FAQs answered

Yes. Bright Grey is one of the few providers that still offers commission on a reduced earnings period (REP) of 2 years. By choosing Bright Grey, you can benefit from receiving your total commission over 2 years instead of 4. We know that some advisers value this option so we'll continue to offer it, as long as it's commercially viable to do so.

The advantage to you of receiving commission on a reduced earnings period of 2 years means that you will have received the full amount of commission, even if your client cancels the plan after 2 years.

Advisers and providers want business to stay on the books for as long as possible and we calculate payment of commission on the basis that a plan will be on our books for a considerable number of years.

We are entitled to claw back a proportion of commission if the plan is cancelled in the early years. The majority of providers do this over the first 4 years, known as full earnings period (FEP).

However, we also have to acknowledge that a shorter earnings period creates a greater risk of the plan going off the books early and therefore harming our revenue.

If a REP plan is cancelled in the first year, we claw back the same amount of commission that we would if the plan had been a FEP. This is a slightly higher amount than set out in the standard LAUTRO tables used by the very few other companies that offer REPs. But we believe that this is a fair price for the continued availability of REPs. Click here to see how we calculate the percentage of commission we claw back each month.

Yes. You can choose to change from a 2-year earnings period to a 4-year earnings period at any time. Please contact distribution@brightgrey.com for more information.

It depends on the terms of business you have with us. For example, if you belong to a network that has negotiated the option of a 2-year earnings period, yes you can choose. However, if your current agency agreement with us is on a full earnings period then you can't change to a 2-year option without our agreement and your agency's permission to do so.

Our terms of business don't drill down to the level of commission detail so that we have more flexibility to adapt to market conditions but still meet advisers' needs. This allows us to offer competitive commission terms at all times.

There are 9 illness definitions that exceed the ABI standards:

• Aorta graft surgery - for disease or traumatic injury. We have added traumatic injury.
• Benign brain tumour - resulting in permanent symptoms. In addition, the requirement for permanent neurological deficit with persisting clinical symptoms will be waived if the benign brain tumour is surgically removed.
• Coma - resulting in permanent symptoms. We have removed the need for the use of life support systems to be for a continuous period of at least 96 hours.
• Coronary artery bypass grafts. To correct narrowing or blockage of one or more coronary arteries. We have removed the need to have median sternotomy (surgery to divide the breastbone).
• Heart attack - of specified severity. We have removed the requirement to have typical clinical symptoms.
• Heart valve replacement or repair. We have removed the need to have median sternotomy (surgery to divide the breastbone).
• HIV infection - caught from a blood transfusion, a physical assault or at work.
• Stroke - resulting in permanent symptoms. Traumatic injury to brain tissue or blood vessels is no longer excluded from the definition.
• Third degree burns - covering 20% of the body's surface area. We have added 50% loss of surface area of the face which for the purposes of this definition includes the forehead and ears.

We cover 43 definitions on all Bright Grey menu plans. 41 of these definitions pay the full amount of cover. For 2 early forms of cancer:

• Ductal carcinoma in situ (a form of breast cancer)
• Low grade prostate cancer

We'll pay 20% of the amount of cover, up to a maximum of £15,000, over and above the amount covered.

So if the worst happened, and you were later diagnosed with a critical illness and met the definition, we would still pay the full amount you're covered for.

Take me to the full list of illnesses.

If a client wants to increase the amount of Critical Illness Cover they have on an existing plan we will issue a new plan for the increase. This is because new definitions will only apply to the increase. But the new plan will not include another plan charge.

We believe that the basis for recommending a provider shouldn't just depend on the list of critical illness definitions they offer. It's the overall proposition that delivers best value and the combination of a number of things that makes a great product:

A comprehensive and sensible list of conditions
Your clients will understand which illnesses are covered, and to what severity.

Practical and emotional support
We give your clients and their families access to our Helping Hand service at no extra cost. When we say 'your family' we mean the spouse or partner of the Bright Grey plan owner and their children.

Value-for-money protection
You can tailor your client's plan to suit their budget, because a little bit of critical illness cover is better than none at all.

Clear and simple literature for your client
We know that protection can seem complicated so we make sure that we communicate our product clearly and simply for your clients.

Yes, we automatically cover children for all the critical illnesses on our list if you choose Critical Illness Cover. We will pay 50% of the main cover amount up to a maximum of £20,000. Any claims we pay will not affect the main cover.

There are 9 illness definitions that exceed the ABI standards:

• Aorta graft surgery - for disease or traumatic injury. We have added traumatic injury.
• Benign brain tumour - resulting in permanent symptoms. In addition, the requirement for permanent neurological deficit with persisting clinical symptoms will be waived if the benign brain tumour is surgically removed.
• Coma - resulting in permanent symptoms. We have removed the need for the use of life support systems to be for a continuous period of at least 96 hours.
• Coronary artery bypass grafts. To correct narrowing or blockage of one or more coronary arteries. We have removed the need to have median sternotomy (surgery to divide the breastbone).
• Heart attack - of specified severity. We have removed the requirement to have typical clinical symptoms.
• Heart valve replacement or repair. We have removed the need to have median sternotomy (surgery to divide the breastbone).
• HIV infection - caught from a blood transfusion, a physical assault or at work.
• Third degree burns - covering 20% of the body's surface area. We have added 50% loss of surface area of the face which for the purposes of this definition includes the forehead and ears.

We cover 43 illnesses including Total Permanent Disability (TPD).

If a client wants to increase the amount of Life or Critical Illness Cover they have on an existing plan we will issue a new plan for the increase. This is because new definitions will only apply to the increase. But the new plan will not include another plan charge.

We believe that the basis for recommending a provider shouldn't depend on the list of critical illness definitions they offer. It's the overall proposition that delivers best value and the combination of a number of things that makes a great product:

A comprehensive and sensible list of conditions
Your clients will understand which illnesses are covered, and to what severity.

Practical and emotional support
We give your clients and their families access to our Helping Hand service at no extra cost. When we say 'your family' we mean the spouse or partner of the Bright Grey plan owner and their children.

Value-for-money protection
You can tailor your client's plan to suit their budget, because a little bit of critical illness cover is better than none at all.

Clear and simple literature for your client
We know that protection can seem complicated so we make sure that we communicate our product clearly and simply for your clients.

Yes, we automatically cover children for all the critical illnesses on our list if you choose Life or Critical Illness Cover. We will pay 50% of the main cover amount up to a maximum of £20,000. Any claims we pay will not affect the main cover.

