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RATS - Retirement Annuity Trust Schemes.

RATS - Retirement Annuity Trust Schemes

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:

Income TaxThe 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
     trust funds.

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.

Letter of wishesThe remaining fund can be left to the member's heirs
     without any loss of annuity value, unlike a traditional
     pension annuity. 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
     of wishes.

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 RATSGuernsey 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 RATSGuernsey RATS

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.

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