What Are The Benefits Of Relevant Life Insurance?

I’ve newly set up my limited company. I’m now looking into Life Insurance for company directors to replicate what I used to have in my previous employed role.

I’ve come across Relevant Life Cover in my research. However, I’m not quite sure what the benefits of it are. Could you please explain?

Question asked by Richard Banks
29/03/2023

Of course. There are many benefits to a Relevant Life Insurance policy. These mostly all centre on how tax-efficient the cover is. This allows for significant tax savings over a personal plan.

As you mentioned, company directors commonly use Relevant Life Insurance. It’s also available to contractors and other eligible workers.

When a limited company or other eligible entity, for example a charity, takes out Relevant Life Insurance for an employee, it is:

  • A business expense for corporation tax.
  • Free from income tax.
  • Free from employer and employee national insurance.

Furthermore, the policy is automatically set up in trust. This means the payout also bypasses your estate. There’s therefore no inheritance tax to pay.

One more benefit is that payouts are typically not included in pension lifetime allowance calculations. High earners with large pension pots therefore face less risk that their company Life Insurance will tip them over the edge of their pension lifetime allowance.

The Tax Savings

The above tax savings — laid out in the table — mean you can save almost 50% on Relevant Life Cover compared to a personal policy once the tax relief is taken into account.

Personal Life Cover
Relevant Life Cover
Cost to Individual
Monthly Premium
£100.00
£0.00
Employee NI Contribution
£3.45
£0.00
Income Tax
£68.97
£0.00
Cost to Business
Premium
£0.00
£100.00
Employer NI Contributions
£23.79
£0.00
Gross Cost
£196.21
£100.000
Corporation Tax
-£37.28
-£19.00
Total Cost
£158.93
£81.00
Total Savings

49.03%

IMPORTANT NOTICE 🧐
As of the Spring Budget 2023, the UK chancellor announced the abolition of the pension lifetime allowance (LTA). This will take effect from 6 April 2023.

It’s important to note however, the Labour party have announced that if they were to be elected the allowance may be reintroduced in the future. If this occurs, we will update our records to reflect any changes. The information on this page is based on the LTA pre 6 April 2023.

Compare Top 10 UK Providers

Takes approx. 60 seconds
  • £
Verified by Norton Symantec icon
 Or Call Us

Frequently Asked Questions

Contact Us

Head Office & Pensions and Investments
Senator House
85 Queen Victoria Street
London
EC4V 4AB
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
Brighton
BN1 6AF
Drewberry London Office MapDrewberry Brighton Office Map

If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is www.financial-ombudsman.org.uk.

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.