Originally published in International Adviser, QROPS Supplement, November 2010
Martyn Russell, director of Ardel Trust Company, explains how peace of mind and security of pension assets makes Guernsey an attractive jurisdiction for QROPS and QNUPS.
Despite intense competition from other jurisdictions, Guernsey has emerged as a location of choice for expats seeking to transfer their pension arrangements out of the UK.
Guernsey's status as a financial services centre of excellence is crucial to its appeal as a location for both QROPS and qualifying non-UK pension schemes or QNUPS.
Peace of mind and security of pension assets are the primary considerations for members in retirement or planning for retirement.
Factors that increase the attractiveness of Guernsey include the professional approach of service providers, the assurance that management is undertaken in Guernsey – not a back office in an overseas location – and the confidence that can be drawn from the work of the Guernsey Income Tax Office, the Guernsey Association of Pension Providers QROPS Code of Conduct Group and continued monitoring and compliance of the UK guidelines on issues such as retirement age.
These factors, together with the support of the Guernsey government, serve to protect the island's position as a jurisdiction of choice. Guernsey has a dominant position within the dependent territories given pension restrictions in Jersey and historic tax uncertainties in the Isle of Man, which means the island finds itself in a strong position relative to two of its main competitors for such business.
Range of Options
QROPS is an important growth area for Guernsey, but is only one of the many services available within the four licensed divisions of Guernsey's financial services industry – fiduciary, banking, investment and insurance – each offering its own broad range of services to the international market.
QROPS has, however, created new opportunities for fiduciary, banking and investment in particular, leading to greater interaction between these sectors in promoting suitable opportunities.
The range of investment options available in Guernsey schemes compares favourably to those available in other QROPS/QNUPS jurisdictions.
Guernsey providers can offer maximum flexibility within the confines of their statutory requirements to enhance and preserve member funds, and within these parameters QROPS trustees have the freedom to select suitable investment managers and asset classes. Where appropriate, trustees can be guided in their choices by the recommendations of the member, which is appealing to individuals who wish to maintain a degree of control over their investments.
Funds can be invested in all the major currencies and there are no limitations or restrictions on QROPS/QNUPS that are specific to Guernsey. All QROPS are required to comply with the conditions stipulated by HMRC, although there may be local differences in jurisdictions in relation to issues such as taxation, pension benefits and investment choice.
Scope for New Entrants
It is difficult to place an exact figure on the number of QROPS/QNUPS providers in Guernsey, although it is reckoned that the island punches well above its weight in comparison to the number of providers in other jurisdictions.
All QROPS are registered with HMRC, but not all are identified by reference to the service provider. There is scope for new entrants provided the trustee is licensed by the Guernsey Financial Services Commission.
There is competition in regard to price and product between the various service providers, but there is also co-operation to ensure the good standing and dominant position of Guernsey through such bodies as the QROPS Code of Conduct Group. In addition, providers do not all necessarily target the same market – for example Ardel, as a large independent fiduciary, has focused on the premium sector.
In order to remain an attractive location for QROPS/ QNUPS over the coming years, Guernsey will need to continue to promote its services through the ongoing efforts of Guernsey Finance, a joint industry/government initiative to defend and promote the long-term reputation, stability and development of Guernsey as an international centre of excellence for financial services.
Code of Conduct
Earlier this year, Guernsey Finance confirmed plans to introduce a voluntary code of conduct for QROPS providers based on the island, which would be reviewed periodically to ensure it meets the evolving needs of the industry.
Providers adopting the code will be able to advertise it to clients, with Guernsey Finance chief executive Peter Niven commenting that the code would provide advisers and their clients with enhanced confidence that QROPS providers in Guernsey were working to the highest standards.
The support of the Guernsey tax office and its relationship with HMRC is invaluable, as are the continued efforts of the Code of Conduct Group. Good governance and sound advice will ensure that the island remains at the forefront of QROPS administration.
It is essential that transfers to a QROPS are not undertaken without having taken appropriate tax and pension advice, both in the UK and the member's new place of residence.
It is also essential that QROPS are administered as a pension arrangement to provide retirement benefits and not as a means to accelerate access to pension funds.
Although it has the knowledge, expertise and experience to keep it ahead of the competition, Guernsey must be aware of the entry to the market of new jurisdictions.
Relocation from the UK
It is also important not to underestimate the value of Guernsey's appeal as a place to relocate from the UK. Its proximity to the UK, common language and currency and natural beauty are all factors that attract resettlement. Since the introduction of higher rate income tax in the UK, a number of high profile individuals have moved to the island and this trend looks set to continue with increased activity in the open market property area.
Ardel was one of the first companies to be granted a formal licence by the Guernsey Financial Services Commission following the introduction of The Regulation of Fiduciaries, Administration Business and Company Directors etc (Bailiwick of Guernsey) Law 2000 and the company maintains a close working relationship with the commission.
Ardel is particularly well placed to service the pensions market, in which it has more than a decade of experience. As one of the Channel Islands' largest independent fiduciaries, Ardel is able to deliver a service without any conflicts of interest. Ardel does not provide tax advice, pension advice, legal advice or investment advice and is therefore free to work with the member's preferred professional advisers, while also being in a position to introduce potential members to suitably qualified advisers in these fields should they require such services.
The Ardel Personal Pension Plan was established in 2008 and maximises the benefits of Ardel's flexible and disciplined approach, working with pension and tax experts to ensure QROPS/QNUPS are an appropriate solution.