About
For individuals looking at offshore retirement solutions outside their country of residence, Sovereign has developed a retirement product called the Conservo International Retirement Plan.
The Conservo is a Guernsey-based multi-member Guernsey-based Retirement Annuity Trust Scheme (RATS), which is open only to non-Guernsey residents and is designed with four entry levels that are tiered to suit a variety of retirement planning budgets.
The primary benefit of contributions made into a RATS, whether they originate from an existing pension or from new contributions, is that retirement benefits can be paid to non-resident members without triggering income tax in Guernsey, because they are not liable to Income Tax in Guernsey.
The Conservo is therefore an ideal plan South African tax residents, or South Africans working abroad that intend to return home when they retire, who are looking to consolidate their offshore assets and utilise their annual ZAR10 million foreign investment allowance and ZAR1 million travel allowance to save for retirement.
Flexibility of funding
A Conservo pension plan is typically funded by either a lump sum cash contribution or the transfer of existing assets, in specie, to the retirement plan. There is no fixed contribution schedule, so a person can continue to invest in their retirement savings on a regular or irregular basis depending on their financial position and what they can afford to put aside as they move through life.
Tiered fee levels
There is no prescribed limit to funding a Conservo. There are four fee levels: ‘Basic’, ‘Builder’, ‘Classic’ and ‘Pro’, which are tiered to suit a potential member’s retirement goals and the budget they can afford.
The ‘Basic’, ‘Builder’ and ‘Classic’ options permit only standard financial investments into the retirement fund.
The entry level for investing in the Conservo Pro is £1 million for standard investments, or any value where non-standard investments are held. Non-standard assets include commercial and residential property.
Member-directed plan
The Conservo is a member-directed retirement plan, so a member has the power of investment over the retirement fund, subject to those investments being within the parameters of the investment strategy set out by the trustee and in line with the Conservo’s Statement of Investment Principles.
This means that the pension funds contributed will either be invested by the trustee at the direction of the member, or at the direction of the investment managers or financial advisers that the member appoints and authorises to invest on their behalf.
Minimum age for retirement benefits
The minimum age from which benefits can be taken from the fund is 50 and draw down of retirement benefits must commence before the age of 75. Benefits can be paid as a regular retirement income stream, a lump sum, or a combination of both.
At the discretion of the trustee, a member can also take a loan from their Conservo prior to retirement that is up to 50% of the value of the account. A formal loan agreement will be entered into, and a commercial rate of interest will be payable.
Taxation
Conservo is not subject to any local taxation in Guernsey either in respect of payments to members or beneficiaries or in respect of the underlying investments held.
Typically for a South African tax resident, benefits will initially be paid tax free from the original capital amount contributed into Conservo, after which any capital gains and then income can be distributed.
A member can also apportion part of the retirement funds to be paid, on death, to named beneficiaries. The Conservo plan can therefore avoid Donations Tax and can assist in mitigating Capital Gains Tax.
Sovereign recommends that any individual contemplating setting up a pension fund or considering a pension transfer should seek and take specialist advice prior to commencing the process. Any tax implications should be discussed with your financial adviser.
Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.
