Can you save money on protecting your family?

Date : 28 Mar 2019
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posted By : eff_admin

If the unexpected was to happen, and you were no longer on this earth, can you imagine the financial impact that would have your family’s future security?

For this reason, the majority of company directors have in place some form of personal life insurance. After all, this is just common sense. The dependents of that person need to be able to pay off the mortgage, pay for all the necessities, put food on the table as well maybe make some significant changes to a very different future life. Let’s be honest, life insurance of one form or another is not the most fun you will have with your money, so if you can save as much as 51% of the cost by using tax breaks, that can only be a good thing.

A recent client of ours, Richard, who was the director of his own company, was paying for his insurance out of his taxed income. Whilst he knew that insurance was an important part of his financial planning strategy, he felt that the expense was escalating and costing him too much.

Thankfully, the introduction of Relevant Life Policy enabled him to save money. Richard was a higher-rate taxpayer and his premium was costing him £100 per month. However, by moving his policy to a Relevant Life Plan, he was able to pay the premiums out of out of his pre-taxed income and save £49 per month.

Even if Richard had been a basic-rate taxpayer the saving is still significant, at around 36 per cent.

On the whole, Relevant Life Policies will mostly benefit directors who want to provide their own individual ‘death in service’ benefits without taking out a scheme for all employees. Another major benefit of these types of contracts though is that the policy does not count towards their lifetime allowance for pensions, so this can also be a benefit for high earning employees too. Lump sum payments from a registered pension scheme would be included in this pot, and amounts in excess of the lifetime allowance are taxed at 55%, however, Relevant Life Policies are not included so higher earners in particular will benefit.
The final piece of good news, is that Relevant Life is being offered by a range of providers, so prices are becoming increasingly competitive- even more savings for you and your business!

If you feel that you may be spending too much on life insurance, and would like to explore the ways in which you could save some tax whilst safeguarding your future, Smith Hodge & Baxter partner with Efficient Portfolio who would be delighted to discuss your situations and form a strategy for you and your business. Call 01572 898060, email hello@efficientportfolio.co.uk, or contact our office and….