Yes, 12 months after we pay a claim as a result of a critical illness or for Total Permanent Disability, your client may take out a new Life Cover only, on the life of the person who the claim was for. For more information see section C of the plan details.

At the moment we're unable to accept applications online. You can use our quote service online 24 hours a day, 7 days a week. To submit an application you will need to use a paper application and then send to: Business Protection, Bright Grey, 2 Queen Street, Edinburgh, EH2 1BG.

If it is a company that is applying on the life of a key person, then you simply put the company's details in the section 'About the other applicant' on page 4 and then put the details of the person covered on the following pages.

If it is a partnership and the key person is a partner, this would normally be arranged by the partner taking out the plan on their own life and putting this under trust for the benefit of the other partners. You would therefore leave the section 'About the other applicant' blank and complete the rest of the form in the normal way. It is however important to make sure we receive the trust form before the plan starts

You can get quotes for our Business Protection Menu online using our 'quote' service, but we only accept applications using our paper application form.

Yes, our business trust is designed specifically for use with business protection plans.

We have produced a guide on how to complete the form that you can download.

Download 'our guide on how to complete the form' PDF
Size: A4 - 12 pages - 1mb
Online publication date: June 08

No. In business protection arrangements it is usual to have any critical illness benefit paid to the beneficiaries. This makes sure that the proceeds are available to them to either buy the share of an ill owner or to invest in the business to replace the ill person. If this didn't happen, the other owners could find themselves with an obligation to buy the share of the ill person but with no money available to them to actually do this.

There are 2 main differences.

The first is that the trust only includes people actually involved in the business as possible beneficiaries. This maintains the commercial nature of the arrangement making sure that no inheritance tax will be payable following a claim.

The second is that the trust holds any benefits payable on death or diagnosis of a critical illness for the benefit of the other owners but retains any other cover for the partner or shareholder taking out the plan (the split trusts keep any critical illness payment for the plan owner). This allows your client to include benefits such as Income Cover for Sickness to replace an ill partner's or shareholder's income within a share purchase arrangement and this will be held under trust only for them, not the other owners in the business. The trust also reserves any Children's Critical Illness Cover for the partner or shareholder whose child is diagnosed with a critical illness instead of this being paid to the other owners.

We don't recommend that our business trust is used with an existing plan. This is because in the event of a claim this could lead to a liability to Capital Gains Tax (CGT) on the proceeds. This liability can arise because of the reciprocal nature of the arrangement. Each owner of the business is taking out a plan and putting it under trust for the other owners in return for the others doing the same. The putting of the plan in trust after it has started would therefore be an assignment for money or money's worth. Any subsequent disposal under that plan, including a claim would give rise to a capital gain calculated as the sum assured less the premiums paid, which is likely to give rise to a significant liability to Capital Gains Tax (S210 Taxation of Chargeable Gains Act 1992).

We therefore recommend that if using the business trust, it is always completed before the plan starts so that the plan is issued under trust from its commencement date and there is no assignment.

Yes we do have a draft agreement that your client can use with their legal advisers as a basis for their own agreement.

The agreement automatically includes a double option on the death of a partner or shareholder. This gives the family of someone who dies an option to sell their share of the business to the other owners. It also gives the other owners an option to buy that share from the family. If either side exercises their option then the other must comply.

The agreement can also include either a single option or a double option in the event that one of the owners is diagnosed with a critical illness.

The single option gives the ill person an option to sell their share of the business to the other owners. If exercised, the other owners must buy the ill person's share, but there is no option for the other owners to force the ill person to sell.

The double option also contains an option for the ill person to sell their share to the other owners. But it also contains an option for the other owners to buy the ill person's share if they do not return to work within a specified period, usually 12 months. If either side exercises their option, the other must comply. This gives some protection for the ill person from being forced out if they are able to return within a reasonable time. It also gives some protection for the other owners from having to support an ill person and their family when they are unable to contribute to the business because of their illness.

Yes, this is part of our draft cross option agreement. If the client wants to include an option for them to be able to sell their share of the business on diagnosis of a critical illness they simply need to include the relevant paragraphs in the agreement.

However, our draft agreement can also include what we call a deferred double option on critical illness. If this option is chosen the partner or shareholder will have an option to sell their share of the business as soon as they qualify for a payment under their plan. But if they do not return to work within a specified period, usually 12 months, the other partners or shareholders then have an option to buy the ill person's share.

If the business is a company there are 2 ways this can be set up.

The first is for each shareholder to take out a plan on their own life for the value of their share of the business. They write that plan subject to a business trust under which all of the other shareholders are the beneficiaries, taking care to make sure the trust is completed before the plan starts. The shareholders then enter into an agreement, which gives the family of a shareholder who dies an option to sell their share to the other shareholders. The other shareholders also have an option to buy their share. If either the family or the other shareholders exercise their option the others must then comply. They can also include either a single option or a double option on diagnosis of a critical illness.

The second option is for the company to purchase the shares instead of the other shareholders. Under this arrangement the company would take out a plan on the life of each of the shareholders so that the company receives the money directly and no trust is needed. They would still enter into a cross option agreement, but this time the agreement would be between each shareholder and the company. The agreement would provide a double option on death and they can again include either a single option or double option on critical illness. There are several other formalities they must go through to actually purchase the shares and not all companies can do this.

If the business is a partnership there are also 2 ways this can be done.

The first is the same as the first way for a company. Each partner takes out a plan on their own life and puts that under the business trust for the benefit of the other partners. They then enter into a cross option agreement giving the same options to buy and sell the share of the business to their family and the other partners. If either side exercises their option the other side must comply.

The second is what is known as automatic accrual. In this type of arrangement instead of putting the plan under trust for the other partners each partner takes out a plan for the value of their share of the business. The plan is written under trust for the benefit of their family using the normal split trust rather than a business trust. Within their partnership agreement there will usually be a clause, which states that if any partner dies their share of the business automatically passes to the other partners and that they will maintain a policy to the value of their share of the business to compensate their family. No purchase of the share therefore occurs, it simply accrues to the other partners, hence the name automatic accrual.

Yes but they should be aware of the tax consequences of doing so. These depend on who is taking out the plan and what type of business it is.

