Key Features of Relevant Life Insurance Policies

In today’s competitive business landscape, companies are constantly seeking innovative ways to attract and retain valuable employees. One financial strategy that has grown in popularity among UK businesses is relevant life insurance . This type of policy offers a unique blend of benefits for both employers and employees, making it a worthwhile consideration for many organisations. But what exactly are the key features of relevant life insurance policies, and why are they becoming a critical part of business benefit packages? In this article, we explore these features in detail and explain their significance for small to medium enterprises (SMEs) across the UK.

Understanding Relevant Life Insurance

Relevant life insurance is a term assurance policy that an employer can take out in favour of an employee, providing a tax-efficient life cover to individuals. Unlike traditional group life insurance plans, relevant life insurance is tailored for smaller companies that are looking to offer competitive benefits without entering into a group scheme. This solution is especially advantageous for companies that have directors or high-earning employees due to its flexibility and tax benefits.

Tax Efficiency

One of the primary draws of relevant life insurance is its tax efficiency. Premiums paid by the employer are typically viewed as a business expense, meaning they are tax-deductible for corporation tax purposes. Additionally, these premiums do not count as a benefit-in-kind, so employees do not face income tax on premiums paid into the scheme. Furthermore, death benefits are generally paid out tax-free, making it an attractive option for both employers and employees looking to maximise financial benefits.

Tailored Cover

Relevant life insurance policies are highly customisable, allowing employers to tailor coverage to suit the specific needs of their employees. Cover can include life insurance and in some cases, critical illness cover, providing comprehensive protection. Policies can be adjusted based on salary multiples or specified financial protections, ensuring that coverage can be as extensive or as minimal as necessary.

Portable Benefits

An essential feature of relevant life insurance is that it is portable, meaning the policy can often be transferred if an employee changes jobs. If an employee were to leave the company, they could potentially continue their cover without interruption by taking over the premium payments themselves, or by having the policy transferred to their new employer. This portability feature enhances the long-term value of the policy for employees and can be an attractive aspect when considering their personal financial planning.

Regulatory Compliance

Relevant life insurance policies also comply with UK regulations concerning employee benefits and life insurance. These policies do not fall under registered group life schemes, therefore they do not count towards the employee’s pension annual allowance or lifetime allowance. This compliance affords peace of mind to employers who can confidently offer these benefits without unintentionally impacting the employee's pension threshold.

Attracting and Retaining Talent

As the business world becomes increasingly competitive, companies consistently seek methods to attract and keep top-tier talent. Offering relevant life insurance can act as an incentive for prospective employees, showcasing the employer’s commitment to their wellbeing and future security. Furthermore, those companies that offer such robust benefits are often seen as favourable places to work, fostering better employee satisfaction and retention rates.