Work here, save there

Intoday's competitive market, and in spite of the difficult economic conditions, salaries are vital to retaining and recruiting key staff. Multi-jurisdictional organisations should consider what tax-efficient structures they can put in place to remunerate their employees. Firms that regularly second staff outside their home jurisdiction should do the same. One such structure is an international pension plan.

Jersey is one offshore jurisdiction that offers this scheme. It allows employers and staff to make savings towards the employees' retirement as a part of their remuneration package, regardless of where they work. An international pension plan, not being tied to the law of any particular country, is particularly attractive for internationally mobile executives and employees for whom would be tax inefficient (and in some cases impossible) to make pension arrangements in the jurisdiction of their employer.

Key features

• Because the plan is a trust-based scheme, it will have a third party (regulated Jersey) trustee, who is responsible for receiving contributions, administering the plan and paying benefits to employees on their retirement.
  This is similar to the UK's employer-sponsored occupational pension plan. The trust basis ensures that the monies contributed into the plan are properly held and invested.
  Jersey trustees conducting trust company business are subject to regulation by the Jersey Financial Services Commission, which adds additional protection for both employers and employees.
• The monies contributed into the plan will be held upon trust in accordance with the trust deed and rules agreed by the employer and the trustee until the employee's retirement.
• The primary beneficiaries are the employees. However, it is also possible to include the employees' spouses and children as beneficiaries in certain circumstances.
  Because an international pension plan is based in Jersey and governed by Jersey law, it offers more flexible benefits than occupational pension plans that are established in the home jurisdiction of the employer.

Other benefits

A Jersey-based international pension plan provides the following:

• There is no limit on the number of contributions an employer or employee can make in any tax year or during the lifetime of the employee. Therefore, the pension plan can grow with the employees, as their remuneration package improves over the course of their careers.
• Investment gains made under the pension plan are tax free in the hands of the trustee. So long as the employees are not resident in Jersey at the time of retirement, such residents can receive pension benefits free of any tax in Jersey. Naturally, employees may have tax obligations in their country of residence.
• There is no minimum retirement age nor any restriction on the age at which benefits must be provided. This allows the employer and the employee to set a retirement age that is suitable for the profession of the employee and the business environment of the employer.
• There is no requirement that employees must purchase an insurance-based annuity on retirement. Employees can choose the frequency and the number of withdrawals they wish to take from the pension plan.
• The Comptroller of Taxes in Jersey can grant registered pension scheme and tax exemption status to a Jersey-based international pension plan. Such tax status may allow the employers and employees to claim tax relief in their home jurisdiction.

Jersey offers favourable tax treatment of such pension plans, a robust regulatory framework for trustees, together with a well-developed and internationally recognised trust law and judicial system.

Nancy Chien is a senior associate at Bedell in Jersey