceeds forming part of the taxable estate. Legal advice should confirm the trust structure is appropriate.
A relevant life plan sits outside a registered pension scheme. The policy and its payout do not count against the individual's pension annual allowance. This can make it a useful vehicle for high earners who want significant employer-funded life cover without using pension allowances. The pension lifetime allowance was abolished in April 2024, but relevant life plans retain their own specific advantages and structure.
A relevant life plan must be written in a discretionary trust that meets HMRC's specific requirements for these policies. The insurer will typically provide a suitable trust deed. The trust should be properly established with appropriate trustees and a letter of wishes setting out how the policyholder would like the funds distributed. Legal advice should be sought to ensure the trust is properly constituted.
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