Pensions
The Insurance and Pensions Authority has completed a revision of the Island's pensions legislation, which sees the Authority become the regulator of all Isle of Man pensions schemes. The Authority's objective has been to provide a regulatory framework which not only encompasses domestic pension arrangements available to Isle of Man residents, but also provides a broader framework enabling multi national or global businesses to use the Isle of Man as a centre from which to manage retirement benefits schemes for their employees who may reside anywhere in the world.
In order to address the needs of these two diverse markets, the Retirement Benefits Scheme Act 2000 was enacted. This Act established a broad framework catering for all schemes operated in or from the Isle of Man. Under the Act, separate regulations have been introduced catering for international schemes (those being schemes managed from the Isle of Man yet without Isle of Man resident members) and domestic schemes providing benefits for Isle of Man residents.
The International retirement benefits scheme regulations came into operation in January 2002, and those relating to domestic retirement benefits schemes in November 2004.
International Schemes
The Isle of Man has always successfully protected its history, as well as continually looked towards its future. As a consequence, in this changing global environment, legislation was passed to provide additional security for multi-national or global businesses wishing to establish retirement benefits schemes in the Island to provide benefits for their global work forces.
The Retirement Benefits Schemes Act and International Retirement Benefits Schemes Regulations create a strong infrastructure for the management of international pension schemes. The legislation has introduced fixed prudential rules which oversee the management of schemes and protect the interests of members. At the same time, individual companies or their advisers are afforded a large degree of flexibility to tailor scheme rules in line with varying corporate or market objectives.
The legislation aims to ensure that retirement benefits schemes based on the Island, and their members, benefit from the reassurance that their retirement benefits are secured in an appropriate manner and that their retirement needs are being catered for by skilled and professional businesses.
Those considering domiciling international pensions schemes in the Isle of Man should, in addition to our regulatory framework, also consider the following historical factors:
Political stability
The Island has the oldest continuous democratically elected Parliament in the World, with a political system that is free of the diversity of party politics. This creates a firm base for pension planning providing pension fund members with three overriding factors - security, reliability and certainty of benefit.
Strong investor protection
The Island adopts extremely high levels of consumer protection and operates compensation regulations covering insurance, banking and investment schemes. These regulations often exceed the protection available to investors in their country of residence and therefore generate a high level of confidence from the consumer.
Stable currency base and strong banking sector
International companies and employees alike need to ensure that their capital is invested in a major currency that is freely convertible and which can be used to pay secure benefits. The Island's financial institutions are highly skilled in not just sterling, but 'multi-currency' processing and schemes can therefore be established and managed using a variety of global currencies.
The instruments which have been introduced to regulate the pensions industry build around these core attractions and use them to add considerable value to the business case for using the Isle of Man as a jurisdiction for pension scheme structuring.
Domestic Schemes
The Retirement Benefits Scheme (Domestic Schemes) (General Administration) regulations came into effect in May 2005. The regulations establish a new pension framework for the Isle of Man under the Retirement Benefits Schemes Act 2000. The new framework operates independently of the existing pension scheme tax approval process. It is necessary for all schemes to be registered with the Authority in addition to seeking tax approval from the Assessor of Income Tax.
The domestic pensions legislation operating in the Isle of Man is similar to that of the UK. Individuals who come to reside in the Island are therefore able to transfer their UK occupational or personal pension rights into equivalent Isle of Man based arrangements. Furthermore, similar restrictions on the payment of contributions, and the payment of benefits at retirement apply.
As with the UK, those who are not afforded access to an occupational scheme through their employer, are able to establish a personal pension arrangement.
The Income Tax (Pensions) Act, which took effect from 5th April 2008, has provided greater flexibility on the types of investments permissible within a pension plan. It is now possible to take income withdrawals from a pension fund and the compulsion to purchase insured annuities has been removed. The tax-free lump sum limit has been raised to 30% from 25% and lump sum payments can be taken prior to pension payments commencing.
Regulations and Guidance
For further information on regulations and guidance in relation to pensions business, please see the IPA website.
Acknowledgement: Insurance and Pensions Authority
Contact Details:
Isle of Man Government Insurance and Pensions Authority
4th Floor, HSBC House
Ridgeway Street
Douglas
Isle of Man
IM1 1ER
British Isles
TEL NO: +44 (0) 1624 646000
FAX NO: +44 (0) 1624 646001
EMAIL: ipa.admin@ipa.gov.im
Please click on the Insurance and Pensions Authority logo for a link to their own website.