Relevant life policy Employee pays premium from salary

January 5, 2018 | Author: Anonymous | Category: Social Science, Law, Labor Law
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Relevant life policies Sales opportunity

Relevant life policies – qualifying rules Income Tax (Earnings and Pensions) Act 2003 •

Life cover only



Single life assured



Benefits to an individual or a charity



Placed in relevant life policy trust from outset



No surrender value



Policy must end before age 75



Main purpose of the policy must not be tax avoidance

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Employee benefits • Pensions







– auto enrolment Protection benefits – group life/death in service – group critical illness – group income protection Health care benefits – group private medical insurance – health cash plans – employee assistance programme Flexible benefits / salary sacrifice – cycle to work – employee discounts – childcare vouchers – technology

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Why a relevant life policy instead of group life?

Advantages

• • • • • • •

No minimum scheme numbers High max coverage amount Tailored to individuals Attraction, reward, retention High net worth market Annual/Lifetime Pension Allowance More tax efficient for employer

• Individual application and trusts form

Disadvantages

• Individual underwriting – no salary exemptions

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Relevant life policies A tax-efficient way of arranging life cover for employees Employer • Premiums paid by employer are a deductible business expense • Premiums not assessable for National Insurance Contributions Employee • Premiums paid by employer are not a benefit in kind and so no income tax for employee • Benefits paid free of income tax • Benefit is free of inheritance tax (not part of employee’s estate due to a trust) • Does not form part of the employee’s annual or lifetime pension allowance

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Relevant life policies in practice Option A: Ordinary life cover policy

Option B: Relevant life policy

Employee pays premium from salary

Employer pays the premium

Cost to employee Monthly premium Employee national insurance Employee income tax Gross earnings needed

£600 £105.88 £176.47 £882.35

Cost to employee Premium Employee national insurance Employee income tax

£0 £0 £0

Cost to employer Premium Employer national insurance contribution

£121.76

Cost to employer Premium Total national insurance (on gross pay)

Total gross cost

£1004.11

Total cost to employer & employee

£600

Less corporation tax

£200.82

Less corporation tax

£120

Total cost

£803.29

Total cost

£0

£600 £0

£480.00

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Online tools

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What are the barriers? Business owners • Lack of awareness • Lack of concern • Cost Advisers • Lack of awareness • Low priority • Out of practice • Complexity and time • Low collaboration Product • Price • Indexation • Continuation • Online portal restrictions 8

Qualification for a relevant life policy Eligible for a relevant life policy • An employee of a: – Sole trader – Partnership – LLP – Limited company • A shareholding director of a limited company Not eligible for a relevant life policy • A sole trader • An equity partner • An LLP member • A contractor

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Opportunities • How many SMEs do you see that are not eligible for group life? • Which of your 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?

• How would you market relevant life policies?

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Thank you

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