UK legislative changes have caused a fundamental shift in the types of pension products that can be offered by International Finance Centres (IFCs) such as the Channel Islands. The Jersey Pensions Association (JPA) has proposed an amendment to the Jersey law that will make Jersey-managed international savings plans an attractive proposition to providers around the world. Here, Director of Retirement and Savings at Intertrust and JPA member Mark Lindsay and JPA chairman and Partner at Bedell Cristin Nancy Chien outline their proposal and explain why a flexible future is the best option for the island.
Jersey recently hosted its second annual International Pensions Conference and much of the focus was on the future: How does Jersey maintain a competitive advantage over other jurisdictions? How do we continue to innovate to stay ahead of the pack and offer solutions that providers really want? How do we leverage the expertise and knowledge we have here to take Jersey into the future?
The JPA, supported by Jersey Finance, has been working hard to keep abreast of international demands and opportunities. One area that is of particular interest to large multinational corporates is the use of international savings plans. The JPA is lobbying the States of Jersey to amend the Income Tax (Jersey) Law 1961 ("Tax Law") so that such savings plans can be approved officially and make it more attractive for them to be set up and administered in Jersey.
Why international savings plans?
Clients' demands for pensions and savings products have evolved in recent times. The concept of having a long-term pension with your lifelong employer to safeguard your money and provide for you in retirement is outdated. Employers and employees are now more mobile so it's crucial that the vehicles they use to hold their long-term savings can serve their needs. Such vehicles must allow savers to move their money more freely, as opposed to being tied to a single retirement date, and allow them to have more flexibility and control over where and how their money is invested.
This explains the appeal of an international savings plan, which allows employers to provide benefits to employees on the occurrence of certain major life events, such as the termination of their employment, divorce, children entering university or needing a deposit for a house.
In order to establish these plans, international corporations typically look for a tax neutral jurisdiction which has the legal framework to set up vehicles that can provide flexible rules on benefit payments, tax approval from the relevant body and oversight from an established regulator.
The JPA's proposal
The JPA is proposing that the current Tax Law is amended through the introduction of a new provision which:
- permits the Jersey Comptroller of Taxes to approve such international savings plans; and
- provides beneficiaries of such plans, who will be non-residents, to not be subject to tax in Jersey.
This change would introduce legislation that is modern, fit for purpose and actively promotes Jersey as a jurisdiction that recognises the relevance and importance of international savings plans. In our view, such a provision in the Tax Law would enhance the appeal of Jersey for administering and structuring savings plans and enable Jersey to showcase itself as a leading jurisdiction for providing these services.
A modernised tax law would signal that Jersey is open for business and able to capitalise on opportunities such as end of service benefit schemes from the Gulf Cooperation Council (GCC), savings structures from the Far East and flexible lifetime savings plans from many other international employers with globally mobile employees.
The number of globally mobile employees will continue to rise and Jersey should position itself to take advantage of this growing market and cement its reputation as a leading jurisdiction in the long term savings space.
Rapid adoption of our recommendations and the subsequent promotion of Jersey's offering would also increase the island's reputation for innovation and set it apart as a jurisdiction of choice for international savings plans.
Article written by: Mark Lindsay, Member of the JPA and Head of Retirement & Savings Team at Intertrust & Nancy Chien, Chairman of the JPA and Partner at Bedell Cristin
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