Isle
of Man Pension Investments
Insurance
business carried on in and from the Isle of
Man is controlled by the Insurance Act 1986.
Domestic insurance business is largely carried
on by 'permit-holders', being foreign companies,
mostly UK insurers.
The
Isle of Man Government Insurance and Pensions
Authority regulates the sector through an Insurance
Supervisor. Insurance companies are required
to satisfy the Supervisor that the company will
be properly managed in the Island and will have
adequate financial resources and reinsurance
support for the business to be undertaken.
The
Isle of Man has created a bespoke pensions regime
which it hopes will attract international companies
offering retirement benefit packages and schemes
to expatriates and companies employing them.
Schemes
offered from insurers in high-tax countries
may give some tax benefits, but suffer from
the lack of flexibility inherent in national
pensions legislation. With more and more individuals
and companies basing themselves internationally
there is a growing market-place for offshore
pension provision, and this is the market which
the Isle of Man has set out to capture.
The
Retirement Benefits Schemes Bill 2000 came into
force in June 2000. The Pensions Authority consulted
widely with international life and pensions
companies in drawing up the legislation.
In
August, 2004, the Isle of Man Insurance and
Pensions Authority (IPA) introduced new regulations
which allow bodies other than limited companies
to carry on insurance business in or from the
Island.
The Insurance (Limited Partnerships)
Regulations amend the Insurance Act 1986, and
the Insurance Regulations 1986, to allow limited
partnerships to carry on insurance business.
The new regulations attempt to introduce a regulatory
framework for limited partnerships that mirrors
that already established for limited companies.
Individuals
in a number of situations can gain advantage
from offshore pension investment, for instance:
Expatriate
executives, professionals or entertainers;
Residents in high-tax countries intending to
become non-resident on or before retirement
;
Residents in low-tax countries.
Expatriate
executives, professionals, entertainers and
similar types of global wanderer have a considerable
problem with pension provision, since it is
often the case that while non-resident they
cannot continue with tax-privileged pension
investment at 'home', ie in their original domicile,
to which they probably intend to return in the
end. It may well be that offshore investment
is the only practicable route, even though the
income they eventually receive in retirement
is going to be taxed - and they may decide to
retire offshore, in which case they will have
preserved flexibility by not committing to any
particular high-tax jurisdiction.
People
who already live offshore and have no intention
of moving onshore, are not really concerned
with the distinction between 'pensions' investment
and 'non-pensions' investment, since there are
probably no taxes to consider either way. They
need to have regard to security of course, and
will no doubt be planning to maximise income
in retirement, so that offshore pensions products
are still relevant to them.
Investments
intended to provide pensions income need to
take into account the choice of jurisdiction
for eventual retirement. The Isle of Man, like
many offshore jurisdictions, provides tax exemption
for non-residents, but not for residents, or
at any rate not for the local income of residents,
so that it may be undesirable to locate a retirement
investment in The Isle of Man if that's where
you plan to live.
In
March, 2006, it
was announced that pension
rights transfers from the UK to the Isle of
Man would no longer be subject to HM Revenue
and Customs (HMRC) discretion, and individuals
will not have to meet any HMRC conditions under
simplified pension laws introduced in the UK
on April 6 ('A' Day).
It
is believed by HMRC that the new rules will
make it easier to make transfers than the existing
bilateral arrangements.
As
a result, the existing reciprocal agreement
between HMRC and the Manx tax authorities for
the transfer of pension rights were terminated
with effect from 5th April 2006, according to
Malcolm Couch, the Isle of Man's Assessor of
Income Tax.
Mr
Couch explained that the ability of an Isle
of Man resident moving to the UK on changing
their job after 5th April 2006 to transfer their
pension back to the UK will remain but it will
take place under the new regime. Guidance on
the new arrangements has been posted on HMRC's
website.
The Isle of Man's Income Tax Division published
a consultation document on the taxation of pension
schemes on the Island, in October, 2006.
According
to the Income Tax Division: "It is hoped
that this consultation will generate debate
about changes in the Isle of Man which were
proposed some time ago, the changes which the
UK has recently made and the degree to which
the UK changes might, or might not, be appropriate
for introduction here."
Changes
proposed in the consultation document include:
