Royal London Relevant Life Plan
Since dropping the Bright Grey and Scottish Provident brands in 2014, Royal London has been able to select the best bits of both brands and present arguably a more coherent protection insurance brand that builds on the legacy of an £84.5bn group that employs almost 3,000 people and is now the largest mutual life, pensions and investment company in the UK.
This plan is a relevant life plan that can last to age 75 and pays out on death or terminal illness. As with other RLPs, the plan is placed into a discretionary trust. RLPs are, in effect, non-registered death-in-service arrangements for employees and must meet the requirements of section 393(B)(4) of the Income Tax Earnings and Pensions Act 2003. As such, premiums should qualify for tax relief.
Benefits can be level or increase each year by a fixed rate or in line with the Retail Price Index (RPI). Cover can also increase (below age 55), without fresh underwriting on marriage/divorce/civil partnership, on a mortgage increase, having or adopting a child and getting an increase in salary. The limit on such events is the lower of 50% of the original cover amount or £200,000 (£50,000 any event).
Premiums can be guaranteed renewable every five or ten years and in some circumstances, free cover can apply before the plan starts. Maximum cover is unlimited but cannot be more than 30 times salary (lives insured up to age 39) down to a still generous 15x cover at age 60 or over. Financial evidence is only needed where the sum insured hits £3.5m (the highest level in the industry Royal London says). The plan can continue as personal cover (with unchanged premiums) after leaving the employer or can be taken over by a new employer.
The plan includes the Helping Hand service – although this is discretionary rather than part of the contract. Royal London lists no less than 16 literature items which can be downloaded from http://adviser.royallondon.com/literature/protection-literature-library/, including useful comparison tables and generic information on RLPs.
Comment: Royal London’s RLP follows the industry pattern, which is simple life cover up to age 75 that will pay out on terminal illness or death. To meet the tight regulations around RLPs to get tax relief on the premiums, the plan cannot be taken out mainly to get that benefit but otherwise the traps for the unwary are not too hidden on RLPs.
As with most term plans, selecting which product to buy is largely a question of what it costs. However, Royal London is a mutual (which some may see as preferable), long-established and the plan includes the Helping Hand service. If you need a particularly large sum insured or want the trust to work in the way Royal London’s does, those can be factors too. We also like the fact that cover can not only continue if the employee leaves the current employer, but the premium continues unaltered and a new employer can take over the cover. The lack of continuation options is a significant consumer detriment on many group risk and insurance plans, yet this plan effectively offers just such an option on the best terms.
The plan does not include the option to add critical illness cover (only one company did offer this when we reviewed this plan in March 2016) but that’s only of interest if that’s what the customer wants.
One minor gripe – Royal London pays interest if it is late in paying out a claim (which is a good thing) but the current interest rate paid is just 0.5% (which is not…).
Otherwise the plan looks likely to feature on many RLP shortlists.
Plus points: Usual RLP benefits with the addition of the Helping Hand service; Good continuation option; High maximum sum insured; Free life cover option in some circumstances; Good literature and adviser help.
Not so plus points: No CI option; Low interest rate paid if claims are paid late; RLPs need care when advising to ensure the valuable tax benefits are achieved.
Website: http://www.royallondon.com.
Rating (max 10): Innovation: 8. Overall: 8. Gold
Tags: Term; Royal London