Multi-member or bespoke – which RATS is right for you?
Retirement planning is essential. And whether you choose to do this via a pension scheme, tax efficient savings, property or investment, it’s not something that is advisably left until the last minute. According to government statistics, three out of four people won’t qualify for a full Guernsey pension so, for most, a private pension plan is going to be key to achieving retirement goals.
The Retirement Annuity Trust Scheme (RATS) is a personal pension scheme designed to be a flexible and reliable option for retirement planning. Guernsey RATS offer options for retirement planning with a range of choices when it comes to the way investments are handled and how you want your pension to be structured. The two key choices are the multi-member RATS or the bespoke RATS – but which one is right for you?
A popular type of pension arrangement – for good reason
RATS have a number of potential tax benefits. Together, the multi-member RATS and the bespoke RATS have become popular options for pension planning for Guernsey residents. RATS can be tailored to suit individual lifestyle choices and specific retirement needs and have a lot more flexibility with respect to investment options than the historic insurance based contract schemes. Both a multi-member RATS and a bespoke RATS have a number of general benefits that include:
• No fixed retirement date – this can be set anywhere between the age of 50 or 75
• Very tax efficient - the assets in the RATS grow without being subject to either Guernsey income or capital gains tax
• Flexibility – RATS offer a greater freedom of investment
• Inheritance – on death any remaining fund can be left to others and, unlike a traditional pension annuity, there is no loss of annuity value
• Versatile – it’s possible to borrow from the fund at a commercial rate of interest. It’s also possible to withdraw a part of the fund as a lump sum, as opposed to an annuity
There are some very clear benefits to the Guernsey RATS and these are just a few of the reasons why both the multi-member RATS and the bespoke RATS schemes have become so popular. But what’s the difference between them?
Guernsey multi-member RATS
The multi-member RATS is the simplest of the two options for pension planning in Guernsey. Opting for this type of pension means joining an existing scheme, already established, as opposed to creating a brand new RATS just for you. Multi-member RATS are very cost effective as there are no set up costs to pay. They are the ideal choice for a first pension because they are simple to handle and very straightforward when it comes to getting started.
• Make regular contributions to your multi-member RATS and transfer in existing pension funds too
• A low minimum contribution means that anyone can join a multi-member RATS and sustain it to create a healthy income for retirement
• No initial investment is required to join a multi-member RATS – you can sign up and start saving as soon as you’re ready
• Great first time pension option – you can start from scratch with a multi-member RATS even if you don’t know anything at all about pensions or investing
• Multi-member RATS offer a fixed investment solution with either IFA advised or trustee directed investments
Guernsey bespoke RATS
If you’re looking for a personal pension scheme that is tailored to you, you and your partner, or you and your family then the Guernsey bespoke RATS is ideal. It is more expensive to set up a bespoke RATS because the scheme is designed specifically for you and your family/partner (together, you’ll be the ‘members’ of the scheme). However, while it costs more, it’s also the most flexible personal pension option because it’s tailored specifically to your lifestyle and needs.
• Investment in Guernsey bespoke RATS is non standard so there is a great deal more investment flexibility than with a multi-member RATS
• Overall, both in terms of investments and the way that the scheme is structured, you will have a lot more control with a bespoke RATS
• Bespoke Guernsey RATS are ideally suited to pension pots of £150,000+
• The option of member directed investment gives you the opportunity to be more involved
• Flexibility of investments – a broad range of investment options are available with a bespoke RATS, from property and buy to let investments through to quoted/unquoted shares
As a way to provide for retirement, the Guernsey RATS is tax efficient, cost effective and provides as much or as little investment control as you want to have. Together, the multi-member RATS and the bespoke RATS offer options for anyone looking to plan for retirement wisely.