If the business is a company and they are paying the premiums on a plan taken out by one of the directors or an employee, the premium would be treated as part of their remuneration. They would therefore have to pay income tax and employee's National Insurance on the amount of the premium. The company can however treat this as an expense and therefore deduct the premium from their profits for corporation tax purposes, but will have to pay employer's National Insurance.

If the business is a partnership and they pay the premiums out of a business account on a plan taken out by a partner, this will simply be classed as part of his drawings and would be subject to income tax and National Insurance in the normal way. If however they are paying the premiums on a plan taken out by an employee, the employee would again have to pay income tax and employee's National Insurance and the partnership would be able to offset the premium against their profits, but would have to pay employer's National Insurance.

This will depend on the purpose of the plan, their relationship with the employee and the type of cover involved.

If they take out Life Cover, Critical Illness Cover or Life or Critical Illness Cover, they will normally only pay tax on any claim if the plan qualifies for tax relief on the premiums. To get relief from tax they must meet all of the following conditions:

• The plan must be to cover loss of profits only.
• The relationship between the client and the person covered must be employer and employee.
• The cover must be short term.
• The amount of cover must be reasonable.

This means that if the plan is for example to cover the repayment of a loan rather than a loss of profit, they are unlikely to get relief. If the person covered is a significant shareholder (generally meaning they or members of their family own more than 5% of the business) they are unlikely to get relief.

If the cover is not short term, which normally means a term of 5 years or less, they are unlikely to get relief. If the amount of cover is not related to the amount of profit they will lose if this employee is no longer able to work for them, they are unlikely to get relief. If they do not get relief they will not normally be taxed on any amount they receive from a claim. However they should speak to their local inspector of taxes setting out the full details of the plan and ask them to confirm how they will treat the plan for tax purposes.

If the plan includes Income Cover for Sickness this is taxed differently in the event of a claim. If we pay a claim, the amount your client receives will be treated as a trading receipt and they must pay tax on it. However, if they pay this amount to their employee to continue their salary they can treat this as an expense for tax purposes so the receipt and expense cancel each other out. They will however have to continue to pay employer's National Insurance and to deduct income tax and employee's National Insurance from the amount they pay the person covered.

You can increase your cover following any of these events:

increase in the value of the key person - you can increase by any amount within the limits below.

increasing your business mortgage or loan - you can increase by the amount you increase your mortgage or loan subject to the limits below.

an increase in the value of a partner's or shareholding director's interest in the business - you can increase by any amount within the limits below.

If you took out your plan to protect a business from the loss of a key person, you can increase your cover following an increase in value of a key person based on an increase in salary, or increase in gross profits attributable to that person. You can increase by a maximum of:

• 5 times the amount of the increase in salary;
• or twice the increase in gross profits attributable to that person,

subject to the limits below.

If you took out your plan in connection with a business mortgage or loan you can increase your cover following an increase to your business mortgage or loan (but not increasing an overdraft). You can increase by the amount you increase your mortgage or loan subject to the limits below.

If you took out your plan in connection with a partnership or directors share purchase arrangement, you can increase your Life Cover, Life or Critical Illness Cover or Critical Illness Cover following an increase in the value of a partner's or shareholding director's interest in the business. You can increase by the amount of the increase subject to the limits below.

You can increase your cover on more than one occasion but the maximum increase for all events is limited to whichever of the following amounts is lower:

• half of the original amount of cover;
• or £150,000 for Life Cover, Critical Illness Cover or Life or Critical Illness Cover;
• or £10,000 a year for Key Person Income Cover for Sickness.

If you have more than one cover or more than one plan with us, these limits apply across all of those covers and plans and not separately to each of them.

If you increase Key Person Income Cover for Sickness using this option, it is further limited so that your total cover after the increase is not more than the lower of;

• the maximum percentage of profits attributable to the person covered shown on your cover summary;
• or the maximum amount of cover we allow at that time.

The increase in cover will:

• be on the terms and conditions that we offer at that time;
• have a term no longer than the remaining term of the original cover or shorter than the minimum term we offer for that cover at that time. If the remaining term of the original cover is less than the minimum, you will not be able to use this option;
• and include the same additional features, as the original cover.

We will base your payment for the new cover on:

• the terms which applied at the date the original cover started or at any subsequent restart under section C2.3;
• the age of the person covered at the date the increase in cover starts;
• and the payment rates and plan charge at the date the increase in cover starts.

The only time this can be done is where the client is a sole trader. In all other cases the 2 needs should be addressed separately.

This is because it is essential that business protection arrangements are established on a purely commercial basis. This will make sure that there are no problems with inheritance tax being charged unexpectedly. To keep an arrangement on a commercial basis only those who actually own shares in the business should be able to benefit from the arrangement. You should not therefore include a shareholder's or partner's spouse or children as beneficiaries under any trust arrangement unless they also own a share of the business as this would prevent the arrangement from being purely commercial.

If the arrangement is not commercial it could be argued by HMRC that a gift with reservation by associated operations has been established. That is because each partner/shareholder is taking out a plan and putting this in trust for the benefit of the others in return for them doing the same thing. This is an associated operation and so if there is an element of gift (i.e. someone who is not themselves taking out a similar plan being able to benefit), a gift with reservation will arise. This would mean if the partner/shareholder died HMRC would treat the policy proceeds as part of their estate for inheritance tax. It is therefore advisable to keep personal protection arrangements separate from business protection arrangements.

However for a sole trader they are the business and there are no other owners. Their protection plan would therefore simply be placed under a normal split trust for their family. The family then have the funds available to them outside of the business to maintain their lifestyle. It is therefore possible to combine cover for both personal and business reasons in these circumstances.

It is possible to do this as long as the same people are applying for both the key person and the shareholder/partnership protection.

For example if the business is a partnership and they would like to cover each partner for the loss of profit that would occur if any of them died and would also like to buy out that person's family, this cover can be combined into one plan. Each partner would take out a plan on their own life with an amount of cover that would cover both the loss of profits and the value of their share of the business. The policy would be written under the business trust for the benefit of the other partners. If any of the partners died the policy would pay out and the proceeds would pass to the other partners. They can then use some of the proceeds to buy the share of the dead partner from their family and the rest they can invest in the business to cover the loss of profit they will incur.

For shareholders in a company there are 2 ways this can be done.

The first is the same as with a partnership allowing the remaining shareholders to receive the proceeds of the plan from the trust and to use some to buy the shares and the rest to invest in the business.

