Overview
Protecting loved ones financially is a priority for many high-earning professionals. However, how that protection is structured can have a significant impact on both the overall cost and tax efficiency.
We were introduced to a successful limited company director by one of our longstanding introducers. The client wanted to ensure their family would be financially protected in the event of their unexpected death. They were looking for a solution that would provide security for their spouse and children without placing undue strain on personal finances.
This case demonstrates how a Relevant Life Policy can deliver both comprehensive life cover and substantial tax benefits for company directors.
Client Profile
The client, who we had recently assisted with arranging a mortgage for a new main residence, had a high income and substantial lifestyle costs to consider. These included childcare, private education fees, and other family-related expenses, all of which they were keen to safeguard.
The Challenge
Following a detailed income and expenditure review, we determined that a £3.5 million life assurance policy over a 10-year term would meet the client’s needs. This amount would ensure that their family could maintain their current lifestyle and manage key expenses, including education, in the event of the client’s death.
The 10-year term was selected carefully to coincide with the period during which their youngest child would remain in secondary education. This approach ensured the client was not over-insured beyond the point at which the need for cover would naturally reduce.
However, securing this level of cover through a conventional personal policy would have been costly, as premiums would be paid from the client’s post-tax income.
Our Solution: Relevant Life Policy
By reviewing the client’s corporate structure, we identified a more efficient option. We arranged a Relevant Life Policy through their limited company, allowing premiums to be treated as a business expense. This not only removed the personal financial burden but also ensured that the policy had no impact on their annual or lifetime pension allowances. This solution was possible by working closely with the client’s tax adviser to find the most tax-efficient solution.
To enhance protection further, we arranged for the policy to be placed into trust, ensuring that the proceeds would be paid quickly and directly to their chosen beneficiaries without delays or additional tax implications.
The result was a comprehensive £3.5 million level term policy, set over 10 years, that met the client’s objectives. Most notably, by using a Relevant Life Policy rather than a personal plan, the client saved approximately 53 percent on premiums over the policy term. This represented a total saving of more than £41,000.
The Outcome
The client was extremely satisfied with the outcome. They were able to secure a high-value life assurance policy that fully protected their family while also unlocking significant tax savings through efficient structuring.
At Henry Dannell, we specialise in designing tax-efficient protection strategies that align with each client’s personal and business circumstances. In this case, we delivered more than just life cover. We provided peace of mind, financial security, and a significant cost saving that will benefit the client and their family for years to come.
This is a case study and not indicative of typical results. Past performance is not necessarily representative of future results. This information is for general purposes only and does not constitute financial advice. Please seek professional advice before making any financial decisions.
Please note: these plans have no cash in value at any time and will cease at the end of the term. If premiums are not maintained, then cover will lapse.
