Below is a summary of the main features of a pension and how they relate to taxation.
Contributions or premiums
- Members no longer need to request a certificate of unused contribution.
- A member may contribute any amount they wish without approval from the Guernsey Revenue Service, however only the following contributions will be eligible for tax relief:
- For the purposes of section 36 of the law, money placed into the member's pension, must be of a monetary amount (i.e. cash, cheque, debit/credit card, standing order, direct debit or bank transfer). The payment must actually be paid to the scheme by the member;
- For the purposes of sections 157(A)(10) and 151(1) of the law, a transfer of funds from another pension scheme is not treated as a contribution or premium paid by or on behalf of the member and cannot be utilised for the carry forward provisions;
- If a member pays a contribution into the scheme and all or part of the contribution consists of funds withdrawn from any approved pension scheme, then tax relief will not apply to the amount of the contribution that has been withdrawn from an approved scheme.
- In-specie contributions (i.e. transferring the ownership of an asset) are not allowable for the purposes of claiming tax relief or utilising the carry forward provisions.
- Tax relief will be limited to the lower of 100% of taxable income or £35,000 (2011 - 2017 limit was £50,000) (please refer to Statement of Practice M48 (under "Practitioners and technical information") for further explanation of the retirement annuity allowance for married couples). This limit applies to the overall contributions or premiums made to all Approved Schemes (Retirement Annuity Trust Schemes ("RATS") and Retirement Annuity Contracts ("RACs") and Approved Occupational Pension Schemes.
- Further restrictions on tax relief will apply if you are subject to the withdrawal of personal and other tax allowances for high earners - for further information please follow this link.
- If the member has made a contribution but does not take full advantage of tax relief available on their contributions or premiums in any year, they may carry this unused relief forward for up to 6 years (starting from 2011) subject to certain limitations. Examples can be found within the Guernsey Practice Notes (see document downloads below).
Contributions by employer(s)
- Employer(s) contributions to RACs or RATS are neither taxable as a benefit, nor claimable by the employee(s).
Benefits
- The member may take the benefits from the pension between the ages of 50 and 75 but cannot defer them beyond 75 commencement; earlier than age 50 may be allowed if due to incapacity or agreed by the Director of the Revenue Service.
- The member may take a tax-free lump sum of up to 30% of the fund value up to the specific limit (with effect from 1st January 2020 this limit is £203,000). Tax is due if the sum taken is more than £203,000.
Triviality
- At any age, you may commute a fund value of up to £15,000 without approval from the Revenue Service and without taking into account any other pension(s). This is taxable at 20% if you are aged under 50, or 10% if you are aged 50 or over.
- If you are aged 50 or over, you may commute a fund value of £15,000 - £50,000 without approval from the Revenue Service and without taking into account any other pension(s). The first 30% of the payment can be made tax-free and the balance is taxable at 20%. It is the fund value after payment of a notional 30% retirement lump sum that is tested against the £15,000-£50,000 triviality limits.
- If a scheme is in drawdown (i.e. you have already started taking money out of it), you may commute where either the aggregate value of the funds attributable to you under that scheme at the time of making the payment is no greater than:
- a) £50,000 or
- b) £100,000 where you have a guaranteed minimum retirement income for the remainder of your life of £20,000 per annum.
- This is taxable at 20% and prior approval is required from the Revenue Service where the fund value exceeds £50,000.
Fund value
- The term used to define how much is held within the pension and will be the gross amount (i.e. value of the pension before any money is paid out).
Flexibility
- Changes to permit greater flexibility for funds derived from overseas inward transfers were approved at the States meeting held on 29 September 2015 (you can view the relevant Ordinance here), to be effective from 2 October 2015, and Trustees/Administrators should be aware that these changes supersede any restrictions contained in their original approval letters. Scheme members should contact their Trustees/Administrators, in the first instance, to discuss the options open to them.
