Guernsey: Guernsey’s QROPS Regime – Environmentally Friendly

Last Updated: 19 March 2011
Article by Peter Niven

Most Read Contributor in Guernsey, September 2016

Originally published in International Adviser, QROPS Supplement, March 2011

The Oxford English Dictionary defines the word 'environment' as "the surroundings or conditions in which a person, animal, or plant lives or operates." It also makes the distinction between this and 'the environment' as "the natural world, especially as affected by human activity."

What does this have to do with QROPS?

Well, Guernsey has provided conditions that have allowed QROPS business to flourish in the Island. We have a broad selection of service providers who are able to offer schemes with a range of benefits for clients. This is supported by the approach of the Island's authorities who are proactive in ensuring that Guernsey schemes continue to be approved by HMRC. Indeed, Guernsey has become the leading jurisdiction for QROPS and related products.

However, we are not resting on our laurels. We are taking every possible step to ensure that the Island continues to provide an environment that is attractive for QROPS business in the future.

In that respect, Guernsey is what you might call environmentally friendly.

Leading international finance centre

Guernsey is a British Crown Dependency which is legislatively and fiscally independent of the UK and has its own democratically elected parliament. This delivers political and economic stability on which business can rely and means the Island can and does respond quickly to the needs of commerce.

The Island has a special relationship with the European Union, which means it enjoys access to EEC countries for physical exports without tariff barriers but other EU directives do not apply unless voluntarily accepted.

Conducting business in Guernsey is also made easy because the Island is English speaking; uses the British pound (Sterling); is in the same time zone as the UK; and is located close to and with good air links to both the UK and continental Europe, including London and Zurich/Geneva.

These characteristics have helped Guernsey establish and maintain a broad-based finance centre that comprises a banking sector of 40 licensed institutions holding total deposits of £115 billion, a captive insurance industry that is the largest in Europe and fourth in the world, a funds sector with total business valued at more than £240 billion, an investment management and stockbroking sector with assets of more than £70 billion and 150 licensed fiduciary providers – ranging from large multinational organisations to local, independent boutique operations – with in excess of £300bn worth of wealth and assets in trust and company structures.

Fiduciary excellence

Guernsey's fiduciary sector has been a mainstay of the Island's finance sector over the last 50 years and this heritage has developed significant infrastructure and expertise. For example, the Island has had a bespoke personal pension regime, including Retirement Annuity Trust Schemes (RATS), for more than 25 years and all our pension schemes are approved by the Guernsey's Director of Income Tax.

The Island was also one of the first jurisdictions to introduce an effective licensing and supervision system in relation to trust administration services and company management – rather than the trusts themselves, it is the businesses that manage and provide fiduciary services that are regulated by the Guernsey Financial Services Commission (GFSC).

Our well-regulated providers offer schemes with major advantages for clients including: pension income paid gross without the deduction of Guernsey income tax; no Guernsey income tax or capital gains tax on the assets within the scheme, there is gross roll up; increased freedom of investment choice; no limits to the value of the fund which can be accumulated; flexibility of benefit drawdown; no requirement to purchase an insurance based annuity (although may do so); and the ability to leave the residue of the fund to named beneficiaries.

In addition, Guernsey schemes provide the option to withdraw a lump sum – up to 25% tax free. The good news for clients is that the Guernsey Government, The States of Guernsey, has also recently agreed, in principle, for this to be increased to 30%. The detailed legislation has now been drafted and will come before the parliament during April. Assuming this is given final approval then the change will be backdated so that in essence it will have come into effect from 1st January 2011.

This comes at the same time as the publication of a draft code of practice for local QROPS providers. A committee of the Guernsey Association of Pension Providers (GAPP) has been working on the draft code to cover critical areas of QROPS business and an exposure draft of a new code of practice has now been released on the association's website The exposure draft has been published as part of a consultation period which runs until 28th February 2011. The draft will be reviewed in light of the comments received and it is intended that that final code will be issued by 31st March 2011.

The move towards a voluntary code of practice emphasises the proactive nature of our sector in relation to best practice. Similarly, the Guernsey Income Tax Office has in the past and continues to take a positive approach to working with HMRC. This stance has been extremely important in ensuring that Guernsey schemes continue to retain HMRC approval. The security and stability which this offers is of significant comfort to clients.

Strong reputation

Guernsey has during its 50 years as a finance centre and particularly during the last decade or so faced scrutiny from the UK Government (the 1997 Edwards Report and the more recent Foot Report), the EU, the IMF, FATF and the OECD/G20. The Island has always cooperated in these processes and on each occasion been placed within the premier division of international finance centres.

In January this year the IMF commended Guernsey's high standards of financial regulation, supervision and stability along with its robust criminal justice framework. The ratings that have been achieved by Guernsey, particularly in the area of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), are among the highest awarded to any jurisdiction.

In addition, Guernsey was within the first wave of territories placed on the OECD 'white list' at the conclusion of the G20 summit in London, April 2009 and this January the OECD's Global Forum has endorsed Guernsey's commitment to tax transparency and exchange of information. The report notes that the Guernsey has made substantive developments in expanding its exchange of information network and indeed, the Island has now signed Tax Information Exchange Agreements (TIEAs) with 22 other jurisdictions.

The Guernsey Government has also announced that financial institutions in the Island have a window from 1st January 2011 to 1st July 2011 for moving to automatic exchange of information as part of equivalent measures the Island adopts in relation to the EU Savings Tax Directive (EUSTD).

The right conclusion

Guernsey has provided the conditions that have allowed QROPS to flourish in the Island. There are a range of service providers offering schemes with a range of benefits for clients and supported by an industry association and government authorities taking a proactive approach to ensure that the Island continues attracting QROPS business going forward. We are committed to taking the steps necessary for Guernsey to retain its status as the leading jurisdiction for QROPS.

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.

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