Pensions & Retirement Planning

It is now generally accepted that the State can no longer provide for us in our retirement. And today, we are living longer healthier lives so it is more important than ever to make the right decisions to ensure a secure and enjoyable retirement without financial worries.

All too often, planning for our retirement is not a top priority. When you are relatively young, retirement planning is often seen as something that will "take care of itself". And, as you get older, other demands can make it difficult to find enough money to save.

Retirement represents a major change in lifestyle and gives you a major new asset; time! Whatever your feelings, retirement is probably the opportunity of your life for a new and potentially very enjoyable phase of life in which you, and not others, manage your time.

Whether you are planning your retirement or about to retire, we can advise you on the most appropriate course of action.

Those running their own businesses need to take care not to only work in their business but also on their business, and need to carefully prepare for an exit strategy. The selling of your business (or shares or partnership) for what you think it is worth compared with what you actually may achieve, means it is essential to have a comprehensive plan ‘B’.

The existence of a pension fund can also enable phased retirement rather than an overnight change from worker to pensioner.

Pension Transfers and QROPS

Pensions are often not considered in offshore financial planning despite their asset worth and the potential flexibility and tax savings to be derived. Depending on your circumstances you might not want to simply view a pension scheme as a means of providing an annuity for you and your spouse that will cease on your death. We understand the natural desire of clients to preserve the capital value of their pension funds, which you have worked hard to build-up. Using highly respected providers of Isle of Man approved schemes to provide the management and trusteeship of offshore self-administered pension schemes, we can assist you to achieve these desires, enabling you to ultimately pass on the residual value of your pension funds to your heirs.

For clients who are moving jurisdiction, you may wish us to assist in the export of your pension funds from restrictive high tax jurisdictions to more flexible low tax jurisdictions. All transfers are arranged in compliance with Revenue requirements and, where necessary, with the full approval of Revenue authorities in the transferring and receiving jurisdictions to ensure that funds are transferred without a tax charge. Having a well regulated but flexible pensions regime, the Isle of Man is an ideal base from which to engage specialist pension advice and services.

Isle of Man Pensions

Recent changes in Isle of Man pension legislation offer a number of benefits for SIPPS (Self-Invested Personal Pension Scheme)

Contributions

Contributions receive full tax relief at the member’s marginal rate. SIPPS imposes no minimum or regular contribution conditions and consequently contributions can be made at a level and frequency chosen to suit the member. Each member can contribute up to £300,000 per annum and tax relief is available up to 100% of relevant earnings. Contributions can also be accepted from a member’s Employer potentially offering significant tax savings, an exit strategy and protection from creditors.

Scheme Benefits

Benefits are payable at the member’s discretion any time from age 50 (55 from April 2010) to 75 and are not linked to the need to actually retire from employment.

On drawing benefits, up to 30% of the member’s accumulated fund may be taken ‘tax free’ as a lump sum payment with the balance of the fund used to provide a pension, which does not have to be taken at the same time as the lump sum. Pensions are calculated in accordance with tables issued by the Isle of Man Treasury and can be varied according to the member’s needs. Pension payments are made directly to the scheme member from the assets of the SIPPS and there is no requirement to purchase an insured annuity. Residual capital can therefore be passed to nominated beneficiaries on death rather than being lost as a windfall profit to an insurance company.

The maximum pension that can be drawn is 120% of the Basis Amount (the Basis Amount being roughly equivalent to a single life annuity rate). Prior to age 75, there is no minimum pension that must be drawn and after age 75 the minimum is 35% of the Basis Amount. The pension in payment will be reviewed every three years and may vary depending upon the investment performance of the funds held within the SIPPS. All undrawn benefits continue to grow free of Isle of Man tax.

The whole of the member’s accumulated fund can be distributed tax free in the event of the death of the member before drawing benefits and arrangements may be made for members to provide ongoing widow(er)s, or other dependant pension benefits. If the payment of benefits has commenced the residual fund can be distributed to beneficiaries subject to a tax charge of 7.5% or the residual funds could be transferred tax-free to another approved Isle of Man pension scheme.