Like most financial advisors we receive a lot of enquiries about “personal life cover” or “term assurance” from our clients. One thing that we find surprising is that we get very few enquiries about “Executive Pension Term Assurance”. This is something that we have always found odd, as there are some major benefits from choosing Executive Pension Term Assurance over Personal Term Assurance.
Why choose Executive Pension Term Assurance?
Firstly a Company Director can take out life cover of up to 4 times their salary and the premiums can be paid by the company. So they are not treated as income in hands of the director, so they are not taxed.
Secondly premiums are normally a tax deductible expense. Under current legislation this means that premiums are tax relievable at the current rate of corporation tax of 12.5%
So a €50 monthly premium would have and effective cost €43.75 and would give the company a corporation tax saving of €6.25
Also most of these policies carry a conversion option, this means that if you choose to leave or sell off the company at a later date you can convert the policy to personal cover without having to provide medical evidence of health, so you don’t lose your life cover.
Finally, the premium is not treated as a benefit in kind in the hands of the director so they do not get penalised for this extra benefit.
Who is Executive Pension Term Assurance Suitable for?
If you are an Employee of a company who pays income tax under schedule E then Executive Pension Term assurance in suitable for you. So basically any employee or director of a company can take out this type of policy.
As Life cover is limited to 4 times your salary this type of policy is particularly beneficial to company directors and executives who are on large salaries and can therefore take insure a larger lump sum.
If you are considering taking out life cover then make sure you talk to an independent financial advisor who can give you a holistic view of your options.