The second way is for the company to apply for a plan on the life of each of the shareholders. This does not need to be written in trust and the company will receive the proceeds in the event of a claim. The company therefore has the funds necessary both to cover the loss of profits and buy back the shares of the dead shareholder from their family. The shares would then be cancelled by the company effectively increasing the proportion of issued share capital each remaining shareholder now owns. But not every company can do this and there are several formalities that must be carried out for them to do this.

The cover cannot be combined into one plan if they want the company to receive the proceeds of the key person cover and the other shareholders to purchase the share of a dead shareholder. This would need to be 2 separate applications because different owners are needed for each element of the cover.

The Bright Grey relevant life policy is a single life, stand-alone death-in-service plan.

They are governed by the same legislation that deals with group schemes. However unlike most large employer provided schemes they are 'non-registered', so don't fall under pensions legislation.

Relevant life policies provide life cover for the benefit of employees' and directors' dependants paid through a discretionary trust. They are taken out and paid for by the employer.

Any employee of a business, including directors. The business can be a limited company, a partnership, a charity or a sole trader.

However we can't cover sole traders or equity partners themselves where they are taxed under schedule D.

'Salaried' partners who are taxed as schedule E can be covered.

• Small companies who have too few members for a group scheme.
• High earners who don't want their group death-in-service lump sum benefits to be amalgamated with their lifetime pension allowance.
• Employees who are looking to top up the benefits they receive from their employer's scheme.

Benefits

• Benefits are payable free of income tax.
• Benefits are normally free of inheritance tax. In exceptional circumstances there could be a periodic tax charge on the trust. For full details on this see the 'Trust' section below.
• Unlike lump sums paid under a registered scheme, relevant life policy benefits don't form part of the employee's lifetime allowance for pensions. There is a limit (£1.8 million for tax year 2010/2011) that you can accumulate over a lifetime in your pension 'pot'. Any lump sum payments (as opposed to dependant's pension) under a registered scheme fall into this pot and any payments to the estate in excess of this is taxed at 55%, so a relevant life policy is a useful vehicle for high earners to opt out of a group scheme.

Premiums

• Premiums paid by the employer are not treated as a P11D benefit and are not taxed back on the employee. For a higher rate taxpayer in a small company this can reduce costs by up to a third.
• There are no National Insurance implications on either the employee or the employer.
• Subject to the company's accountant/local tax inspector accepting that the premiums are 'wholly and exclusively for the purpose of trade' as part of the remuneration of the employee, then they may be relievable as a trading expense. This is a bit of a difficult area to be precise on as different inspectors and accountants will have different views. Being a relatively new concept there is no HMRC precedent on this that we are aware of.
• Premiums don't count as part of the annual pension allowance for tax purposes.

This diagram shows the effect on the company of paying for an ordinary life policy and having it treated as a benefit in kind. It then looks at a relevant life policy assuming tax relief is available.

Why does the premium not create a P11D charge?

Relevant life policies are non-registered arrangements and are the successor to the old unapproved schemes. Prior to A day and the pensions simplification legislation, these schemes were taxed as income in the hands of the employee under ITEPA 2003 (Part 6 Ch 1). This charge to income tax was removed by s.247 of the 2004 Finance Act and consequently there are no longer any income tax or national insurance implications on the employee.

How is tax relief granted on the premium?

It's uncertain whether premiums will be treated as an allowable expense for the employer.

The company's accountant may be able to advise or confirm the position with the local tax office.

Why does the benefit not form part of the annual or lifetime allowance?

Because relevant life policies are non-registered schemes they don't come under pension legislation, therefore there's no connection between the sum assured on claim and the lifetime allowance, nor does the premium have any effect on the annual allowance.

Registered schemes are registered with HMRC and will come under pensions legislation in both these respects.

Why are the benefits not subject to corporation tax?

Because the policy is not owned by the company. Although the company is the proposer, the policy is issued under trust from outset and is therefore not an asset of the company. It's owned by the trustees for the benefit of the potential beneficiaries and paid directly to them. This is one of the reasons why we insist on the policy being issued under trust from outset.

Is there any income tax payable by the beneficiaries?

No. As long as the plan adheres to the conditions laid down in the technical brochure then there is no income tax charge on the proceeds. However, if the funds are held within the trust after a claim has been paid and income is generated, there could be Income Tax charges.

How is the policy treated for inheritance tax?

The policy does not belong to the life assured and therefore doesn't form part of the estate for IHT purposes.

However, in common with all non-pension discretionary trusts, the trust itself can be subject to periodic and exit charges. Such a charge could arise if the trust has any assets on a 10-year anniversary. If this is the case then a periodic charge will arise on the value of these assets in excess of any available nil rate band at a rate of up to 6%.

However, it's considered unlikely that such charges will arise in the vast majority of cases. The most likely cause will be if death occurs just before a 10th anniversary and there's not enough time to pay the assets out to the beneficiaries.

If the assets remain in the trust past a 10-year anniversary then there could be a potential exit charge when paid out. This will be a proportion of the last periodic charge due, again up to a maximum of 6%.

However, where assets are paid out as soon as possible following a claim, the likelihood of any significant exit charge arising appears to be negligible. No exit charge will arise if assets are paid out within three months of a 10-year anniversary.

If death occurs at any other time then no periodic charge will arise.

Can the trust be used with a spousal bypass will trust?

Yes. The bypass trust will need to be entered into the trust as a potential beneficiary and we would recommend that the nomination form is completed accordingly to assist the trustees in their decision.

When the trustees assign the policy back to an ex-employee, does this create a tax charge?

We do not believe so. The policy is not owned by the company and therefore it cannot be treated as a benefit in kind. It is merely the trustees exercising their discretionary powers to assign an asset of the trust to any beneficiary, in this case the policy to the life assured.

Neither do we believe that any capital gains tax charge will arise on claim under s.210 TCGA as the assignment to the ex-employee is not for consideration.

Can these plans be used for business protection?

No. The legislation requires that the primary or main purpose of the policies must not be for tax avoidance. We would be concerned that if the benefits were paid to non-dependant or non-family beneficiaries (such as the co-shareholders) to avoid the benefit in kind charge, or to obtain tax relief on such policies, could compromise this rule. If the co-shareholder were also a spouse, or one of the defined beneficiaries in the trust then this would be acceptable.

It's also a requirement in the legislation that benefits cannot be paid to a limited company, so using this for key person purposes would also be disallowed.

