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Employer Solutions Insights: Why Guernsey for Pensions?

22nd Jun 2021
Anton Seatter, Director – Employer Solutions, recently shared his insights on the appeal of Guernsey’s pensions proposition and the jurisdiction’s strong ties with South Africa when he spoke at the WE ARE GUERNSEY South Africa Private Wealth Virtual Roadshow…
Can you provide some background to Guernsey pensions?

Guernsey has led the international pensions market for over 50 years. 20 years ago, it was one of the first jurisdictions to regulate pension providers and in 2017 it introduced additional pension regulations to further enhance member protection.

That long-term experience means Guernsey is well positioned in this space and is seen as a gold standard for international pensions. Guernsey offers anyone setting up a retirement structure access to world-class expertise and experience with a modern and principles-based regulatory regime which conforms to international standards. This is underpinned by the security and stability of one of the world’s leading international finance centres.

The Guernsey pensions industry recognises that international pensions are constantly evolving and therefore takes a collaborative approach to ensure the island stays at the forefront of international pensions. Via the Guernsey Association of Pension Providers (GAPP), professional service providers work closely with the Guernsey Financial Services Commission, the Guernsey Revenue Service and Guernsey Finance to maintain its industry-leading position.

Why would a Guernsey pension be of interest to someone in South Africa?

Guernsey has a long history with South Africa; this includes pensions but it also goes much deeper than that. For example, Guernsey has significant experience in supporting South African asset managers with their global distribution needs, and in supporting South African families with their family wealth, investment and succession planning.

Guernsey is very good at tailoring solutions around the needs of clients. In the pensions space, the jurisdiction has built a full range of retirement options covering both individuals and corporates and which are flexible enough to accommodate most plan design needs.

South African corporates and individuals choose Guernsey pensions for a number of reasons. This includes tax efficiency, asset protection, design flexibility, estate planning and international diversification.

Are there different options for individuals and corporates?

Yes. Recognising the different needs, the Guernsey pensions regime is split into retirement options for corporates and individuals.

For corporates, the 40(o) pension plan is used by South Africa-based companies for their international populations and by non-South African companies for their employees based in South Africa. As with personal pension plans, they can be used as the primary pension pot or they can be used as a top-up arrangement.

In addition to design flexibility, South African companies like to take advantage of having a single centralised retirement plan for employees in multiple locations as it helps simplify their international operations, reducing the number of counterparties and operational risk.

For individuals, the 40(ee) personal pension plan is commonly used by South Africans who are resident in South Africa and those who are internationally mobile. It can be used as a pension top-up arrangement or it can be used as the main pension pot.

What makes a Guernsey pension different to a South African pension?

There are a number of attractive features of Guernsey pensions:

  • They are extremely flexible and can accommodate a wide range of plan design needs
  • There are no contribution limits. This is particularly attractive to high net worth individuals who have the ability to build up a significant retirement pot
  • At retirement, members can take a 100% lump sum distribution and are not required to acquire an annuity
  • A wide range of multi-currency international investment options. This is attractive to corporates or individuals who do not want to be pegged to the rand or have South African investments as well as high net worth individuals who value investment flexibility. We look after pensions with a wide range of investments, including private equity, real estate through to real assets, such as art
  • Lastly, because the pension is already offshore, it provides maximum flexibility if the member plans to move to another country in the future as their pension is held outside of South Africa
What are the key considerations for an individual or a company thinking about a pension in Guernsey?

One of the first things is to have the end goal in mind. Where the client is a corporate with multiple, possibly, competing objectives, then we can establish a parallel structure designed to meet the needs of different employee groups. Guernsey pensions are very flexible and can be designed to fit a clients’ exact requirements. Standardised or ‘off the shelf’ retirement options are available but it is important to make sure these reflect the clients’ objectives.

It is important to take proper advice and work with an established pension provider. The adviser and service provider will guide the client to ensure all aspects of the pension – design, operation and investments – align to their needs. An experienced pension provider, such as JTC, will also have dedicated people, processes and technology which ensure your plan operates smoothly.

Lastly, do not to be put off by the fact they are offshore. It is tempting to assume that sort of solution is reserved for high net worth individuals or large corporates, but that is not the case at all. We are entrusted with the pension plans for a large cross-section of individuals and corporates. Guernsey is good at providing a standard product where necessary but due to the flexibility of their pensions regime, it can be scaled up to be as tailored as you need.

If you would like to watch the South Africa Private Wealth Virtual Roadshow on demand, please click here.

To find out about our Employer Solutions offering please contact Anton directly or visit JTC Employer Solutions.

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