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Jersey Responds To QROPS Change With New Offering

Wednesday, April 11, 2012

The Jersey government has announced the launch of a new Jersey-based pension scheme, the Recognized Pension Scheme(RPS), which provides a structure compliant with UK law following changes to UK rules regarding Qualifying Recognised Overseas Pension Schemes (QROPS).

To qualify as a RPS, a pension scheme would need to meet the following requirements:

  • It must be based in Jersey;
  • No benefits can be paid out of the scheme until the member reaches the age of 55 (except in cases of the memberís death or the member suffering serious ill-health);
  • At least 70% of the funds in the scheme must be designated to provide the member with an income for life;
  • Benefits may only be paid to a limited category of other people on the death of the member; and,
  • No Jersey tax relief will be available for contributions made to a RPS and no Jersey tax will be payable on benefits paid out of a RPS.

The RPS could be used for pension transfers from the UK. Those seeking to utilise the vehicle would continue to benefit from the exemption from UK tax upon transfer as the scheme has been designed, with support from the finance industry, to comply with the new QROPS rules.

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 GBP1.2m per year and create an additional 120 jobs.

In line with the required changes, the RPS will also be available to Jersey residents, although in practice most Jersey residents will find it is more effective to save through existing domestic pension schemes, which offer immediate tax relief on pension savings.