States of Jersey legislators are due to consider the legislation after 16 May, and upon their approval – which is considered likely – it would take effect immediately.
The lodging of the proposed scheme follows years of planning by Jersey officials, who were determined to create a robust structure that would not be vulnerable to some of the problems that some other jurisdictions have encountered with their own qualifying recognised overseas pension schemes (QROPS).
Current Jersey law permits the transfer to the island of the UK pensions of Jersey residents only. This means that the 138 Jersey QROPS listed on HMRC’s website hold just the pensions of people who live on the island.
Details of the new scheme
Under the new, so-called Recognised Pension Scheme (RPS), benefits would not be paid out before the scheme member reached the age of 55, except in cases of the member’s death or the onset of "serious ill-health".
At least 70% of the funds in the scheme must be designated to provide the member with an income for life, and the benefits could only be paid out to what a summary of the new legislation called "a limited category of other people" on the death of the scheme member.
In order to comply with regulations recently implemented by HM Revenue & Customs, the new scheme would not provide Jersey tax relief on contributions made to an RPS, and no Jersey tax would be payable on benefits paid out of such schemes.
Years in the making
Jersey officials and the island’s finance industry have been working on developing the new pension regime since at least as far back as 2010, as the importance of the international pensions market became increasingly obvious after QROPS were created in 2006, as a result of an overhaul of the UK’s pension legislation known as A Day.
Since A Day, Jersey’s neighbour and historic rival, Guernsey, has become a global leader in the so-called "third-country" QROPS market. It accounted for 10% of total UK pension transfers into QROPS, by numbers transferred, between 2007 and June 2011, according to HMRC data obtained last year by Guernsey QROPS provider Concept Group, through a Freedom of Information Act request. This put Guernsey in third place overall as a recipient jurisdiction of such pensions, behind Australia and New Zealand. And in the first part of last year, according to the same data, Guernsey had the largest share, with 32% of the total, followed by New Zealand and Australia.
In a statement today, Jersey said the proposed RPS "would allow [Jersey’s pensions] industry to capitalise on this market, and diversify its existing offering to clients", including, but not only, from the UK.
"While the RPS may be used internationally in many different markets, it is estimated that accepting transfers from UK schemes alone could generate tax revenues of approximately £1.2m per year and create an additional 120 jobs," the statement noted.
Although the RPS will be open to Jersey residents, it is thought that in practice, most locals will prefer to make use of existing domestic pension schemes, which offer immediate tax relief on pension savings.
To view a pdf of the scheme, click here.
