Aegon has updated its Relevant Life Plan (RLP), introducing an improved trust and making the plan portable.
As with all RLPs, Aegon’s Relevant Life plan brings the tax advantages in buying life cover that those in big pension schemes enjoy to smaller businesses and to firms that want to provide more life cover for their top people.
One change is added portability. This means the employee can take the plan with them (so avoiding fresh underwriting) when they change employer. The new employer then takes over paying premiums. This feature could also benefit business owners who set up new businesses in future. Alternatively, the employee could continue cover themselves, although in that case the terminal illness benefit falls away.
Another change is that the employer is not automatically a trustee of the discretionary trust that goes with the policy. The reasoning behind this is that delays could arise for very small businesses (e.g. owner managers) if the business owner dies. The company itself would continue, but someone else would need to be appointed and have to complete the necessary paperwork. The invariable delay can be avoided by not having the company as a (corporate) trustee in the first place. Aegon says this feature is unique in the marketplace. The trust form itself has also been redesigned, making it shorter and easier to complete.
Customers can apply for cover online, using Aegon’s business protection menu and there is also an immediate cover facility. The company also has competitive financial underwriting limits, with no financial evidence being required on sums assured up to £2.5m.
What They Say
Protection director John Wilkinson said: “With the portability feature, customers can take their life policy with them if they move company. Should the new employer not want to take the policy on, it could be converted to an ordinary life policy, with no direct link to the employer. They are suitable for small businesses through the employer with group life schemes who have members looking to top up their benefits.”
What We Say
"RLPs are a great way to buy life cover, as they effectively give tax relief on premiums. That facility has long been enjoyed within pension schemes, but RLPs extend that to another group of employees.
"There are limitations, so care has to be exercised both in the design of the plan and in how it is used. Aegon says it has sought counsel’s opinion in designing its plan, but it still makes sense to read all the technical material before setting up a plan. Aegon produces a useful eight page guide that gives the information you need.
"The new changes are relatively minor, but welcome nevertheless. RLPs have not enjoyed the level of sales success they deserve (the industry is still nervous following the withdrawal of tax benefits from the seemingly approved pensions term assurance plans in December 2006) but, for those who qualify, why would you not want to get tax relief on premiums?"