If you’re new to the Isle of Man or thinking of making a move, you may be wondering how your pensions and investments will work.
Here are 7 things that might help you:
1 – State pension
If you’re already receiving your UK state pension:
-your state pension will continue to be paid by the UK Government
-the UK Government will not deduct UK tax from it, but it will be subject to tax in the Isle of Man.
If you’re yet to retire, you will receive a UK state pension based on the number of state pension qualifying years you’ve accrued in the UK.
And, if you work in the IOM you will also accrue IOM state pension entitlement.
You can get a UK state pension forecast here.
2 – Other pension income from the UK
Income from other UK pensions, such as occupational pension schemes, is generally paid after UK tax has been deducted. This taxation is the default position if you do nothing.
You can, however, complete this form so that no UK tax is initially deducted:
3 – UK personal pensions and tax-free lump sums
A UK personal pension (or Self Invested Personal Pension, SIPP) does not carry automatic entitlement to a 25% tax-free lump sum, for IOM residents. It is subject to IOM income tax.
Transferring to certain Isle of Man schemes can provide this lump sum entitlement, however, and in certain situations, enhance it to 30%.
Seek professional advice first!
4 – Tax relief
One of the main benefits of saving into a pension is the tax relief you receive on the contributions you make.
Rules exist that limit tax relief if you continue to make contributions to a UK scheme as an IOM resident.
Depending on your circumstances, it may be that you need to reduce or stop these contributions. Setting up an IOM scheme may also be an option to make the most of pension tax relief available to you here.
5 – Investment Bonds
If you have an Investment Bond issued by one of the major insurance companies, you may have been taking regular withdrawals from it in the UK, to help meet living and other costs.
A different regime exists in the IOM for such Bonds. It’s not generally advisable to continue to take regular withdrawals from such products.
6 – UK assets and inheritance tax
You may be aware that there is no inheritance tax in the IOM.
Just because you have moved from the UK does not mean that you have extracted yourself from the UK inheritance tax net. It’s not that simple!
There are several steps that need to be taken to get to this point, which could eventually save your estate 40% inheritance tax.
7 – Investment portfolios and overexposure to UK assets
We sometimes see people from the UK with overexposure to the UK stock market within their investments and pensions. Global diversification is vital, as the Covid-19 pandemic demonstrated.
For example, the US stock market recovered far more quickly from its initial fall in early 2019 compared with the UK. It’s benefited from companies being based there that have thrived during the pandemic; big tech firms including Apple, Amazon, Zoom, Facebook, Netflix and Microsoft.
It may be worth checking that your investments have a global outlook.
If you require help with any of these issues, please get in touch.
All of this can be planned for and taken care of to allow you to enjoy everything the Island has to offer.
If you found this blog post useful, you might also want to read Sharon’s thoughts about how the pandemic could change the ROL of your holiday home, and Natalie’s 10 things to do before engaging a Financial Planner.