Yes. To qualify for relevant life policy status there are certain requirements the plan has to meet.

• It must provide only life cover. No disability or critical illness benefits are allowed.
• The term cannot exceed the 75th birthday of the employee.
• No surrender value is allowed - Bright Grey policies don't have surrender values.
• Benefits must be payable to an individual or charity, or to a trust for the benefit of individuals or charities. We insist on the plan being written through a discretionary trust to ensure we comply with this requirement.
• It must not be set up for tax avoidance purposes. To avoid this happening we insist on using a trust for all cases.

We will allow level, decreasing or increasing cover. We will also allow renewable term assurance.

Yes. Cover can be increased each year without evidence of health using the RPI increase option within the 2-10% interest rate range.

Alternatively fixed increases can be used up to 5% each year. Other increases are allowed at any time but will require health evidence.

Since 'A' day the statutory limits on the amount of cover that can be provided have been removed. However we do have a maximum we are prepared to cover which has been agreed with our re-assurers.

This is 15 times the remuneration of the employee. Remuneration can include salary, bonus, and dividends paid in lieu of salary plus any taxable benefit in kind.

The reassurers also have a 'jumbo risk' limitation. This will be £10 million per company.

There is no need for financial underwriting up to £1.5million per employee. After that we would require evidence of earnings. This could be a copy of a P60 or 3 months' salary slips or a letter from the employer confirming income. For a small company we might require external confirmation from the accountant or copies of the accounts to show dividend income.

A relevant life policy can only include life cover but you can have multiple life covers with different terms within the plan as long as they are all for the purpose of providing benefits for dependants.

You cannot use the same plan for other key person or ownership protection benefits.

We use a discretionary trust with the potential beneficiaries being family members, although there is the ability to include non-family members such as a live in partner.

The employer is automatically a trustee but we do require at least one additional trustee. This can be anyone but we normally recommend that the additional trustee is an officer of the company (director/company secretary) to reinforce the commercial aspect of the arrangement.

The life assured can be a trustee, but if this is the case there must be an additional trustee unless a corporate body is a trustee.

For single person companies with no company secretary this will have to be an external person. It could be a spouse or the company's accountant or solicitor. On death the trustee duties of the company will have to fall onto the executors or administrators of the estate who will either carry out those duties or appoint someone else.

In all cases we recommend that a nomination form is completed to direct the trustees as to whom they pay benefits to. This is not binding on them but in most cases will guide them and speed payments up.

Trust Taxation

In exceptional circumstances a periodic charge could be levied on any assets in the trust on any of the 10-year anniversaries. For this to happen death would have to take place very close to this anniversary leaving the trustees no time to pay the benefits out. The charge would be a maximum of 6% of the assets in the trust in excess of any avaliable nil rate band.

If the 10-year charge applies then there could also be an exit charge when assets are paid out. In theory this could also be up to 6% if the assets remain in the trust for the next 9-plus years, however assuming benefits are paid out just after the anniversary the charge will be insignificant.

It is unlikely that these charges will apply in the vast majority of cases.

Yes. In the beneficiary box put the by-pass trust in as a potential beneficiary and nominate that trust under the nomination form.

No there isn't, however we don't need one. When an employee leaves service the trustees can appoint the policy back to the employee and they can then continue it as a personal policy. They could even put it into a personal trust if they chose to.

If the policy is going to be assigned to the life assured on leaving service there is a 2-step process. First of all the trustees would need to make an irrevocable or absolute appointment in favour of the life assured. The trustees would then need to assign the policy to the life assured. We have a draft deed of appointment and assignment form.

Alternatively if the employee goes to another employer, or starts a new company up, the new company can take over the policy and pick up the premiums. In these circumstances we would recommend that the trustees are changed to the new employer.

These options may often be better than those offered under a group scheme. Some schemes don't offer a replacement policy while those that do can be expensive.

If you're on Avelo Exchange use the new business protection option on the opening quotes page.

Alternatively use Assureweb and input as business protection.

Or login to quote & apply and once you've chosen Life Cover, click Key Person Protection - this is the correct option to use when quoting for a relevant life policy.

And when it comes to the application form, please remember to tick the relevant life policies box.

Click here for full details and documentary support for relevant life policies

Business should be submitted on a business protection application form (it can't be submitted online at the moment) with the relevant life policy trust.

Make sure the relevant life policy tick box is selected on the application.

Submit to our normal address:

Bright Grey
2 Queen Street,
Edinburgh,
EH2 1BG

The Bright Grey trusts are flexible enough to allow existing trustees to be removed or new trustees to be appointed. The settlor has the power to remove a trustee by giving them at least 30 days' written notice. They can do this as long as at least 2 trustees remain, one of which is not the settlor.

Bright Grey can supply the following forms to help administer existing trusts:

Deed of appointment trustees

This deed can be used to appoint a new trustee to act with the current trustees.

Deed of appointment and retirement of trustees

This deed can be used when the settlor has requested the retirement of one or more of the trustees and wants to appoint other trustees at the same time. To request the retirement of trustees, the settlor must serve a notice of removal.

Deed of appointment and retirement of trustees (voluntary)

This deed can be used when one or more of the trustees are retiring voluntarily and the settlor is appointing other trustees at the same time.

Deed of retirement of trustees

This deed can be used when the settlor has requested the retirement of one or more of the trustees but is appointing no other trustees. To request the retirement of trustees, the settlor must serve a notice of removal.

Deed of retirement of trustees (voluntary)

This deed is used when one or more of the trustees are retiring voluntarily and no other trustees are being appointed.

The trustees' main duties are as follows.

• To invest the trust fund.
• To act impartially, if providing different benefits to each beneficiary.
• Trustees may delegate their powers of investment and management to someone else.
• To obtain and consider proper advice before exercising powers of investment.
• To secure the trust property.
• To keep records of any decisions and actions, as they may need to prove they're managing the trust fund properly.
• To not use the trust to benefit themselves. If the trustee is also a beneficiary, then they must not use their powers as a trustee to gain any benefits over the other beneficiaries.

You can find more information about the role of trustee in our guide to being a trustee.

Business trust

Your client's spouse should not be included as a beneficiary under the business trust unless they are also a partner or shareholder. It is essential that any business protection arrangement be entered into on a totally commercial basis. The inclusion of people who are not also owners of the business would mean that this is not the case. This can lead to adverse tax consequences.