Section 154A schemes
- Following States approval of The Income Tax (Pension Amendments) (Guernsey) Ordinance, 2017 the Director of the Revenue Service may grant formal approval under section 154A of the Income Tax (Guernsey) Law, 1975 ("the Law") to:
- A superannuation fund to which section 40(o) of the Law applies
- A Retirement Annuity Contract or Retirement Annuity Trust Scheme to which section 40(ee) of the Law applies
- Such other fund, contract scheme or trust as may be prescribed under section 40 of the Law
- Please note that end of service gratuity schemes are not considered to meet the requirements for pension schemes seeking approval under section 154(A).
- The application form (form 681) and Practice Notes for section 154A schemes are now available from "Printable Forms" and "Document Downloads" below, respectively. The Pension Composite Return (form 704), which may be used to submit pension scheme returns, either on an individual or composite basis, is also available from "Printable Forms" below.
- Any scheme that has approval under section 154A is required to submit the following information with the pension return:
- Signed Accounts which clearly show the fund value
- A schedule detailing payments made by the scheme to the members or any other person, including the name, address, date of birth (if applicable) and nationality/place of residence of the person receiving a payment
- Whilst the filing deadline will usually be 30th November following the end of the year of charge, due to the late development of the return, the Director requires the submission of the 2016 pension return by 31 May 2018.
- Further guidance will be issued shortly, confirming that where a scheme:
- meets all the requirements of either a Broad or Narrow Participation Retirement Fund, and
- reports relevant information to the tax authority, and
- is subject to regulation by the GFSC
- it will benefit from an exemption under the Income Tax (Approved International Agreements) (Implementation) (Common Reporting Standard) Regulations and is not subject to reporting.
Common Reporting Standard
- Where a pension scheme approved under section 150, 154A, 157A or 157E:
- meets all the requirements of either a Broad or Narrow Participation Retirement Fund (for more information click here, and
- reports relevant information to the tax authority, and
- is subject to regulation by the GFSC,
- it will benefit from an exemption under the Income Tax (Approved International Agreements) (Implementation) Common Reporting Standard Regulations and is not subject to reporting.
- To meet the requirement of reporting relevant information to the tax authority, the pension scheme will need to annually submit the following information by 30th November following the year of charge:
- signed accounts which clearly show the fund value, and
- a schedule detailing payments made by the scheme to the members or any other person, including the name, address, date of birth (if applicable) and nationality/place of residence of the person receiving a payment.
- A pension composite return is available from "Printable Forms" for this purpose, which is a requirement for section 154A schemes and will be rolled out to other approved schemes in due course.
Printable forms
- Application for Approval of Pension Scheme
Application for Approval of Pension Scheme (form 681) [563kb]
- Application for relief for Guernsey pensions (UK claimants)
- Application for relief for Guernsey pensions (non-resident other than UK claimants)
- Notification of closure of Guernsey approved pension
- Trustee confirmation form
- Retirement Annuity Member Certificate
- Pensions composite return
- Pensions composite return
- Pensions composite return
- Pensions composite return
- Pensions composite return
- Pensions composite return
- Pensions composite return
International Savings Plans
Pension Schemes - withdrawal of approval
- The Director may, at any time, withdraw approval of a pension scheme if it appears that the facts concerning the scheme no longer warrant the continuance of approval. See Pension Scheme - withdrawal of approval in document downloads.
Breaching scheme rules/unauthorised payments
- The conditions of approval that are in place for a pension scheme include the requirement that the scheme provides its members with retirement benefits for life. The Revenue Service may withdraw approval of a scheme if the facts concerning the scheme no longer warrant its approval.
- The Budget for 2023 has introduced further penal measures, where unauthorised payments are made from a pension scheme. An unauthorised payment would be one that is not allowed by the Law, or as a condition of approval (unless that payment has been made with the prior agreement of the Revenue Service).
- Where an unauthorised payment is made, there will be a tax charge of 50% levied against the individual who received the payment. Such income would be excluded from the tax caps and standard charge, meaning the tax would be charged in addition to any limits on tax payable being in place.
