INTERNATIONAL
PENSIONS
If you’re an international employer looking to provide a company pension scheme for your global employees, then make sure you consider the advantages of an IPP and in particular the specific benefits that schemes from providers in Guernsey can offer.
What is an IPP?
An international pension plan (IPP) is a pension plan established in an International location, such as Guernsey, which is the home country of neither the employer nor the employees, to provide benefits for the global employees of an international employer.
It is not generally possible for an international employer to retain all its global employees in a single pension plan established in its home country. This might be due to economies of scale, lack of local pension vehicles, legal and tax issues. Therefore it may be that an IPP is the most appropriate solution. The IPP can be either ‘approved’ or not depending on the needs of the trustee/sponsor. An advantage of ‘approval’ is that the ability to accept transfers in or make transfers out may be enhanced.
What does an IPP in Guernsey offer?
- Many different employers within the same multinational group can join the same IPP.
- Flexibility over benefit design, even for individual members of an IPP.
- No limits on the amount of employer or employee contributions.
- Employer contribution rate flexibility; pace of funding for defined benefit arrangements and contribution rate structure for defined contribution schemes.
- No requirement to comply with EU ‘cross border’ restrictions and to be ‘fully funded’ at all times (for defined benefit arrangements).
- Freedom of investment choice offered to members (for defined contribution arrangements).
- No income tax or capital gains tax on the assets within the IPP.
- No limits to the value of the benefit/fund which can be accumulated for an individual member.
- Option to take entire account as lump sum on leaving service or retirement (subject to being over age 50).
- No requirement to purchase an insurance based annuity, the provider can offer both drawdown and annuity options.
- Pension income paid gross without the deduction of Guernsey income tax.
- Able to transfer and receive benefits from other pension arrangements.
Guernsey - A leading location for an IPP
- Many different employers within the same multinational group can join the same IPP.
- Flexibility over benefit design, even for individual members of an IPP.
- No limits on the amount of employer or employee contributions.
- Employer contribution rate flexibility; pace of funding for defined benefit arrangements and contribution rate structure for defined contribution schemes.
- No requirement to comply with EU ‘cross border’ restrictions and to be ‘fully funded’ at all times (for defined benefit arrangements).
- Freedom of investment choice offered to members (for defined contribution arrangements).
LOCAL
PENSIONS
If you’re an employer looking to provide a company pension scheme for your local employees, then you can provide tax advantaged arrangements either through an occupational pension scheme or through a multi-member retirement annuity trust scheme (“RATS”).
If you’re a Guernsey resident then you can also provide personal pension provision through a multi-member RATS or an individual RATS.
Occupational Pension Schemes
An occupational pension scheme for local employees may be approved by the Guernsey Income Tax Office under Section 150 of the Income Tax (Guernsey) Law, 1975 if it meets the requirements set out in the Guernsey Pension Practice Notes: Occupational Pension Schemes
The scheme will then be exempted from income tax and capital gains tax on the assets within the pension scheme. Within limits, contributions will benefit from tax relief and part of the retirement benefits may be taken as a tax free lump sum.
A Guernsey approved scheme is not limited to local Guernsey staff. Similarly, a non-Guernsey scheme may be approved by the Guernsey Income Tax Office in relation to local employees.
Retirement Annuity Trust Schemes
and Approved Retirement Annuity Schemes
A retirement annuity trust scheme and a retirement annuity scheme for local employees may be approved by the Guernsey Income Tax Office under Section 157A of the Income Tax (Guernsey) Law, 1975 if it meets the requirements set out in the Guernsey Pension Practice Notes: Retirement Annuity Trust Schemes and Approved Retirement Annuity Schemes
The scheme will then be exempted from income tax and capital gains tax on the assets within the pension scheme. Within limits, contributions will benefit from tax relief and part of the retirement benefits may be taken as a tax free lump sum.
International
Personal
Pensions
Individuals as well as companies may set up international pension plans. For the globally mobile employee, this provides a flexible, multi-national and portable pension plan. The rules are highly flexible and the assets are held in a fiduciary capacity. The assets in the plan grow free of taxation. Plan benefits are paid gross to members and are not liable to Guernsey tax, unless payable to a resident of Guernsey.
Individual international personal pensions can be set up as QNUPS (Qualifying Non UK Pension Schemes) where individuals have a potential exposure to UK Inheritance Tax. As QNUPS are not UK registered pension schemes, different rules from those in the UK can apply to the investments held within the fund, and the terms of the drawdown. They provide a flexible pension structure that can supplement existing pension arrangements. Assets of the plan roll up gross, and are outside the scope of UK Inheritance Tax whilst offering succession planning opportunities.
While Guernsey cannot currently offer QROPS to non-locals, it remains home to a substantial number of former QROPS which were established prior to 6 April 2012. These former QROPS retain the same tax advantages within Guernsey as previously. There is no Guernsey income tax or capital gains tax on the assets within the scheme and benefits are paid gross, without any deduction of Guernsey income tax.
USEFUL RESOURCES
Use the following links for further information.