Any new cover added to a plan is automatically subject to the existing trust arrangements. It will therefore automatically become either a gifted benefit or a retained benefit depending on what kind of cover it is. For example a new Life Cover will automatically be a gifted benefit but a new Income Cover for Sickness will be retained.

When we can't add a new cover to an existing plan, we will offer your client a new plan for the new cover. If this new cover is to be placed under trust, your client would then have to complete a separate trust form for the new plan.

No. If your client was able to do this, the trust would have no effect for inheritance tax purposes.

No. The trust form sets out which of the covers are gifted and which are retained and this can't be changed once the trust is completed.

Any monies from the protection plan will always be paid to the trustees. The trustees are then responsible for paying the money to the beneficiaries but must complete the Bright Grey 'Deed of appointment to benefit (absolute)' form before distributing any benefits.

We don't recommend using the Bright Grey trust with another company's plan. The Bright Grey trust forms have been designed with the terms and conditions of a Bright Grey plan in mind and the words we use within the trust fit with our plan terminology. To use it with another plan would be dangerous as the words we use in the trust are unlikely to be exactly the same as those used by another company. This could mean the trust is invalid or could have adverse tax consequences. If your client wants to put another company's plan in trust, we recommend that they ask the other company or their solicitor to supply the appropriate form.

For the same reasons, we also don't recommend that you use other companies' trust forms with a Bright Grey plan.

Although the plan is in trust, inheritance tax could still be payable in some circumstances.

If the claim is for Income Cover for Sickness no inheritance tax is payable as this has no value in your client's estate when they die.

If the claim is on death or diagnosis of terminal illness, a critical illness or Total Permanent Disability, there will be no immediate liability to inheritance tax as this will not be part of your client's estate. However if the proceeds of the plan remain in trust past the next 10-year anniversary of the date the trust was created, a liability can arise.

The liability is calculated by looking at the value of the trust fund on the 10-year anniversary, any chargeable lifetime transfers your client made in the 7 years before the trust was created, and any amounts that have been taken out of the trust before the 10-year anniversary. If the total of these amounts is more than the nil rate band for inheritance tax at the 10-year anniversary, tax is payable on the excess. Tax may also be payable if money is given to a beneficiary after a 10-yearly charge has arisen.

An example

John took out a Bright Grey Business Protection Menu plan, which provided £300,000 of Life or Critical Illness Cover. He wrote this in trust on 4 Feb 2008. In 2003 he made a gift to a discretionary trust of £50,000. This created a chargeable lifetime transfer of £44,000 as he had made no other gifts and was therefore able to deduct 2 years annual exemption of £3,000.

On 1 June 2016 John suffers a critical illness and the plan pays out. No immediate tax is payable. John recovers and decides not to exercise his option to sell his shares in the business. The trustees decide to leave the money in trust as the beneficiaries are intended to be John's co-shareholders and because of his illness John can not get any replacement cover. On 4 Feb 2018 the trust fund has grown to £320,000 and the nil rate band has risen to £350,000. No money has been taken out of the trust. Inheritance tax is now payable out of the trust fund and is calculated as:

On 1 August 2019 John decides to retire and agrees with his co-shareholders that they will purchase his shares using the money held in trust. The trustees decide to give John's co-shareholders £350,000 to purchase his shares. The nil rate band for inheritance tax is still £350,000. There would now be an exit charge calculated as:

• You can come direct to the Bright Grey interactive quote & apply service from leading portals and most of the data you've already keyed for your client will be automatically transferred.
• You can combine up to 10 covers in one interactive quote and plan, getting the most out of the flexibility our product menu offers.
• We've developed the screens to work with our paper data capture form which avoids unnecessary questions for 'clean' lives. This simplifies the sale and saves you time.
• Underwriting rules, limits and combination risks are built into the system, so the processing time is reduced and underwriting decisions are more consistent.
• There is flexibility for you to amend quotes before you submit them. You can add, change or delete covers or lives, which helps gets clients on risk quicker and is useful when it comes to budget-driven sales.
• We ask additional health questions at the end of the application process, so there's just one further call to the client, not several.
• There's a dictionary with over 18,000 medical conditions, occupations and lifestyle and leisure pursuits, which will improve the quality of disclosure and reduce the need for medical information.
• You can add life of another and third party payers.
• We've included bank account validation and address look-ups to help you find this information quickly and accurately.

• The online quote service is quick and easy to use.
• You can combine up to 10 covers in one quote and plan, getting the most out of the flexibility our product menu offers.
• You can store and retrieve all quotes through the quote service for 30 days. Please note that any quotes from a portal or 'click-through' will only be stored for 7 days.
• Unfortunately, you can't apply online for business protection.

No, you must use a data capture form with interactive quote & apply as the questions are designed to work with the screens. If you have not yet upgraded to interactive quote & apply, please use the normal application form.

Yes, you can apply online with a third party payer. If the plan is accepted and the payer is marked as business partner, company, employer or other, the decision will change to 'refer' so that financial underwriting can be done.

Yes, you can apply online for life of another. Simply choose 'no' when asked on the quote screen if the person covered will also be the plan owner.

You can part-complete pages all the way through (but you won't be able to get past the end of section C if you've missed out anything from the previous sections). So if you start filling in the screens and then find that you don't have all the information you need, you can save the application and return to it later, up to 30 days from the quote.

Yes, you can submit online applications 24 hours a day, 7 days a week. However, we might have some 'down time' at weekends when we'll close the service to upgrade or improve it. If this is likely to happen, there will be a message on the site to let you know when the service won't be available.

Please also be aware that:

• if you submit a personal protection application after 9pm, we will start to deal with it at 8am the following day (apart from Saturday and Sunday).
• Business protection applications can't be submitted online at present.

For some cases we'll still need to carry out identity checks, but once they're successfully completed, the plan can go in force. If an identity check is not successful, we'll ask you to provide verification of your client's identity.

If we give an application a decision online and your client has asked for an immediate start date, it will start on the same day, provided we've carried out a successful identity check. If we give an immediate decision (whether standard or non-standard), this will be subject to all the information you have given us on behalf of your client being accurate and complete.

If your client tells us that some of the information is incorrect or incomplete, we may change the terms we've offered or decline the application. We may then have to request further information before we can decide on any revised terms. If this is the case we'll cancel any terms previously offered. Please make sure your client knows that they need to check the online application we send them and return the online confirmation form to us.

