Guernsey: Have Pension….Will Travel

Last Updated: 27 July 2010
Article by Alison Vine

Most Read Contributor in Guernsey, September 2018

Originally published in the Guernsey Wealth Management Supplement from Taxation Magazine, June 2010

Alison Vine, Tax Director at Ernst & Young in Guernsey, explains the advantages of establishing or transferring your pension abroad if you are not staying in the UK.

The top rate of income tax in the UK is 50%, contributions into UK pension schemes are qualifying for less and less relief, and the fiscal position of the UK is worrying. Now is the perfect time for someone who has:

  • accumulated a pension pot in the UK but is about to leave;
  • no longer lives there, or
  • is in the UK for some temporary purpose only, to consider whether placing the pension outside the UK would make more sense.

Key Points

  • Why it is a good time to consider a transfer of your pension overseas.
  • The advantages and disadvantages of QROPS.
  • Other pension plans for the internationally mobile.
  • The advantages of Guernsey as a jurisdiction.


As a result of amendments made to UK legislation following the Finance Act 2004 (and presumably bowing under the pressures arising from the EU free movement of capital principle), it is now possible for a UK pension to be migrated to another jurisdiction, without punitive exit charges, and with certain exemptions from UK tax continuing to apply.

For a transfer to be exempted the receiving scheme must be a qualifying recognised overseas pension scheme (QROPS). To be a QROPS an overseas scheme must satisfy certain criteria. It must provide for benefits to be paid to a member such that it qualifies as a pension scheme and it must be established outside the UK. It must be regulated as a pension scheme in the jurisdiction in which it is established and be recognised for tax purposes as such in that territory. The type of scheme must be open to residents of the jurisdiction (i.e. the regime cannot be exclusively for non-residents). At least 70% of the fund must be designated to provide an income for life, and any benefit (including any lump sum) must be payable no earlier than 'normal minimum pension age' (55 since 6 April 2010).

To be a qualifying scheme the scheme must be established in an EU jurisdiction, Norway, Liechtenstein or Iceland. Failing one of these, it must be in a country with which the UK has a double taxation agreement that contains exchange of information and non-discrimination provisions.

Importantly, it is not necessary for the receiving scheme to be in the jurisdiction in which the individual resides or with which he has closest ties; indeed, there may be very good reasons not to transfer a scheme to this jurisdiction.

Other Pension Plans

For mobile executives, who move from country to country with some frequency or who struggle to be regarded as resident in any jurisdiction, an international pension plan is the ideal pension savings scheme. This vehicle is particularly suited to employers who have employees scattered all over the world such that it is difficult to know where to locate the pension scheme.

In these scenarios, having a pension scheme in an independent jurisdiction which is well regulated, such as Guernsey, with recognised pension expertise and legislation which has been in existence (and been relied on) for over 30 years is reassuring. If the jurisdiction also exempts those schemes, and any payments made out of them, from local tax there is an even greater incentive.

Guernsey's Income Tax (Guernsey) Law 1975, s 40(o) provides a legislative framework which has been used by multinational companies for many years to provide flexible pension arrangements. Oft en these may have no restriction on the level of contributions, with the ability to tailor the scheme as a defined contribution or defined benefit scheme. The scheme can also offer flexibility on draw-down, both in respect of the minimum age it can start and the amount which can be taken.

There are few restrictions placed on these schemes; the two most important being that they must be created by employers whose companies carry on business wholly or mainly outside Guernsey, and they must be for the benefit of those working entirely outside Guernsey.

Temporary UK Residents

What about individuals who, perhaps being only temporarily in the UK, have set up pensions overseas? Provided that:

  • the scheme member is a relevant migrant member (see below);
  • the pension scheme is a qualifying overseas pension scheme (not necessarily a qualifying recognised overseas pension); and
  • the member has relevant UK earnings;

then UK tax relief will be granted on the contribution of those earnings (subject to limits). Moreover, relief may also be granted on contributions made by an employer to that scheme.

In Guernsey a s 40(ee) pension scheme would provide an excellent framework for this type of pension. It need not necessarily be an employer-funded scheme. A relevant migrant member is an employee who was not resident in the UK when he became a member of the scheme. The relevant contributions are those made to the scheme in respect of periods when he was resident in the UK, and tax relief is only granted on contributions to the scheme which would have been subject to relief in the jurisdiction in which the member was resident before he came to the UK. Relief will also only be granted if the scheme manager agrees to notify HMRC if there is any payment or circumstance which crystallises an event which needs to be reported to HMRC. Once a member leaves the UK he can continue to contribute to the scheme, but the contributions would no longer qualify for UK tax relief.