- This aims to deter such payments from being made (so preventing serious breaches of the conditions for approval). The Revenue Service may abate the liability by an amount which, having regard to the relevant circumstances, is just and reasonable (such as where it is the actions of the employer or trustee (and not the individual member) that has caused the payment to be made).
Document downloads
- Pension Scheme - withdrawal of approval
- Notice to GAPP regarding filing regarding pension scheme accounts (April 2022)
- Guernsey Practice Notes (occupational schemes) (January 2020)
- Guernsey Practice Notes (Retirement Annuity Contracts and Retirement Annuity Trust Schemes) (January 2020)
- Guernsey Practice Notes (Exempt Trusts and Contracts) (March 2012)
- Guernsey Practice Notes (section 154A schemes) (February 2018)
- Retirement Annuity Trust Schemes (RATS) - "administered" in the context of approval under section 157A(4) of the Law
Frequently Asked Questions
Are contributions paid to a Retirement Annuity Contracts and Retirement Annuity Trust Schemes (RATS) eligible for tax relief?
- Yes, but only in respect of Guernsey approved schemes.
What should I do when I receive a Guernsey States' Pension or a state pension from the United Kingdom or another jurisdiction ?
- Please let us know the date when the pension commences and details of the amount of the pension you will be receiving each week/month.
- When you retire please let us know the following information:
- The date of your retirement
- If you receive, or will commence to receive, a pension which was not shown on your last income tax return, please provide the following details for each pension:
- the nature of the pension (For example, Social Security Old Age Pension, occupational pension from a previous employer, personal pension);
- the jurisdiction from where the pension is paid;
- the weekly, monthly, quarterly or annual rate of the pension;
- the date it commenced , or will commence, to be paid;
- whether overseas tax will be paid on the pension.
- If you will continuing to work (for example, part time) please let us know the name and address of your employer.
- Guernsey or UK Old Age Pensions
- If you are in receipt of a Guernsey Social Security or United Kingdom State Old Age Pension, no tax is deducted at source. These pensions must still be declared on your income tax return. As tax is due on your pension income in the year it is received (or accrues) an interim assessment may have to be issued so that you know how much tax will be payable.
- Please contact us on (01481) 225700 once you know when you will commence receiving the pension, and the amount you will receive to ensure the correct tax is paid. Alternatively, please email us, quoting your tax reference.
- Guernsey occupational pensions and Guernsey personal pensions
- If you are in receipt of a Guernsey occupational pension or personal pension, a Coding Notice will be issued to your pension provider in order that the necessary tax may be deducted at source (in a similar way to an employer deducting tax at source from wages).
- UK/Overseas occupational pensions
- If you are principally resident in Guernsey you are liable to Guernsey income tax on your worldwide income. However, if you paid tax in a jurisdiction other than the United Kingdom, you may claim relief for that against your Guernsey tax liability by providing this office with evidence of the tax deducted (For example, overseas final assessments).
- Since 2010, where an individual resident in Guernsey, in receipt of UK pensions, completes a 'DT Individual Form', they no longer pay United Kingdom income tax on their UK pensions but will, instead, only be subject to Guernsey income tax.
- Form DT/Individual can be obtained online.
- If you are eligible to complete a DT Individual Form, but you do not do so, no relief can be given in Guernsey for the UK tax you will have paid.
- Other Income
- You will continue to be taxable on your other income (for example, bank interest, investments, rental income) if your total income exceeds the amount of your personal allowances.
What if I leave Guernsey and I am receiving an occupational or personal pension from Guernsey?
- From 1 January 2020, all Guernsey pensions paid to residents of the United Kingdom are no longer be subject to Guernsey income tax, but will instead only be subject to United Kingdom income tax. If you are living in the United Kingdom and Guernsey tax is being deducted from your Guernsey pension, please contact us.
- If you live in a jurisdiction other than the United Kingdom, your pension will be subject to Guernsey income tax at 20%. You may claim, against your Guernsey pension a personal, retirement annuity and dependant relative allowance that you would have been entitled to had you been resident in Guernsey.
- You may claim, against your Guernsey pension, the personal allowance by completing a form 676.
