Traditionally, offshore pension planning has remained the preserve of the expatriate/ex-colonial community. However, the advent of fast, cheap and efficient air travel leading to the globalisation of international business has brought a surge of demand for the provision of pension benefits administered offshore. These plans provide an appropriate solution to the savings and pension requirements of the international executive throughout his career no matter where he may be based at any one time.
Volaw Trust Company is able to provide a full range of pension products, able to receive contributions from either the employer, employee or both. The retirement benefit arising from these contributions will be calculated either (i) on the assumption that there will be stipulated fixed contributions; or (ii) on an assessment of final pay. In either case, contributions will be invested and administered by the trustees as part of a discernible separate fund held on behalf of the individual employee. Alternatively, an individual’s contributions may form part of an overall fund to be of future benefit to a group of employees as a whole.
ADVANTAGES OF ESTABLISHING PENSION FUNDS IN JERSEY
Trusts established in Jersey for the purpose of holding pension funds are exempt from all Jersey tax that might otherwise be associated with the accumulated income and profits provided that the plan is approved by the Jersey Comptroller of Income Tax under Article 131A of the Income Tax (Jersey) Law, 1961. Thereafter, the trustees are at liberty to administer and distribute pension funds in accordance with the provisions of the plan. The plan will be drafted in a manner that is mutually conducive to both the participants and employer.
FISCAL TREATMENT OF A PENSION FUND IN JERSEY
International corporate groups and/or their employees may opt to establish a tax exempt pension trust in Jersey on the basis that the Settlor is not resident in Jersey. Should it transpire that one of a group of employees wishing to form a plan is Jersey resident, the Jersey Comptroller of Income Tax will consider the situation on a pro-rated basis assuming that the number of Jersey participants remains in the minority. In the event that a pension trust is established in association with a business carrying on a part of its trading activities in Jersey, the exemption may apply regardless for so long as the majority of the business’ activities are seen to be conducted overseas.
FLEXIBILTY OF A JERSEY TAX EXEMPT PENSION FUND
The size and frequency of contributions are entirely flexible so that payments by regular instalments or as a lump sum are allowable. The entire pension fund may be distributed to the beneficiaries as a tax free lump sum at any time without there being any necessity to retain any part of the fund for future disbursements such as the acquisition of an annuity. Alternatively, benefits may be tailored, in accordance with the employer/employees’ wishes, to provide for an ongoing consistent level of distribution. In any event, distributions will not be subject to taxation in Jersey.
CONTROL OVER THE ACCUMULATED JERSEY PENSION FUND
These pension plans provide the employer and employees with the flexibility to determine the manner in which the accumulated fund will be invested. Consequently, the employer/employees may direct investments into a portfolio of their choosing. During the acquisition procedure the trustees will respectfully consider their wishes. It is unusual for the trustees to question the wisdom of the employee’s investment recommendations unless there are significant legal, ethical or commercial objections to the prospective investments under consideration. Likewise, the trustees will seek to avoid speculative or unusually volatile investments. In such circumstances, the trustees will confer with the employer/employees before taking any further action.
In the case of a collective fund, the employer may choose to exercise a degree of control and supervision over the arrangements adopted on behalf of his employees. This might apply specifically to pension funds belonging to a collective pool of investments whose performance will influence the future benefits accrued to all concerned. These plans permit an employer to establish an offshore pension fund for the future benefit of all or some of his employees that should accumulate gross in a tax-free environment, with the maximum of flexibility and the minimum of regulation.