The Schedule to The Secondary Pensions (Guernsey and Alderney) Law, 2022 sets out the essential criteria a pension scheme must meet to be an approbated pension scheme.
Paragraph 3(3) of the Schedule includes the following restrictions, where an approbated scheme must not allow a member after 3 months from the date of enrolment to:
- Have any refund of that member's contributions,
- Have any commutation of benefits under sections 153A or 157CA of the Income Tax Law - so triviality for those aged under 50 to commute a fund value of up to £15,000, or
- Transfer to a non approbated scheme.
Recognising that once an individual has left Guernsey, they may wish to move their pension to a scheme in their new jurisdiction of residence, and also the difficulties for pension providers keeping track of member's contact details once the member has left the Island, the above restrictions do not apply for non-residents where certain conditions are met.
Non-resident conditions
The conditions are as follows:
- The member has not been resident (within the meaning of section 3 of the Income Tax Law) for a consecutive period of 2 calendar years; and
- The member is still not resident at the time of making the request; and
- The request for payment is made in the year immediately after a 2-year period of non-residence.
If this is the case then the non-resident may have a refund of their contributions, may commute the benefits or transfer the funds to a non approbated scheme (provided such transfer still meets the requirements of the Income Tax Law).
Section 3 of the Income Tax Law sets out that an individual shall be treated as being "resident" in Guernsey in any particular year of charge, if-
(a) The individual spends 91 days or more in Guernsey in that year of charge, or
(b) The individual spends 35 days or more in Guernsey in that year of charge and, during the four preceding years of charge, they have spent 365 days or more in Guernsey.
Example 1
Member W is a 31-year-old member of an approbated scheme. Member W leaves Guernsey in September 2025 and does not return to the islands. Member W will have met the relevant conditions to benefit from greater flexibility over their funds from 1 January 2028, as they will have been non-resident for a consecutive period of 2 calendar years (i.e. 2026 and 2027).
Member W asks their pension provider for a refund of their member contributions on 28 March 2029. As Member W is not resident at the time of making the request or for the two preceding calendar years (i.e. 2027 and 2028), the restrictions may be disapplied and the member may receive a refund of their contributions.
Example 2
Member X is a 44-year-old member of an approbated scheme. Member X leaves Guernsey in October 2025, returning to the island on 7 January 2028 and leaving again on 30 November 2028.
Member X asks their pension provider for a refund of their member contributions on 4 April 2029. Although Member X is not resident at the time of making the request, as the request for payment is not made in the year immediately after a 2-year period of non-residence (as Member X was resident in Guernsey in 2028), the restrictions cannot be disapplied. Member X will have met the relevant conditions to benefit from greater flexibility over their funds from 1 January 2031 (i.e. as they will have been non-resident in 2029 and 2030).
Example 3
Member Y is a 25-year-old member of an approbated scheme who has always been resident in Guernsey. Member Y leaves Guernsey permanently on 10 February 2025. Member Y will have met the relevant conditions to benefit from greater flexibility over their funds from 1 January 2028 (i.e. as they will have been non-resident in 2026 and 2027).
Example 4
Member Z is a 52-year-old member of a defined contribution approbated scheme. The total fund value is £4,000, all of which are funds in relation to contributions made since the date on which the scheme became approbated. Member Z leaves Guernsey in October 2026 and does not return to the island.
Member Z asks their pension provider for a commutation of their benefits on 1 January 2027. As Member Z is over the age of 50, they are permitted to take triviality (i.e. under the same conditions as set out in sections 153A or 157CA of the Income Tax Law).
Published: November 2023
