Jersey is likely to see a raft of pension changes come into force in 2016, but that shouldn't stop people investing in a Self Invested Personal Pension (SIPP).
In fact, any changes that do occur in Jersey's pension marketplace are only likely to be more advantageous for SIPPs.
1. Preparing for the Future
With a Jersey SIPP.
Why Now Is a Good Time.
Chris Cotillard
Offshore Director and Trustee
at Alex Picot Trust
2. Jersey is likely to see a raft of pension changes come
into force in 2016, but that shouldn't stop people
investing in a Self Invested Personal Pension (SIPP).
In fact, any changes that do occur in Jersey's
pension marketplace are only likely to be
more advantageous for SIPPs.
In the future you may be allowed to drawdown on your pension
pot earlier or even drawdown the whole amount. There could
also be a relaxation of the types of assets you're allowed in your
pension pot, providing more opportunities for investment.
3. A Jersey SIPP is an approved pension,
so should the Jersey pension rules change again, say in 5 to 10
years' time, and something better comes along you will be
able to transfer out of a SIPP and into a new approved
pension scheme without penalty.
SIPPS are available to Jersey tax payers as an alternative to
traditional personal pension plans. And they're beneficial as
pensions are still an area Jersey residents get tax relief on.
4. We are seeing a growing number of people
taking advantage of SIPPS,
particularly those who don't have the benefit of an employer with
a workplace pension scheme in place.
They are also attractive to people with accounting and investment
management experience as they enable you to look after your
own pension fund and save premiums, costs and commissions.
5. The major benefits include:
Flexibility
Premiums can be paid monthly, quarterly or as a lump sum, stopped or changed
according to circumstances. You can also purchase an annuity or drawdown between the
ages of 50 and 75.
Costs
Costs are fully transparent, expenses can be controlled, and premiums paid into the SIPP
are not reduced by commission or charges to your advisor.
Tax
There are many tax benefits to having a SIPP, including the ability to deduct your
premiums from your taxable income (one of the few areas Jersey residents get income
tax relief on under the 20% means 20% rule). Importantly, income received from a Jersey
SIPP is Jersey tax free and any Jersey tax deducted at source can be reclaimed.
6. You can even transfer between approved schemes,
although it is not currently possible to transfer out of
an occupational pension scheme unless
the relevant employment has ceased.
7. A list of permissible investments is given
on the taxes website,
but some exclusions include residential property, for example, and
other items which might cause the Comptroller of Taxes to
question whether the main purpose of the investment is to
provide a pension. Normal investments in shares, bonds, unit
trusts and so on are acceptable.
8. Other restrictions include:
The Jersey SIPP is prohibited from borrowing funds, for example,
to take a mortgage in order to buy an investment property.
It is not permissible for the Jersey SIPP to own a property for the
individual to reside there, as it cannot trade with or allow the use
of the funds' assets by the owners of the company.
The owner cannot transfer shares that he currently owns in his
own name into the Jersey SIPP without the need to sell and
repurchase them using a stockbroker, as all contributions to
these schemes must be in the form of cash.
The Jersey SIPP is prohibited from entering into any transaction
with the owners, as directors or otherwise.
9. The flexibility, costs and tax benefits are making Jersey SIPPs
an attractive proposition for residents looking at alternative
ways in which to manage their pensions.
Even if you have investment experience or are a qualified accountant, it is
still worth speaking to a qualified adviser to guide you through the myriad
ways a Jersey SIPP can help you plan for your future retirement.
10. JERSEY SIPP FACT #1
The Income Tax (Jersey) Law 1961 allows individuals to look
after their own pension arrangements, rather than paying
premiums to an insurance company and incurring the related
costs and commissions.
11. JERSEY SIPP FACT #2
Premiums, in the form of cash payments, are made into the Jersey
SIPP. These reduce income for personal tax purposes, up to the
limits prescribed by the Jersey Income Tax Law. At present these
limits are the lower of £50,000 or the individual's relevant earnings.
Additional restrictions apply if your earnings exceed £150,000 and in
the event that they exceed £200,000 no relief will be given.
12. JERSEY SIPP FACT #3
The procedure involves setting up a dedicated investment holding
company to hold the pension fund (a Self Investment Personal Pension
company). The individual, who is responsible for the running of the
company, may hold the position of director and can appoint their own
investment advisor. A separate company secretary must be appointed.