Retirement annuity trust schemes or RATS have been in existence as a highly tax efficient vehicle in Guernsey since 1991. The flexible pension legislation in existence in Guernsey allows such schemes to be tailored to suit the individual's lifestyle and retirement needs, and provides flexibility in investment choices making it more a savings scheme than a pension scheme in the traditional sense.
The RATS is a discretionary trust which acts as a self-administered pension scheme run by the Trustees. Key benefits of such schemes include the following:
The assets are able to grow without being subject to Capital
Gains Tax or any Income Tax in Guernsey.
Whilst the individual member does begin to draw an income
on retirement, it is not necessary for this to be an insurance
annuity, and the payments can be made directly from the
There is no fixed retirement date, and this can be anywhere
between the ages of 50 and 75.
Part of the fund is available to be taken as a lump sum on
Investment freedom is greatly enhanced, allowing such
features as direct investment in property.
The remaining fund can be left to the member's heirs
any loss of annuity value, unlike a traditional
There is also the added benefit of the
trustees having a
measure of discretion over the destination
of this remaining
fund, subject to the guidance of the letter
There are no hidden penalties or exit charges.
Monies can be loaned from the fund at commercial interest
Hansard would be delighted to advise on the creation of a RATS scheme, and would be available to draft the scheme documents and act as trustee.
There are two distinct forms of RATS, though they have the same basic structure:
Guernsey International RATS
International RATS are pension plans for non-Guernsey resident individuals.
There is no limit to the level of contributions or to the fund size.
Sections 40ee and 157A of The Income Tax (Guernsey) Law 1975 allow an International RATS to make payments to non Guernsey residents without deduction of tax. Accordingly these vehicles are ideal for international pension plans for internationally mobile individuals, wherever the individual is working or residing in the world.
Payments from such RATS can be made in any recognized currency, and can be structured to suit the individual. They can be a mixture of lump sum and regular income payments.
Guernsey RATS are pension plans for Guernsey resident individuals.
A separate scheme can be set-up for an individual with substantial assets. Alternatively, there are a number of group schemes in existence which have the benefit of associated cost reductions whilst retaining assets in separately protected cells.
Guernsey RATS retain many of the benefits of the RATS structure for the Guernsey resident individual, and although the distributions will be taxable in the individual's hands, contributions to such schemes by Guernsey resident individuals qualify for tax relief within certain rules, so they remain relatively tax efficient when compared to their more traditional onshore alternatives.