Royal London was founded in 1861 by Joseph Degge and Henry Ridge to help secure its members finances. Today they are the largest mutual life, pensions and investment company in the UK with offices in London, Wilmslow, Edinburgh, Bath, Glasgow and Dublin. In 2000, Royal London acquired the United Assurance Group for £1.6 billion and the following year Scottish life was also acquired. In 2013, 2 million new customers were brought in and £20 million in assets under management when the Cooperative’s Life & Pensions and Asset Management businesses were sold to Royal London. They currently have over 3,600 employees and manage over £115 billion in funds for their clients.
Royal London is a mutual company which, compared to a public limited company (PLC) which is owned by external shareholders, a mutual company is owned by its members. Because there are no shareholders to pay, this ensures that any profits are either reinvested to gain better levels of service or divided between members.
Executive Income Protection is a protection plan this is owned by the business the employee works for, rather than the individual person that is insured. The employee can benefit from this as they will have a degree of financial safety in case they fall ill or get injured. As for P11D benefits, this does not count so there is no tax liability for the employee.
Executive Income Protection plan payments are very flexible for the business which makes it a more attractive alternative compared to a personal income protection cover plan. The cover will pay out if the insured person falls ill or gets injured and is unable to work. However, unlike a personal plan, the cover is paid to the business rather than directly to the employee. For businesses, this means they can have financial support for the loss of a team member, pay the employee the benefit, or a combination of both.
Currently, plans can cover up to a maximum of 80% of an individual’s gross income (a maximum of £300,000), however as there are lots of different plans they will offer different rates. Speaking to an advisor would help you discuss your best options. National Insurance and pension contributions are options that can be covered under some plans which is useful when the pay-out period runs until retirement age. Any payments made to the insured person will be taxed the same as Pay As You Earn (PAYE) so you will need to take this into consideration when looking at the amount of benefits required. Different pay-out terms can be 2, 3, 5 years or until the age of retirement. Policy terms are a minimum of 5 years and most policies are written to a maximum age of 70.
The two different types of premiums, guaranteed and reviewable. Guaranteed premiums will only change the cost of cover if the amount of benefits is changed for example if you chose the “indexation option”, the premium will change as the Retail Price Index (RPI) increase. Reviewable premiums are subject to change the cost of cover as the initial cost is based on a number of factors over the term of the plan. Assumptions are made from with the information provided when you take out the plan and this gives us the initial premium cost. Often, reviews take place on the anniversary of the benefit start date in question and they happen in 5-year increments after taking out the plan. If these assumptions change after conducting the review, the premium rates may increase or sometimes decrease and the amount this could change is not limited. Any increases will be fair and reasonable taking each individuals situation into account. If the premium does need to increase, most insurers will write or call you to help explain and discuss the changes around 2 months before the changes are due to take place.
Royal London currently don’t have any Executive Income Protection plans, however if you think an Executive Income Protection plan would be good for you and your business, here at income protection expert we can help to put you in touch with a qualified adviser who can help explain and discuss your options to get you the premiums that will suit you best.