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The  European Court of Justices recently ruled that the pricing of insurance products on the basis of being male or female will not be allowed from 21st December 2012.
The verdict will force changes in the current standard practice across Europe of basing insurance rates on statistics about differing life expectancies.
As a result it is possible that the cost of life cover in the UK may rise in the future.  As a consequence, and taking account of the current fragility of UK consumer confidence, we’re naturally looking for ways to minimise the cost of protection for clients, whilst ensuring they have in place the right cover for their situation.
Although Relevant Life Policies have been around since 2006, it’s only recently that more than one company has developed products to help clients take advantage of the tax efficiency they offer.
A Relevant Life Policy is a tax efficient way of providing death in service benefits for your employees and  it helps provide some financial security for their beneficiaries.
As company directors can also qualify for this arrangement, they too can help to protect the future financial security of their loved ones this way.
Relevant Life Policies have a number of potential benefits:
1. Providing death in service benefits for employees can inadvertently create potential tax problems for those high earners with substantial pension funds – any life cover paid out in a ‘lump sum’ from a company death in service scheme will be included as part of the deceased employee’s lifetime allowance at that time. If this benefit takes them over the current lifetime allowance threshold of £1.8m (tax year 2010/11), a tax charge of 55% may be applied to the excess. This lifetime allowance threshold will reduce to £1.5m in the tax year 2012/13 – a Relevant Life Policy could help mitigate the effects of the lower lifetime allowance threshold from tax year 2012/13.
2. Some company directors may have trouble getting access to a group scheme as they’re considered to have too few employees – a Relevant Life Policy taken out on each of their employees individually could provide the valuable death in service benefits they want for their staff.
3. As the company pays the policy premiums, they are usually considered as an allowable deduction and are not treated as a benefit in kind so:
• – As the policy premiums are treated as a business expense they are likely to be an allowable deduction against Corporation Tax
•  – There is no liability for National Insurance for employers or employees on the policy premiums
•  – There is no liability for employees to pay Income Tax on the policy premiums
•  – The life cover benefits are paid free tax free to the nominated beneficiaries
•  – The death in service benefits do not form part of an individual’s annual or lifetime allowance.
So, taking out a Relevant Life Policy could be a tax efficient solution to provide valuable death in service benefits for individual employees where the number of employees is too low for a company group scheme or, for those who may require more life cover than the main Company scheme provides.
Please remember that tax treatment depends on individual circumstances and may change in the future.

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