GTC

Local Pension Plans

Local pension plans for individuals are known as Retirement Annuity Trust Schemes (RATS) and
are available to persons who are resident or non-resident in Guernsey.

A RAT is a self-administered private pension scheme written under trust and approved by
the States of Guernsey. It is an excellent way of providing for retirement. GTC can provide the Trusteeship and can arrange for investment managers and accountants to be appointed to the plan who will be able to provide the necessary investment and accounting services. GTC will be pleased to provide details of the fees charged for a local pension plan.

A RAT is also called a Defined Contribution Retirement Benefit Plan or Money Purchase  arrangement.  This type of pension scheme offers considerable flexibility and advantages when compared with the insurers' pension plans which are no longer offered to new
members in the Channel Islands.

Each RAT is a separate trust, whether it is established in an individual's name or as a sub-trust for an employee who is a member of a Group Scheme.  Each member's contributions are invested by the Trustees into the agreed Investment Strategy.  When a member retires the value of the funds held in the RAT will form the basis for calculation of his or her pension.

  • Principal rules for the establishing a RAT

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    The following are the principal rules for the establishment of such a Scheme:-

    • The draft Scheme and Trust Deed must be approved by the Administrator of Income Tax
    • The Trust Deed should contain Scheme Rules and state the Scheme will conform to Guernsey Law
    • There must be a minimum of one corporate or two individual Trustees (each Guernsey resident)
    • There can be more than one member of the Plan
    • With regard to taxation, there are particular contribution limits. Subject to observing those limits, tax relief is available on a member's contributions. There is no tax on the investment income of the fund. Tax is payable on the income paid out as an annuity/pension when the member attains retirement age
    • A lump sum up to a stated percentage of the whole fund can be taken tax free upon reaching retirement age
    • An annuity or pension must be paid out of the fund at normal retirement age which can be at any time between the ages of 50 and 75
    • Transfers in and out from approved schemes are permitted
    • The investment parameters (this is effectively a self-invested plan) are broad, including listed and unlisted equities, loans and commercial property. After the plan is set up the Trustee must prepare and submit accounts annually to the local tax office.

  • Why have a RAT?

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    The demise of defined benefit schemes and demographic changes mean that providing a source of income at retirement independent of a State funded scheme is becoming a necessity rather than simply being desirable.  As individuals we are becoming aware of the need to make financial provision for our own retirement in addition to anything we might expect from the State.  As an approved pension scheme, a RAT is a tax efficient way to accumulate funds for your retirement with tax relief on contributions to encourage saving.

    Some of the advantages of a RAT:

    • Tax relief on contributions (subject to annual limit)
    • UK pension may be transferred into RAT (QROPS compliant)
    • Offers flexible, wide range of investments
    • Up to 30% tax free lump sum available from age 50

  • How does a RAT compare with an Insurer's scheme?

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    RAT vs Insurer's Scheme:

    Retirement Annuity Trust Insurer's Annuity Pension Plan
    • Pension must be taken between age 50-75 but no need  to buy annuity
    • Pension is drawn from accumulated 'pot' instead
    • Amount drawn may vary
    • On death, any remaining value paid to pensioner's estate/beneficiaries (after tax)
    • However, it is possible the entire retirement 'pot' may be used before death
    • Must buy an annuity, usually at nominated
      retirement age
    • Income depends on interest/annuity rates at the time
    • Income guaranteed until death
    • On death, any residual value reverts to insurer

     


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