Isle of Man Legislation

The Isle of Man has introduced the Retirement Benefits Schemes Act 2000, (“The Act”), and the Retirement Benefit International Regulations. The Act aims at providing tax neutral (that is to say that the Isle of Man authorities receive no tax revenue from these schemes) international pensions in a regulated environment for individuals or corporations who are resident in any jurisdiction other than the Isle of Man.

Target Market

If you are:

• a Company with overseas offices to which employees are frequently seconded
• an Individual working for a Company whose work entails secondments to overseas offices,
• a Company or someone seeking flexibility in pension management without a mandatory requirement to purchase an annuity, and wish to have the option of controlling the way in which your pension funds are invested
• a non Domiciled UK resident with cash or other assets offshore
• an EU national with cash/bond deposits in another EU state or offshore
• a non UK domiciled individual employed in the UK by a non UK domiciled Company

then International pensions located in the Isle of Man may provide a cost effective and robust solution to your needs.

Flexibility of Pension Schemes

The flexibility of International Pension Schemes means that there are many different circumstances in which they can provide a solution to the needs of a corporation or individual. These include:

• Pension Schemes can be established for international companies whose workforces are in several jurisdictions and who wish to take advantage of the economies of scale and the option of having one pension scheme in one jurisdiction. Locating offshore pensions from many jurisdictions in one place, and for long periods by one well regarded and independent provider and administrator should lead to administrative cost savings, as well as providing stability.
• Pension Schemes for small companies who wish to establish a bespoke occupational pension scheme for one or more of their key executives with the ability to ensure that any surplus funds after death are transferred into a trust or other similar arrangement.
• Pension Schemes for individuals who wish to establish a flexible bespoke pension in a well regulated environment. There is no need for pension plans to follow the executive as he pursues his career in differing overseas localities for the same employer.
• Pensions fall outside the scope of the EU Savings Directive and because there are no limits to the contributions made into a scheme, assets already possessed may be transferred into such a scheme.
• Suitable for Companies employing highly qualified expatriates in low tax environments-such as the Oil and Gas Industry and Airlines operating from the Middle East.

Characteristics and Benefits of International Pensions

Some key characteristics and benefits of International Pensions are:

• No minimum or maximum limit on the amount held in the Pension Fund
• No restriction on the level or frequency of contributions - a single contribution can be made
• Wide range of investments permitted including the retention of funds on bank deposit
• No limit on the age at which benefits can be provided
• No limit on the amount or frequency of withdrawals from the Pension Fund
• Not subject to taxation in the Isle of Man
• Provides a structure for estate planning as the scheme member can direct who should benefit on the death of the Scheme Member either by the addition of persons as members or the distribution of the Pension Fund
• Because the assets are held subject to the terms of the Personal Scheme there is no requirement for the individual member to hold a separate Will in the Isle of Man or any requirement for probate of a foreign Will
• We can provide members of International Pensions with internet access to monitor the assets within the Scheme.
• Funds held are not subject to the EU Savings Directive
• The scheme member has the right to appoint and remove the Scheme Trustees and Administrator (subject to the requirements of the Insurance and Pensions Authority)
• The legislation provides for a certain level of creditor protection by permitting schemes to provide for substitute members in the event of the bankruptcy of the principal scheme member
• Low cost establishment and administration

An International Personal Pension Scheme offers a tax neutral convenient and cost effective method of retaining funds in a secure well regulated environment.

Frequently Asked Questions for an IPP (Corporate Schemes are similar)

What are the requirements for joining the IPP?

There are no restrictions on whom the pension provider may admit to membership of an IPP other than that the member must not ordinarily reside in the Isle of Man.

Why is the Isle of Man a desirable location for the administration and management of client assets?

No other jurisdiction currently offers such a product worldwide.

It is the only offshore centre with such a formal statutory framework, and the only offshore centre having “OECD standards” for pensions.

