I PROVIDE my 10 local employees with a multimember retirement annuity trust scheme, to which we contribute on their behalf. I’ve read that there is a new ‘secondary pension’ scheme being introduced. Will I be required to close down the Rats and switch all my employees across?
Sean Gillease, business development manager, Sovereign Trust (Channel Islands) Ltd, replies:
THE introduction of the secondary pension scheme is at proposal stage and it is currently impossible to answer this definitively, with much of the detail yet unknown.
The earliest date for the introduction of the secondary pension is 2020 and, therefore, the details should become clearer within the next 12-18 months.
The States has published information on https://bit.ly/2jL3WVT, including a number of useful FAQs.
One such question refers to anyone with an existing Rat. The States has advised that ‘as long as the scheme you already contribute to is recognised by the States of Guernsey as an eligible scheme, then you will not have to contribute to the new scheme as well. The qualification criteria for eligible schemes have not yet been specified’.
Therefore, until the qualification criteria for an ‘eligible scheme’ is determined it cannot be confirmed whether your existing Rat will meet the criteria and be accepted as an eligible scheme.
According to the States, the primary objective of the proposed secondary pension scheme ‘is to encourage people of working age to save more for their retirement so that they won’t have to rely solely on the States old age pension and tax funded welfare benefits later in life’.
As you are making private pension savings on behalf of your employees, it might be fair to say that the proposals are more for those who currently do not have access to any form of private pension.
However, certain adjustments may need to be made to ensure your Rat is eligible, for example, the levels of contribution etc. may need to be adjusted to be consistent with the secondary pension requirements.
We hope that more information will be available in the coming months, which should enable you to review your existing scheme with your financial adviser and make any necessary adjustments.
Read the full Business Panel article here.