What Is a Relevant Life Plan?
A Relevant Life Plan (RLP) is a type of individual life assurance policy taken out by an employer on the life of an employee. The employer pays the premiums, and on the employee's death the benefit is paid, via a discretionary trust, to the employee's dependants.
Despite being employer-funded and employment-linked, an RLP is not a registered occupational pension scheme. This distinction matters enormously from a tax perspective, as discussed below.
RLPs are most commonly used by company directors — particularly those running their own limited companies — who do not have access to group death-in-service benefits through a larger employer and want a tax-efficient way to arrange personal life assurance.
The legal basis for Relevant Life Plans sits within the Income Tax (Earnings and Pensions) Act 2003, and the arrangement must meet HMRC's conditions to benefit from the tax treatment described here. Rules in this area are subject to change, and readers should take independent advice to confirm the current position applies to their circumstances.
The Tax Advantages of a Relevant Life Plan
The RLP's tax efficiency operates at several levels:
1. Corporation Tax Deductibility
The company pays the premiums. Provided the arrangement meets HMRC's conditions — primarily that it is a genuine employer-employee relationship, not a personal benefit in disguise, and that the arrangement is wholly and exclusively for business purposes — the premiums are deductible against the company's corporation tax liability.
At the current corporation tax rate of 25% (for companies with profits above £250,000), this means every £1 of premium effectively costs the company 75p after tax relief. For a smaller company paying 19%, the premium costs 81p in real terms.
2. Not a Benefit in Kind
Ordinarily, employer-paid life assurance would be treated as a benefit in kind, reported on a P11D, and subject to income tax and National Insurance for the employee. Premiums paid for a Relevant Life Plan are specifically exempt from P11D treatment.
This means the employee receives the benefit of employer-funded life assurance without any personal tax cost.
3. Proceeds Outside the Estate
The death benefit is held in a discretionary trust and paid to the beneficiaries outside the employee's estate. Properly structured, the proceeds are free of inheritance tax.
Compare this to personally-paid life assurance not held in trust: the proceeds would land in the estate and could be subject to inheritance tax at 40% before reaching the family.
4. No Interaction with the Pension Annual Allowance
Before 2023, a significant advantage of RLPs was that the death benefit did not count against the pension lifetime allowance, unlike group life death-in-service benefits registered under a pension scheme. The pension lifetime allowance was abolished with effect from April 2024, making this comparison less relevant in practice.
However, the absence of any pension-related cap or registration still matters in the broader planning picture, particularly for clients using offshore pension arrangements or with complex cross-border pension positions.
Who Can Use a Relevant Life Plan?
The arrangement must genuinely involve an employer-employee relationship. The employee must receive a salary — pure dividend-only remuneration does not qualify.
Company directors who pay themselves a salary — even a modest one, as many owner-directors do — generally meet this test. HMRC confirms that working directors qualify as employees for this purpose.
Sole traders and partners in unincorporated businesses cannot use an RLP because there is no separate employing entity. A limited liability partnership (LLP) may qualify in some circumstances, but specialist advice is required.
There must be a genuine employment relationship. HMRC may challenge arrangements where the only purpose appears to be securing the tax treatment, particularly where the "employer" has no real commercial activity and exists solely to pay RLP premiums.
Comparison with Group Death-in-Service
Scale and Portability
Group life assurance — the death-in-service benefit provided through a registered group scheme — becomes more cost-effective at scale. For companies with twenty or more employees, group rates per £1 of cover typically undercut individual Relevant Life Plan rates.
However, group life cover is tied to employment. When an employee leaves the company, their group life cover ceases (subject to any continuation options). An RLP is an individual policy — it does not automatically lapse on leaving the employer, though the tax treatment may change if the individual continues paying personally rather than through a company.
Registered Schemes and Annual Allowance
Group life schemes registered under a pension trust can sometimes generate very large death-in-service benefits that interact with annual allowance calculations for very high earners. RLPs, being outside registered pension arrangements, avoid this complication.
