Advice led products still lead the way with corporate clients
The Relevant Life Plan market continues to grow, even with the introduction of new providers over the past few years. Yet most business owners are still not aware they exist, or the benefits they can offer.
Legal & General’s latest research identified that almost two-thirds of business owners had never heard of Relevant Life Plans and with over 4.8 million SME’s in the UK*, most of which employ up to 10 people, there’s plenty of opportunity to spread the word.
Relevant Life Plans are simply an individual life policy that provides a death benefit during service, up to a maximum age of 75. They can provide peace of mind in a tax efficient way for employees, including company directors.
More and more business owners are looking for ways to save money and a Relevant Life Plan can be the means of providing life cover for their family, with an estimated saving of up to almost 50% against a typical family protection plan.
So why haven’t more business owners heard of them?
Well Relevant Life Plans need to be set up correctly to meet the legislation requirements and therefore the benefits of having a financial adviser are invaluable. If the policy is not set up correctly there is a risk that the policy would not qualify for the tax advantages it can otherwise boast. There is also a requirement that the policy must be written under trust and most clients would benefit from guidance in this area.
A great advantage for advisers?
With Relevant Life Plans you can be rest assured that your client will not be able to seek out the latest money comparison website and compare prices against your advice to see if they can get it cheaper online. Nor will they be able to buy them at the supermarket like many life products. Some adviser firms may be offering quotes for Relevant Life Plans online, and these can be sold over the telephone but still involve the client completing their own application and trust forms. This could lead to the plan being set up incorrectly and as a leading product provider we still recommend and endorse the need for advice for your client.
A note of caution
With domestic protection we all know that putting a policy in trust is very beneficial and is a sound financial practice for all the reasons we know which, can be best summed up by getting the right money in the right hands at the right time. But these family protection policies will operate quite happily without being put in trust or having one added later on. The big difference with business protection and especially Relevant Life Plans, is that these polices cannot exist without having the correct trust in place.
A growing common trend is to set up a Relevant Life Plan and add the trust later to speed up the time to get the policies live, but in this busy world is there a risk that these trust forms will get forgotten. If this was to happen the consequences could be very dramatic for the company in the event of a claim. If no trust was in place then the proceeds of the policy would be payable to the company and not the beneficiaries, who would potentially have to treat this as a trading receipt and pay tax on. In addition they would have to deal with their employee’s beneficiaries who would be expecting a level of benefits which have not materialised.
We would always recommend that advisers complete all the trust and legal work to make sure that polices are set up correctly, and that they will solve the issue that has been identified, rather than creating a new one. This is another important part of having sound advice from an adviser. Not only can this result in referral business when dealing with trustees, but unlike online trusts, it ensures the adviser can guide the client through the completion process, thereby making sure they are correctly set up.
Relevant Life Plan - expanding the Business Protection Market
The benefits of a Relevant Life Plan can be an effective conversation starter with corporate clients and once an adviser has created a relationship with a business, through discussions about these products, he can then explore other areas of business risk and the need for financial planning such as key person profit protection, business loan protection and share ownership protection. For more information on Legal & General’s Relevant Life Plan, or our other Business Protection products, please visit our dedicated website www.legalandgeneral.com/business or speak to your usual Legal & General contact.