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Pension Planning for New Isle of Man Residents
An important planning factor, often given low priority or overlooked by local advisors, is the ability for new residents to transfer their UK pension rights to a local pension scheme. Such a transfer can lead to substantial tax and capital preservation advantages.
Taxation
Under the double tax treaty with the UK, it is now possible for an IOM resident to have certain UK pension income paid gross and taxed only in the IOM. The treaty does not, however, cover the taxation of any residual fund on the death of the member. Where an IOM resident dies in receipt of UK pension, up to 82% of the residual fund can therefore be payable to HMRC. With the IOM tax rate on residual funds being only 7.5%, it can be a very costly oversight for an Isle of Man resident to leave his pension benefits in the UK.
Capital Preservation
Certain UK pension schemes require the member's pension fund to be liquidated in order that an annuity may be purchased from an insurance company. Members often do not wish to take income based on what may be low annuity rates, nor do they wish to relinquish control of capital in return for an annuity that will die with them.
Solution
It is often possible to mitigate both of the above problems through the transfer of UK pension rights to a suitable approved pension scheme on the Island. IOM pension schemes are capable of being registered with HMRC as Qualifying Recognised Overseas Pension Schemes (QROPS) and pension benefits can therefore be transferred from the UK to the IOM without too much difficulty.
The type of pension scheme into which pension rights are transferred is an important decision. For clients with a substantial pension fund considerable advantages can be gained through the establishment of an approved 'self-administered' scheme. These schemes, written under trust, allow clients to maintain control of their capital and select their own investments within flexible guidelines. Because there is no requirement to purchase insured annuities, residual capital can be preserved for nominated beneficiaries on death rather than being lost as a windfall profit to an insurance company.
The Fedelta Group
Fedelta Pensions Limited is able to arrange the transfer of pension funds and establish and administer approved QROPS in the Island. We believe the experience of our pension
team in this area is unequalled in the Island.
Action
It is important that new residents, particularly those who have been high earners, review their pension arrangements as soon as they arrive on the Island. Even if pension benefits have commenced, it should still be possible to arrange a transfer.
We are always happy to arrange an initial meeting with you and/or your professional advisor without cost or obligation.
For further information please contact Nigel Callin or Mike Pringle at Fedelta Pensions Limited, 29/ 31 Athol Street, Douglas, Isle of Man, IM1 1LB.
Telephone: (01624) 622331 Facsimile: (01624) 677224
E-Mail:nrcallin@fedelta.com Internet: www.fedelta.com
Fedelta Pensions Limited is Registered with the Isle of Man Insurance and Pensions Authority as a professional Retirement Benefits Schemes Administrator.