New pensions law for the Isle of Man
The Isle of Man should be able to challenge Guernsey’s dominance of the QROPS market following a recent change in its pensions legislation.
The new ‘50C’ scheme has created a new type of international pension structure, open to both residents and non-residents, which allows the payment of benefits without any tax being deducted. This refers to benefits paid out as both pensions and lump sums, and upon death.
The previous ‘50B’ legislation was only open to non-residents, and meant they had to pay a 20% tax charge on any income payments received once the pension had gone into drawdown. Similar schemes domiciled in Guernsey do not incur any such tax charges.
The new international pension legislation meets the requirements to be awarded Qualifying Recognised Overseas Pension Scheme (QROPS) status as defined by Her Majesty’s Revenue and Customs (HMRC) in the UK. However, this remains subject to approval.
Another benefit the Isle of Man now has over Guernsey is in regard to the pension commencement lump sum payment. Currently, this is set at 30% compared to 25% in Guernsey, although legislation to increase this to 30% will go before Guernsey’s parliament in November.
The new international scheme can only be provided by registered Isle of Man pension providers who are regulated by the Island’s Insurance and Pensions Authority (IPA).
Neil Chadwick, RL360°’s Technical Marketing Manager, supports the Isle of Man Government’s decision to change the pensions law: “As far as international pensions schemes offered within the Crown Dependencies go, Guernsey should no longer have a perceived advantage over the Isle of Man. With many QROPS Trustees investing in Offshore Bonds for investment flexibility and ease of administration, having the Trustee and the asset provider in the same well-regulated jurisdiction is positive step forward.”