Virtual & Holistic Advice Forum

1. Virtual & Holistic Advice Forum The Business Market & Relevant Life Policies

2. Important information This presentation is provided to you by Zurich Intermediary Group in your capacity as a financial services industry professional. It must not be made available or copied or otherwise quoted or referred to in whole or in part in any way, including orally, to any person without our express written permission, which we may, at our absolute discretion, grant or withhold or grant subject to conditions, including conditions as to our responsibility. We accept no duty or responsibility, and we disclaim all liability whether in contract, tort (including negligence) in respect of this material but this sentence does not exclude any liability which by law cannot be excluded.

3. Agenda Why business protection? • Traditional opportunities • Keyperson protection • Shareholder Protection • New opportunities • Relevant life policy trust • Support • Q&A

4. The business protection market

5. The business protection market • At the end of February 2011, there were over 2.6 million registered companies in the UK* • Business Protection gap defined as £1.1 trillion** • Corporate debt gap just under £300bnShareholder protection gap £400bnKey person protection gap £400bn** • 39% of business owners said their businesses would fold within 18 months of the death or critical illness of a key person** Sources * http://www.companieshouse.gov.uk/about/businessRegisterStat.shtml ** http://www.legalandgeneralcomms.co.uk/businessprotection/the-business-protection-gap.html

6. The business protection market • 23.8% Sole Traders • 58.9% Companies • 13.2% Partnerships • 4.1% General Government & Non-profit *Source: http://www.statistics.gov.uk/cci/nugget.asp?id=1238 (Feb 2011)

7. Handset Question 1 Are you already active in the business protection market? • Yes • No

8. Prospecting for business protection • Existing client bank - mortgages, pensions, investments, group risk, general insurance, commercial insurance • Professional connections - accountants, solicitors, business consultants…working together … • New clients - referrals, mailshots / campaigns, seminars • Relevant Life Policies– Door opener …

9. Handset Question 2 Do you already have commercial insurer connections? • Yes • No

10. Handset Question 3 Do you already have professional connections? • Yes • No

11. Relevant Life Policies: technical refresher

12. The legislation • Section 393 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) which defines a relevant life policy in subsection 393(B)(4) • Section 482 IITOIA 2005 • The Zurich Relevant Life Policy satisfies all of the relevant legislation and The Trust has received independent sign-off by counsel

13. How does it work? • Single life policy taken out by the employer to provide death in service benefits for an employee • Company owns the policy and pays the premiums • Written under a Relevant Life Policy Trust for the benefit of nominated beneficiaries • Employee completes Nomination of Beneficiary form

14. How is it written? • Single life • Life only (including terminal illness) • No disability benefits • Must end before age 75 • Trust must be received pre-issue • Max sums assured: 20 x income under age 4015 x income age 40-5910 x income age 60+ • Business can be submitted online with Zurich

15. Relevant Life Policies: the reasons why

16. Who will be interested? • Businesses with too few employees for a Group DIS • Employees who are members of Group DIS based on salary only • High earning employees who wish to take lump sum DIS benefits outside the LTA • Business owners looking for the most tax efficient way to provide family protection

17. Example: Cost to Ali as a Director paying personally Monthly premium = £200.00 Pre-tax Income to fund £200 at Income Tax rate of 40%* and National Insurance at 2%* = £344.83 Cost with employers National Insurance Contributions at 13.8% on this salary = £392.41 Gross Salary and National Insurance are allowable deductions against Corporation Tax at 19%* Total monthly cost to Ali and LBD Ltd Company = £317.85 Ali Ramat a shareholding director currently pays £200 a month for his life assurance. Figures based on HMRC Tax and NI rates applicable as at 06.04.2011

18. Example: continued LBD Ltd pays premiums through a relevant life plan Monthly premium = £200.00 No employee Income Tax or National Insurance No employer National Insurance Relevant life policy is an allowable deduction against corporation tax at 19%* Total Cost to LBD Ltd Company = £162.00 Cost to Ali and LBD Ltd company paying personally = £317.85 Cost to LBD Ltd Company paying through RLPT = £162.00 Saving = £ 153.93 or 49% Figures based on HMRC Tax and NI rates applicable as at 06.04.2011

19. Underwriting

20. No evidence required £1,000,000 Evidence of: earnings, P11d benefits, pensions contributions, dividends etc £1,000,000 + Financial underwriting requirements

21. Underwriting • No 25% loadings • No questions about other provider decisions • Own Doctor medicals • Large Case Team • Underwriting Helpline • Relationship with reassurers • Life of another - Online

23. Key person cover: the need

24. Key person protection? Anyone whose loss, either permanent or temporary, would affect the company’s ability to maintain turnover and generate profits.

