Guernsey Retirement Annuity Trust Scheme (RATS)

The Sovereign Retirement Annuity Trust Scheme is a Guernsey income tax approved multi-member retirement annuity trust that is open solely to Guernsey residents.

Any Guernsey resident wishing to fund a new personal pension arrangement for their retirement income can benefit from a RATS.

A RATS is generally funded through one-off (ad hoc) or regular cash contributions, the transfer of existing pension plans and / or the transfer of existing assets to the scheme in specie.

Contributions are uncapped, but tax relieved limits will apply. Tax relief will be limited to the lower of 100% of taxable income or £35,000. This limit applies to the overall contributions or premiums. Further restrictions on tax relief will apply if you are subject to the withdrawal of personal and other tax allowances for high earners

It is possible to transfer most existing personal pensions, including UK-registered pension schemes, into a RATS. Some personal pensions have valuable benefits, such as a guaranteed growth rate, or a guaranteed annuity rate. These benefits would be lost if the money in those pension schemes were transferred into a RATS. It is important to be sure that potential benefits of a RATS outweigh the loss of the advantages offered by an existing pension scheme.

Yes, but only if the rules of the other pension scheme permit the transfer to the RATS.

Investment options allow member directed and/or third party directed RATS. Investments must be made in line with the permitted investments under the Income Tax Rules and the Pension Rules. Fixed fees apply when using a single investment portfolio. Investments in funds that contain exit charges, broker funds, and funds deemed to have a high expense ratio/ongoing charges figure (over 2.5%) are not permitted.

As the trustee of your RATS, Sovereign is responsible for investment governance arrangements of your scheme, including determining an appropriate investment strategy and ensuring that it adheres to the investment provisions of your scheme’s governing documents.

Your investment strategy, setting out how the assets are to be invested, is one of the most important drivers of your scheme’s ability to meet its fundamental objective of providing pension benefits as they fall due over the life of the scheme. You need to take an appropriate amount of investment risk to seek the return needed, to understand the overall level of investment risk in your scheme and to manage that risk effectively.

Each member must nominate an Investment Adviser and/or Investment Manager that can make investment recommendations to the trustee. The trustee will take account of the investment objective and purpose of the scheme and ensure compliance with any applicable investment restrictions as imposed by the relevant governing law and the risk profile of the member.

As trustee, our investment proposition is to provide our clients with investment options from our researched list of Investment Providers, which we monitor on an ongoing basis to ensure they remain appropriate for our clients. We will also monitor the costs involved with the management of your scheme assets with to ensure that they continue to represent good value.

Retirement benefits under a Guernsey RATS are available from age 50 and before age of 75.

If you wish, you can take a lump sum of up to 30% of the value of the RATS from age 50. You would not need to start taking any income from the RATS at the same time if you did not require it. However, you must start to take a benefit by the age of 75.

RATS permit you to take a loan be up to a maximum percentage of the value of the funds. This loan must be on commercial terms, which means that there will be interest charged on the loan at a similar rate to other loan providers. However, the interest will be paid to the RATS itself, of which you are the beneficiary.

The RATS will be approved by the Guernsey Income Tax Office, such that tax relief will be available on contributions up to prescribed local limits and any PCLS will be payable tax-free up to the prescribed local limit. Capped drawdown (income) will be paid subject to 20% withholding tax deducted at source.

Yes. Sovereign recommends that any individual considering a RATS should take specialist advice prior to commencing the application process.