Guernsey Residents

For someone moving to or working in Guernsey a retirement annuity trust scheme (RA TS), established under Income Tax (Guernsey) Law 1975, s 157A, might be a suitable vehicle to receive transfers from a scheme elsewhere. This is a personal pension scheme and may also be used for topping up an employer scheme. Contributions (other than approved inward transfers) are restricted according to the levels of earned income and the age of the member. Provided contributions do not exceed the set limits (£13,600 or 15% of earned income for those aged under 40 and 25% or £20,000 maximum for those aged 40 or more years, for 2010) these contributions will be tax exempt. These contribution limits are not compelling incentives to transfer.

However, the fact that an existing scheme can be transferred in and benefits taken which mirror those which would have been permissible in the UK, but with the smaller tax burden of Guernsey's flat 20% income tax rate, could be persuasive.

It is from Income Tax (Guernsey) Law 1975, s 157A that the framework of a QROPS is formed. For the QROPS to receive approved status from HMRC it must be 'recognised' as a pension scheme in the jurisdiction into which the transfer will be made.

The inward transfers into a Guernsey QROPS are therefore transfers into a scheme which was originally devised for, and has functioned for many years like, a Guernsey form of the UK SIPP.

Not Suitable For ...

A QROPS is not the right vehicle for every person who is 'mobile' and is definitely not suitable for someone who, while being 'mobile', has not broken, and does not intend to break, residence in the UK. For someone who is a member of a UK defined benefit scheme, very serious financial, commercial and actuarial consideration should be given as to whether it is sensible to transfer out of that scheme. If an individual does not intend to be abroad indefinitely but is leaving for some temporary purpose only, then a QROPS is not a suitable pension plan.

But a Guernsey QROPS may also not be the best vehicle for everyone who is leaving the UK. If the individual is moving to a jurisdiction which does not understand the concept of a trust this can cause tax problems: the Guernsey QROPS is governed by the legislation for retirement annuity trusts and therefore while behaving like a pension it is legislatively a trust.

The headaches and tax implications of having the scheme, and receiving payments from it into the jurisdiction of residence, should be explored thoroughly before the transfer is made.

Similarly, certain jurisdictions do not favour the Channel Islands (and incidentally Jersey is less experienced in the QROPS arena as the HMRC list of approved QROPS attests) and in these cases a QROPS sited in a tax treaty country or within the EU might be more appropriate. A suitable domestic vehicle must be available in that jurisdiction; a pension scheme which is regulated and recognised in its country for tax relief purposes as a pension, not exclusively for non-residents, where at least 70% of the fund will provide the pension and any benefit cannot be drawn earlier than age 55.

The Advantages of QROPS

Despite the limitations outlined above there are still plenty of reasons why, for certain mobile individuals, a QROPS is a perfect planning tool for retirement. It allows for (not unfettered) freedoms in investment strategy, a greater ability to save and plan for future generations (as an annuity does not have to be bought from a life company), and it allows for future transfers to a 'receiving' QROPS. This means that the pension pot can follow its member around the world, if that is desirable. This might be useful from a currency, time zone, or simply an administrative perspective. On that note, having a QROPS located in Guernsey where for an English person there are familiar banks and investment houses, the currency is sterling, and the time zone suits Europe, can be very appealing.

It is important to note that while there will be no local tax implications for a Guernsey QROPs with non-Guernsey resident members, there could be UK tax implications and there will be reporting obligations on the administrators for at least five years after the UK scheme has been exported. Provided benefits are not paid inappropriately, and certain investments are not made (including residential property) any exposure to HMRC can be kept to a minimum. It is, nevertheless, a prerequisite of gaining approval for the outward transfer that the receiving administrators agree to comply with reporting obligations imposed by HMRC.

Guernsey has been proud of its pension offerings to non-residents for some years now, and the creation of QROPS by HMRC allowed Guernsey to expand this even further. With individuals and finance houses in Guernsey from all over the world our global appeal and reach is now even greater.

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions