Providing the right package of benefits to team members is a vital part of any business's financial planning, both for the continuity of the business and the protection/retention of staff and profits. Benefits can be combined or selected individually, almost like a 'menu' proposition, to meet the needs of the business. We have listed some examples of the options below:
Death in Service Benefits
When consulting with employers about pensions and their plans to cater for staff needs/package benefits, one cost effective option that is often proffered is Death In Service cover. This can be a highly effective way of providing team members with additional valued cover at, usually, a marginal cost to the employer. Usually focussing on as an example 3X or 4X base salary as a benefit, the company can arrange group cover for the whole team (subject to minimum numbers), often with minimal underwriting.
Permanent Health Insurance (PHI)
A policy which provides replacement income of usually up to 50% of the employee's net income in the event of inability to work due to ill health.
This type of plan is arranged to pay an agreed level of income in the event of inability to work due to ill health until a fixed age (say 60-65 as examples) after a waiting /deferred period (benefit will only be paid after this time). The waiting period (selected at outset) is usually 4-8-13-26-52 weeks and the longer the waiting period the lower the premium paid per month. You can also build other options into this type of plan, such as protection against the effects of inflation, as one example.
The benefit allows the employer to protect the employee whilst unable to work due to ill health, without being a significant drain on the business profits.
Critical Illness Protection (CIP) *(see taxation below)
Critical Illness cover should be seen as a complement to Permanent Health Insurance rather than an alternative because they work in different ways. If you decide only to take one type of cover then speak to your Independent Financial Adviser (IFA) or Chapters Financial Limited about the differences of each type of plan and your requirements.
A Critical Illness policy (CIP) pays a lump sum (usually after a period of 28 days from diagnosis) on diagnosis of a critical illness. The 'devil can be in the detail' in this type of plan on the conditions that are covered. In our experience, the existing older plans see broader definitions and this can make these types of plan valuable. You will usually set an end date for the cover (again this maybe 60-65) and a sum assured, the lump sum you would like to receive, in the event of diagnosis of a critical illness.
Company Private Medical Insurance (PMI)
A protection arrangement for the directors/partners and employees of a company/practice to go towards the cost of medical expense in the event of medical attention or need.
Some employers offer this to their staff part of their benefits package and this is a taxable benefit in kind if received. The plans usually have an 'excess' level, an amount that you have to pay before the policy will, and this can vary. The higher the excess will usually see the lower initial premium paid.
*Taxation of Premiums & Benefits
To allow the premiums for these policies to be an allowable expense, it is sensible to gain confirmation from your inspector of taxes before you proceed. The benefits are usually treated as a trading receipt.
As Chapters Financial Limited knows, each company requires individual solutions. Contact us to discuss your needs.
Please note that this is for guidance only and we recommend that you seek further advice from an Independent Financial Adviser before proceeding further. The Financial Conduct Authority does not regulate taxation advice.