If we can't accept your client's plan immediately and refer it to our underwriters, we'll need a signed Access to Medical Reports Act declaration in case we need to request medical information from your client's GP. If we need an AMRA declaration you'll be prompted to download and print one from the application decision screen and you can then fax or post this to us. Alternatively, you can send us the signed AMRA declaration from your client's paper application form. We'll need to receive a signed declaration before we can request any medical reports for your client.

No, please don't send us either the paper application form or the data capture form. We'll process the application using the information you submit online.

This will change depending on whether you're taking the information from a paper application or if you're completing the screens with your client, but it should take between 15 and 25 minutes to complete an online application.

Your quotes and part-completed applications are valid for 30 days after the initial quote date. So if you complete an online application 10 days after you do a quote, the application will be valid for 20 days.

If you're doing a telephone application, we would need to contact the client and take the rest of their information within 30 days from the quote. So be aware that if you submit your application quote on day 29, it may be worthwhile quoting again so we have time to contact the client and gather the rest of the information.

You can register from the home page. Click on 'register' under 'password login'. After submitting your details online, we'll send you an email within 2 working days confirming that we've processed your registration. Any quotes you do before you receive this confirmation will be on our standard commission terms (140% of Lautro with a full earnings period). Once we send you confirmation of your registration, any future quotes will show your correct commission terms.

Note: Only IFAs can be registered, we can't accept registrations for administrators.

If you forget your login details, please use the link on the adviser login screen to let us know. We'll phone you within 2 working days (it's usually much quicker than this) to confirm the answer to your security question and clarify your login and password.

You will have an FSA number unless you're calling from Jersey, Guernsey or the Isle of Man. If you are, simply enter '000000' into the 'FSA number' field on the extranet registration screen instead.

That's OK, you can just use a shortened version. For example, 'Limited' can be shortened to Ltd' and 'Financial Services' to 'Fin Serv'.

You can still register with us and you'll still be able to quote, but this quote won't be saved for later as it's just to give you a rough guide. You won't be able to submit applications online until we accept the terms of business. We'll email or post these out to you within 2 working days at the most - it'll usually be quicker than this.

Please email us at distribution@brightgrey.com with your email address and contact number or call us on 0845 6094 524, selecting option '2'. We'll look into the problem for you and let you know as soon as it's resolved.

If you've received a message that says 'number of login attempts exceeded' you need to close down all your Internet Explorer screens and log in again. If the message says the account has been 'disabled', please email us on distribution@brightgrey.com or call us on 0845 6094 524 (option 2) and we'll activate your account again.

You can retrieve both quotes and online applications by using the 'retrieve quote' and 'retrieve application' option when you log in. This is available from the quotes home page and you can do a search using your client's last name, quote or application number, or date of birth. The search results will be displayed in a list (if more than one) and will show as:

• Quote - these are cases that have not progressed to online applications.
• Application - these are applications that have been partially completed or fully completed but have not yet been submitted.

Tip - clicking on 'retrieve all applications' will bring up all the applications you've not yet submitted to us.

Once you've submitted an online application you won't be able to change the details on it, and you won't find it under 'search for an application' or 'retrieve all applications'. You can only access the applications you've not yet submitted here.

You can view or download a copy of the details you submitted online by clicking on 'client packs' at the top of the screen. This will have all the client's details, except the bank details.

This is a copy of the pack that we sent to the client and we need them to sign and date this within 60 days.

If you want a premium driven quote, please leave the 'amount of cover' box blank and fill in the payment box with the premium.

To do family income benefit, fill in the 'amount of cover' box with the annual amount you want paid out. Don't fill in the payment box, as this would create a premium driven quote.

To do an increasing cover, change the type of cover from 'level lump sum' or 'level income' to 'increasing lump sum' or 'increasing income', then choose either RPI or an increasing rate between 2 and 5%.

If you're having trouble searching for occupations on our online quote & apply system, try using the first 3 or 4 letters of the occupation name instead of the whole name.

If you still can't find what you're looking for, just call our Underwriting Team on 0845 6094 505 or email them at theunderwriters@brightgrey.com and they'll be happy to help you.

This could be down to one of 5 things:

1. It could be because you're applying for Income Cover for Sickness and you haven't added Payment Cover for Sickness (this has to be added to all Income Cover for Sickness plans). You'll also have an error message above the 'quotation summary' saying that you must add Payment Cover for Sickness.

2. It could be because you've just registered, in which case the apply function won't be available for up to 48 hours. If you need to apply within this time, please contact our IFA Admin Team on 0845 6094 524, and they'll speed up your registration.

3. It could be that the payment is less than £10 a month, which is our minimum amount. In this case you need to increase the sum assured, term or add a cover to make it up to £10.

4. It could be because you're applying for business protection. We're not able to take business protection applications online so you'll need to submit a paper application instead.

5. There may be a problem with your agency, please call us on 0845 6094 524.

No, the quote will not be saved on our system, unless at the time of the quote you came through to our website and saved it.

You can save your quote using the 'save quote' button on the quotation summary screen.

You'll find them under 'adviser terms'. You can do commission sacrifice here. We only pay renewal commission from year 5 onwards, even for cases on 2 years' reduced earnings.

The 'new quote' button starts a new quote from the beginning, and will ask for new clients' details. If you want to add another cover to the same quote, you need to click on one of the cover types on the left.

The relevant life policy is just one of the 4 ways you can use our business protection menu. To quote, all you need to do is a standard key person life quote for business protection.

You must apply using our paper application form. The plan must be owned by the employer of the person covered. On our business protection application you must therefore mark the plan owner on page 3 as 'other applicant'. On page 4 you can then give us the details of the 'other applicant'.

Please make sure the declaration at the end of the application is also signed on behalf of the plan owner as well as the person covered. If the life assured has authority to sign on behalf of the company then they can sign both boxes.

If you've done a quote previously, either on our site or on a portal, and are now redoing it on our site and the premium doesn't match your previous quote, please email a copy of both quotes to extranethelp@brightgrey.com. Do make sure to include both quotes or we won't be able to help.

Click on 'review/amend quote details'. This will save your details so far, then go back to the quote and you'll be able to amend and remove any details or covers you need to. Click 'apply' again, and it'll take you back to the front page. The details from earlier will have been saved and you shouldn't need to put them in again. The system will save quotes for 30 days. If you had previously quoted for Income Cover Sickness, Life or Critical Illness Cover or Critical Illness Cover and are now only quoting for Life Cover, it may remove some of the answers (A11, B10, B11, B12 as below).

