IN171 - Advantages of Recent Changes in Isle of Man Pension Legislation for IOM Residents and Expatriates

Changes introduced by British Government in the 2004 Finance Act made it possible to transfer benefits from UK pension funds to overseas pension funds. These funds may offer a more attractive pension environment for UK non-residents and are of interest to individuals currently considering becoming UK non-resident.

Isle of Man Pension Schemes

The Isle of Man is one of the jurisdictions which have pension schemes available to UK non-residents. The Isle of Man has an AAA Sovereignty Rating from Standard and Poors and Moody’s and has recently been affirmed by the International Monetary Fund as an Offshore Financial Centre of Excellence.

Isle of Man pension schemes, which have designated Qualifying Recognised Overseas Pension Scheme status (QROPS), are now available. This method of transferring benefits from the UK has been in existence since 2006. Initially it was designed to satisfy the requirements of Isle of Man residents, but Isle of Man schemes have now evolved to become appropriate products for UK expatriates and internationally mobile individuals wishing to have more control and flexibility over their pension arrangements. A number of Isle of Man schemes have been designed to accept UK Protected Rights transfers, providing the ability to transfer an entire member’s pension fund from the UK.

Key Features of Isle of Man Pension Legislation

The ‘Simplification of the Isle of Man Pension Legislation’ was completed on 6 April 2008 (following Royal Assent):

• Minimum retirement age of 50
• Tax free cash of 30%
• No requirement for the compulsory purchase of an annuity
• No lifetime allowance
• No tax on death pre-retirement
• 7.5% tax on death post-retirement
• A maximum contribution limit of £300,000 per annum
• Flexibility in drawdown

Professional Advice

Pensions and, in particular, the transfer of pensions to a QROPS is a complex area and individuals must seek professional advice.

It should be noted that HM Revenue & Customs demands a number of reporting requirements relating to a QROPS. These requirements are relevant to UK residents and to individuals who have been UK resident during the past five full tax years. These may affect the benefits that can be taken from the scheme.

Summary

In the correct circumstances Isle of Man QROPS approved pension schemes provide the ability to transfer UK based pension benefits into a pension product which is both tax effective and flexible. Benefits can be used to provide an income for life, reflecting specific personal requirements, and to generate efficient succession planning for families.

Additional Information

If you require any additional information on this topic please contact Simon Kelly or Bruce Watterson at the Dixcart office in the Isle of Man, or contact us.