Retirement Annuity Trust Schemes (RATS)

Guernsey Retirement Annuity Trust Scheme (known as “RATS”) are one of the most popular forms of pension arrangement available to Guernsey residents.  The popularity of RATS greatly increased following the withdrawal by a number of insurance providers who had traditionally offered insurance based pension plans to Guernsey residents. RATS are regulated by Guernsey Income Tax Law  (the Law) and schemes will seek approval from the Guernsey Income Tax Office which then allows members to take advantage of the local tax benefits on contributions and retirement.

RATS come in a variety of forms, and we offer the following, each would be governed by the terms of the trust instrument and what is allowed under the Law;

Bespoke RATS

A bespoke RATS is usually established under trust by and for an individual, a couple or for a family (for example parents and their children) who will be the “members” of the Scheme. The Trust Deed is drafted specifically for these Members and can be tailored to meet specific requirements.    While the same allowances and benefits are available to each member,   bespoke RATS are more expensive to establish and administer due to the individual nature of the relationship.  As each Scheme is tailored to meet the needs of the members they tend to be used where the members have or anticipate having substantial pension assets or where the members  require greater  investment flexibility or have very specific investment requirements or want to be more involved in the administration of the pension pot.

Multi Member RATS 

A multi-member RATS will usually be established using a single master Trust Instrument  which will allow unconnected individuals to be admitted into the Scheme as members.    While each member is admitted into the same Scheme their member contributions and investments (their pension fund) would be segregated from the other Members’ within the scheme and would be kept separate notional “pots”.  Contributions can be made into the Scheme by the member  or, for example, by an Employer on behalf of the member.   Our multi-member schemes  offer member’s access to a pre determined range of risk rated investment models with each member being able to  choose the model  best suited to his particular circumstances.  By offering a limited investment choice and a scheme which is open to any number of individuals we are able to provide a lower cost pension solution which is attractive to those who are setting up their first pension savings arrangement , for members who do not wish to incur the cost of a bespoke arrangement or where their current pension savings would not warrant the cost of a bespoke arrangement.

Both multi member RATS and Bespoke RATS are established with reference to Section 157 (A) a specific section of the Income Tax Law.

Occupation Schemes

In some cases a Guernsey Employer may wish to establish a pension scheme for their Employees and we are able to offer pension arrangements sponsored by an Employer in such cases the pension arrangement is usually established as an Occupational Scheme written under trust with reference to Section 150 of the Income Tax Law.  A corporate scheme may be established as a bespoke scheme used exclusively for that Employer or an Employer may elect to join an already established scheme similar to the Multi-Member RATS.  We have a Multi-Member Scheme which will allow both individual members (RATS) and Companies (Occupational ) to be admitted. 

In the case of a corporate scheme the employer would be required to make contributions (this may be a percentage of each eligible members’ salary  or a specified amount) which may or may not be matched by contributions by the employee.    

Key Highlights

• Option of joining a multi member scheme or establishing a bespoke plan
• Occupational schemes may be established by an employer for their staff
• Possible to consolidate existing pension arrangements, including insurance schemes into a single plan
• Ability to receive and consolidate defined benefit transfers, after receiving appropriate advice
• Ability to receive transfers from UK pensions (QROPS approval required)
• Various drawdown options at retirement including income drawdown or annuity
• May draw a pension between the age of 50 and 75
• Lump sum payment of up to 30% (tax free up to a set limit)
• Tax relief of up to £35,000 per annum is available against any income
• Loans of up to 30% are available in some schemes (excluding UK transfer funds and corporate schemes)
• Greater investment freedom on bespoke RATS
• Residual fund passes to beneficiaries upon death

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