Excepted Group Life
For high earners who have maxed pension contributions and for whom group life death-in-service might cause annual allowance complications, excepted group life schemes or Relevant Life Plans are the usual alternatives. The right structure depends on the precise numbers and should be modelled with an adviser.
How a Relevant Life Plan Works in Practice
Step 1 — Application: The company (as employer and policyholder) applies to an insurer for a policy on the director's or employee's life. The application follows standard underwriting processes — medical history, financial evidence of salary.
Step 2 — Trust establishment: As a condition of the tax treatment, the policy must be held in a discretionary trust from inception. The company establishes a trust, with the employees and their dependants as the class of beneficiaries. Trustees are appointed — typically the company directors plus, ideally, an independent trustee.
Step 3 — Premium payment: The company pays premiums from its bank account. These are treated as a business expense.
Step 4 — On death: The insurer pays the death benefit to the trustees. The trustees administer the trust and distribute to the family as per their discretion and any letter of wishes left by the employee.
Sum Assured and Policy Term
There is no HMRC-imposed maximum for RLP benefits, unlike the former lifetime allowance restrictions. The sum assured is typically set at a multiple of salary — commonly four to fifteen times salary — commensurate with the individual's financial obligations.
The policy runs to a maximum age, typically 75 in most current insurer products, and expires if the individual is no longer an employee of the company.
Critical illness benefit can also be added to an RLP, though the tax treatment for CI benefits is less clear-cut and specific advice should be sought.
Key Providers
Several major UK insurers offer Relevant Life Plans as a distinct product:
- Zurich — long-established in the RLP market, competitive rates for non-smokers
- Legal & General — strong digital underwriting capability, competitive pricing
- Vitality — underwriting discounts for health-positive behaviours
- Royal London — mutual insurer, known for policyholder-focused approach
- Aviva — broad medical evidence acceptance, wide distribution
- AIG Life — specialist in higher sum assured and complex cases
Providers differ in underwriting philosophy, maximum ages, acceptance of occupational and travel risk, and pricing. A whole-of-market adviser can identify the most appropriate insurer for a specific individual's profile.
What Happens When the Director Leaves the Company?
If the director-employee leaves the company or the company ceases to trade, the company stops paying premiums. At this point:
- The policy may lapse if no further premiums are paid
- The individual may be able to take over premium payment personally — but this removes the corporation tax deductibility and P11D exemption
- Some insurers offer a continuation option at the point of leaving employment
Planning for business succession and ownership changes is important in the context of any employer-funded protection policy. This is particularly relevant for shareholder protection and business continuation planning, which should run alongside any Relevant Life Plan.
Compliance Notes
This guide reflects the position as of June 2026. Tax legislation and HMRC guidance change regularly, and the conditions for Relevant Life Plan tax treatment are not trivially met. Readers should not rely on this guide as tax advice. An employer establishing an RLP should confirm the current HMRC position with a qualified tax adviser or specialist protection adviser before proceeding.
How Global Investments Can Help
Global Investments advises owner-directors and senior employees of privately held businesses on protection planning that makes full use of available tax structures.
We can model the after-tax cost of a Relevant Life Plan versus personally-paid life assurance, compare RLP options across the market, and guide you through the trust setup process. For directors with complex structures — including multiple shareholdings, international operations, or offshore employment — we have experience navigating the interplay between UK tax rules and cross-border arrangements.
Contact our business protection team to discuss whether a Relevant Life Plan is appropriate for your company structure and personal protection needs.
This guide is for information only and does not constitute tax, legal or financial advice. Tax treatment depends on individual circumstances and is subject to change. Always seek qualified professional advice.
This guide is for general information only and does not constitute financial or insurance advice. Policy terms, premium rates, and insurer eligibility criteria change — always verify current terms with a qualified independent adviser before taking out any policy.