The Isle of Man has over 1,000 years of its own stable government – Tynwald. It has its own dedicated pensions regulatory authority – the IPA (the Insurance and Pensions Authority) - and a highly respected, secure and well regulated financial services sector. This combination of factors has culminated in it being awarded an “AAA” rating by Moodys and Standard & Poors.

Can I transfer an existing pension into an IPP?

Subject to any restrictions or requirements of the existing pension scheme and the tax authorities where the scheme is regulated, transfers of existing pension schemes to an IPP can be achieved.

Am I restricted as to the choice of retirement location?

One of the benefits of an IPP is that the member can decide where he is to retire without prejudicing his final retirement location, by his choice of pension.

What nature are the benefits under the IPP?

The benefits offered by the IPP are not limited by the IOM legislation, although it is envisaged that the standard IPP will effectively offer a Money Purchase type benefit (Defined Contribution Scheme).

What happens to my pension upon my death?

The flexibility of the IPP is such that a member can elect who should benefit from his/her share of the pension fund on death.

What happens if I move Job, and/or jurisdiction?

Provided you do not move to the Isle of Man, you may change jobs and/or jurisdiction and continue making contributions. Your new employer may also make contributions into your existing IPP – you may decide that this is a prerequisite for moving!

At what age may I retire?

There is no prescribed age. Each Scheme can be tailored to suit the requirements of both the employer and member.

Are there limits to the contributions that can be made into the fund?

There are no upper or lower limits to the contributions which may be made by either the employer or the employee. Similarly you can take a pension “holiday” at any time should your circumstances change without penalty.

Is there a limit to the size of my pension fund?

There are no limits as to final pension pot, nor how benefits may be taken (once in drawdown).

What currency can the IPP be denominated in?

Any tradeable currency may be used, our partners have experience in managing IPPs in USD$, Can$, Euros, and Sterling.

How would my offshore cash/bonds Deposits be affected by the EUSD?

Pensions are outside the scope of the EUSD, thus transfers of assets held offshore/in another EU State from the one in which an individual is resident into an IPP may be achieved.

If the IPP is tax neutral what is the benefit to employers in making contributions?

The contributions made by the employing company may be, treated as trading expenses in the profit and loss account and therefore qualify for corporation tax relief. Subject to the applicable tax regime in the lands in which the company operates othertrading expenses in relation to the scheme may also include such items as professional services (e.g. legal, financial or investment advice), and could also be considered to include the salaries of anyone employed to administer the pension arrangement. They may therefore be an effective means of reducing the taxable profit of the company.

Are there any other tax implications?

In the Isle of Man the scheme may also benefit from the gross roll up of assets (provided capital appreciation is achieved).

What other benefits does an employer company stand to gain from establishing an IPP?

There are administrative costs savings in terms of time, money and efficiency in holding offshore pensions for individuals in the one place, and by one well regarded and independent provider and administrator.

There is no need for pension plans to follow the member as he pursues his career in differing overseas localities for the same employer.

International Personal Pensions provide third party impartial oversight and stable long-term independent management. The recent demise of ENRON in the United States, and the earlier Maxwell saga in the UK, serve to highlight the point that some international companies were addressing minimal levels of governance in certain pension related areas of their operations.

Do I have to purchase an annuity?

There is no requirement to purchase and annuity.

Are there restrictions on the assets that can be held under the fund?

There is considerable flexibility with regards to the assets held by the fund. In accordance with the Statement of Investment Principles these may include:

• Quoted shares
• Fixed interest securities
• Bank and building society deposits
• Unit trusts
• Insurance policies
• Unquoted securities
• Commercial property
• Loans

In the Isle of Man the scheme may also benefit from the gross roll up of assets (provided appreciation is achieved). It is possible for certain residential property investments to be considered.

How long will it take to establish an IPP?

The normal period of time is between 2 and 3 months.

Who are the parties to an IPP?

OCRA (Trustees) Limited will act as the trustee. In addition the member can be a trustee or can nominate another individual or legal entity to be a trustee. If either the member or his nominee is to act as trustee then the Isle of Man Insurance and Pensions Authority will have to approve them as accredited trustees.

What due diligence is required?