25. Key person protection • Provides time and space to re-organise • Decreases unwanted attention from creditors Risk and cash flow Provides funds to: Underpin profits Enables business to recruit and train a replacement Support cash flow Maintain value of business/shareholding

26. Business liabilities • Directors’ Loan Accounts- Must be repaid on death • Business Loans- Banks may call in the loan on the death of a key person- Directors may have given personal guarantees • Overdrafts- recalled / reduced / reviewed by the bank • Redundancy costs- staff working for the key person / PA / administrators

27. Tax treatment of premiums and benefits

28. Tax treatment of premiums Anderson Guidelines; Set out in 1944 by Sir John Anderson, Chancellor of the Exchequer • Sole relationship is that of employer / employee • Employee must not be a substantial shareholder • The insurance is intended to meet the loss of profit resulting from the loss of services of the employee • It is an annual or short-term insurance Local Inspector of Taxes will decide whether to allow the claim for deduction – draft letter available • Term must reflect how long the key person will be, ‘key’ to the business

29. Tax treatment of benefits • If premiums are allowable for corporation tax relief, whether taken or not, the proceeds will be taxable and • If premiums are not allowable for corporation tax relief, normal taxation principles will apply- proceeds used for REVENUE expense – taxable- proceeds used for CAPITAL expense – tax free Based on Zurich understanding of current HMRC practice

30. Tax treatment of benefits http://www.hmrc.gov.uk/manuals/bimmanual/BIM45525.htm

31. Business Protection Adviser Tool

32. Who is the tool aimed at? Advisers new to the BP market • Offers a process • Paper fact-find • Technical resource • Calculators • Support material (including client-facing material) • Summary report (audit, next steps, supports client recommendation)

33. Who is the tool aimed at? Advisers already in the BP market • A reference point / easy access to component parts • Support material • Library for documents • Training new RIs / back office / paraplanners • Technical Connection endorsements

34. Fact-find • Focussed fact-find covering all aspects of the business protection need • Highlights other areas of protection need • Can be used as a stand-alone form or in association with the Tool

41. Supporting literature • Client facing letters • Client facing brochures • Sales aids • Technical information • Trusts • Nomination form • Draft option agreements • HMRC Letters

42. www.zurich4protection.co.uk

43. www.zurich4protection.co.uk

44. In summary • The business protection market has huge potential, as many businesses are under-insured • Relevant Life policies are the ideal door opener to clients & accountants • Zurich has vast amounts of calculators, tools & literature • Zurich support every step of the way If you would like access to the Zurich Business Protection Adviser Tool, please register on www.zurichintermediary.co.uk

45. Handset Question 4 Would you like your Zurich consultant to make contact regarding business protection or anything you have heard today? • Yes • No

46. Thank you for listening Important information The tax and legislation information contained in this document is based on Zurich Intermediary Group current understanding as at March 2011 and may change in the future. HM Revenue and Customs (HMRC) practice, and the laws relating to taxation, are complex and subject to individual circumstances and changes which cannot be foreseen. Zurich Assurance Ltd, authorised and regulated by the Financial Services Authority, for its life assurance, pension and investment products. Registered in England and Wales under company number 02456671. Registered Office: UK Life Centre, Station Road, Swindon, SN1 1EL. Telephone – 01793 514 514. Zurich Intermediary Group Ltd, authorised and regulated by the Financial Services Authority. Registered in England and Wales under company number 01909111. Registered Office: UK Life Centre, Station Road, Swindon SN1 1EL. Telephone – 0500 546 546. We record or monitor calls to improve our service. For use by professional financial advisers only. This advertisement has not been approved for use with clients.