However, you'll need to click 'continue' on each section until you get back to the page you were on. And if you've added another cover, for example, Income Cover for Sickness, you might now be asked additional questions relating to that cover.

We don't need the answer for A11 if you're not applying for Income Cover for Sickness. And we don't need the answers for B10, 11 and 12 if you're only applying for Life Cover.

First of all you need to check that all the sections in the box on the left of the screen have a tick in them, including sections A through C. If a section has a cross, click on it and see if there are any words that appear in magenta other than the buttons that say 'amend'. If they do it means that you've missed this question out.

Commonly missed answers are to the following questions:

• Client title
• Phone number (we need at least one phone number for each client)
• Marital status
• Street name
• Country in the address
• For non-smokers, it may ask if they have ever smoked

If you've missed out salary, working hours or occupational percentages for house person, retiree or student, you need to enter these standard figures:

• £33,600 for salary (The salary will automatically fill out for housewife, but not retiree or student)
• 40 for working hours a week
• 100% admin for occupational percentages

This stops the application asking for additional questions about their occupation and allows you to submit the application.

Try shortening the name of the disorder or duty, so if the disorder is 'multiple heart attacks over 5 years' just type in 'heart'.

If you still can't find it, select the 'condition/family history/medication* not listed' option - this opens a text box where you can type in your own description. This will refer the application to our underwriters, which means it won't be accepted immediately online.

*You can also use this for family history not listed, medication not listed, country not listed, etc.

Yes, we don't want to limit disclosure from your client and they should disclose all relevant information under each relevant question.

If your client has had 2 incidents of the same condition - for example, 2 heart attacks at different times, then you should disclose this twice. It will run through the full set of questions twice, including date of symptoms, did they have surgery, etc. They should fill these in fully, one for each incident.

However, if they've had one incident that could be answered yes under 2 different questions in section C, they only need to disclose this once. For example, if the client had a back problem, they would not have to answer yes to both 'any disorder of muscles, bones, joints and limbs' and 'any disorder of the back or neck'.

If they do answer yes, it will again go through the full set of questions for each disclosure, and it will treat it as 2 incidents of the same condition.

If you want to change the answer from 'Family history of heart disease' to another kind of family history, you need to click on the '+' sign to the right of the question.

Please note that if you click 'amend' against a question, it'll take you back to section C to amend the answer from 'yes' to 'no'.

It could be that the system has rated the case - it can offer non-standard terms and increase the payment with a rating.

Or it could be that the client details aren't the same. Changes to date of birth, gender and smoker status can all make a difference to the payment, and can often be mistyped. Failing that, check that the covers haven't changed.

If you're still having problems, call us on 0845 6094 511.

Declines, postponements, referrals and ratings can be due to a number of reasons, usually medical or occupational. You could double check the height and weight details in case you've added these in wrongly. If you put the client's height in as 1 meter 7, it will read centimetres as 07 not 70.

However, if the relationship between life assured and the payer is business partner, company, employer or other, this will also be referred. And if the relationship between the life assured and proposer is business partner, or other, this will be referred too.

Call our online help desk on 0845 6094 511, and they'll be able to tell you the reason.

Yes, one of the functions we've built in is quotation flexibility post decision. This allows you to easily quote for budget-driven sales, avoid submitting declined lives, get clean lives on risk quicker and view rated commission before submission.

We can't accept an online application without valid bank details. Unfortunately there is no way around this. If you don't have your clients' bank details you can save the application and come back to it within 30 days of the quote.

You could submit a paper application without bank details.

Will refer a case. Answer no to 'Is the person paying for this plan the owner?', It will then ask for more details, including their name, date of birth and address. If it's a company, put in today as the date of birth.

Try closing the page then log in again to retrieve the application.

If you don't know the GP's name, put in 'Practice Manager'. You don't need to put in 'Dr' at the start as our system automatically adds this in itself.

If the system refers you back to the GP details page after putting in bank details, this will be because you added in a third party payer. We automatically refer third party payer cases and we need GP details for all refers.

We only support Internet Explorer (IE), and you will need IE version 5.5 or above to work correctly in the 'additional questions' section of the application. If you have a previous version of Internet Explorer, you will need to download a later one from their website to use interactive quote & apply:

http://www.microsoft.com/windows/products/winfamily/ie/default.mspx

Unfortunately, we do not support any other internet browser including-

• Firefox
• Netscape
• Safari
• Google Chrome

We're also not compatible with Internet Explorer 9, but this can usually be fixed. If you're on the additional questions and it's not loading up any questions, you're probably using Internet Explorer 9.

To check that, click on the 'help' option under the address bar. It will bring up a menu, and if you click on 'about Internet Explorer' it will tell you the version you're using.

Once you know that you're using Internet Explorer 9, look up at the address bar where it says www.brightgrey.com/extranet/do... To the right of that there will be some icons. Look for one that looks like a page torn in half.

This is the compatibility view button and if you click on it, it will open our website as though it were in Internet Explorer 8. This should now load up the questions, but if it does bring up an error page, click on 'back to home page', then 'retrieve all applications' and go back into the application. It should load the questions this time.

If you don't have this icon, you can click on tools and then 'compatibility view' instead.

Check you have the latest version of Adobe Reader on your PC. To do this, open Adobe Reader from your start menu, click on 'help' and 'about reader'.

If you have a version of Adobe Reader less than 8.0, we recommend you update your reader to the latest version. You can download this free of charge from www.adobe.com

You may also need to change a few settings on your computer. First, add as a trusted site. Click on 'tools' under the address bar, and then 'internet options'. You should then click on the 'security' tab, and then 'trusted sites' and then click 'sites'. Go to the 'add this website to the zone' tab. It should say https://www.brightgrey.com. Click on 'add', and then 'close.'

Don't click OK or cancel on 'internet options' yet, but instead go to the 'advanced' tab and scroll down until you see a padlock with the word security next to it.

Under that there should be an option that says 'do not save encrypted pages to disk'. If this is ticked, untick it. If it is unticked, leave it at is it is.

Then click 'apply', and 'OK'

If you've had a message saying the application pack is unavailable after you've submitted the application, it probably means the application has failed.

If you've just submitted it, it may take up to 5 minutes to create the document.

We automatically investigate these failures; please call one of our online help desk on 0845 6094 511 and they'll be able to resolve the issue for you.