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Relevant Life Cover

Relevant Life Cover high earner case study

The case study below is designed to illustrate some practical advantages offered by our Relevant Life Cover and potential tax savings. It shows how this policy could help your clients, but please note that this is an example only and is not based on a real company.

Andy

Andy High-earning employee

Miller Property Group

Andy has a substantial pension pot (£1 million) but wants an additional £800,000 life insurance policy with any proceeds paid to his wife, Sally.

Sally

Sally
Andy’s next of kin

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The company takes out three separate Relevant Life Cover policies on the lives of Amanda, Mark and Sam and placed into discretionary trust.

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  1. One of the employees, Sam, is involved in an accident and dies.
  2. Sam’s family makes a claim under the Relevant Life Cover policy.
  3. The money is used to clear the business loan.
  4. LV= pay the proceeds to the trustees.
  5. The trustees pay the beneficiaries (Sam’s family) the proceeds.
  6. Because the policy was written in trust, inheritance tax doesn’t apply.

Background

Andy Taylor is employed as a managing director of a property development company and has £1m saved in his pension pot. He’s 44 and married to Sally, together they have three young children. He’s very active and enjoys playing 5-a-side football and running around looking after his children.

Whilst Andy is healthy, he worries about what would happen to Sally and the children financially if something were to happen to him.

Relevent Life Cover solution

As a tax efficient solution, his financial adviser recommends his company takes out LV= Relevant Life Cover with £800,000 of cover written in trust, nominating Sally as a beneficiary. So, if Andy died (or was diagnosed with a terminal illness) during the term, the trustees of his Relevant Life Cover would receive £800,000. This would then be paid, tax-free to Sally, giving her enough money to pay off the remaining mortgage on the family home and hopefully live free from financial worry. And although Andy has a substantial pension pot of £1million, the £800,000 payment wouldn’t count towards his personal allowance. This means his family could receive all the money they were entitled to.

Costs breakdown

This is how the costs and possible savings would work compared to personal Life Insurance.

To who

Cost type

Personal - Life Insurance (from net salary)

Relevant Life Cover

Cost to Andy

Monthly Premium

£98.32

£ N/A

Employee National Insurance Contribution

£3.39

£ N/A

Employee Income Tax

£67.81

£ N/A

Cost to the company

Monthly Premium

£ N/A

£98.32

Employer National Insurance Contribution

£23.39

£ N/A

Total Gross Cost

£192.91

£98.32

Less Corporation Tax Relief

£38.58

£19.66

Tax adjusted Total Cost

£154.33

£78.66

Total saving with a LV= Relevant Life Cover Plan

£75.67

A saving of

49%

These figures are for illustrative purposes only. Tax calculations are based on 2016/2017 tax rules and may change in the future. The information assumes that the same rate of income tax/national insurance applies to the whole of the premium. It may be affected by individual circumstances.

Relevant life cover

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Suggests cover amount and demonstrates the savings your client could make compared to a personal life insurance policy.

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