Income rises for pensioners with retirement annuity trust scheme

22 May 2014

Pensioners who have a RATS (retirement annuity trust scheme) are now entitled to receive more money from it following a change in the tax rules.

Jersey residents who have saved for their retirement through a RATS do not have to buy a traditional annuity which pays them a monthly pension. Instead, the money that has been paid into the RATS is invested by the trustees and then subsequently used to provide an income during retirement.

The maximum amount of pension income that can be paid by a RATS to the pension holder each year (the annuity equivalent) is determined by the Comptroller of Taxes. The maximum annuity equivalent has been increased by 50% with immediate effect.

The increased maximum annuity equivalent applies for the 2014 year of assessment and subsequent years.

Annual income from RATS to increase to 150%

The Comptroller of Taxes, David Le Cuirot, said “In this year’s Budget the Minister for Treasury and Resources will be lodging an amendment to the tax rules applying to pensions and pension schemes which will result in approved pension schemes being able to offer greater flexibility. Consistent with this move towards greater flexibility, and in light of current low annuity rates, it is considered appropriate to allow RATS more flexibility over the amount of annuity equivalent that they can pay each year.

“Following this change RATS will be able to pay an annual income to the pension holder of up to 150% of the “basis calculation” and the trustees of RATS already paying an annuity equivalent may wish to consider updating their annuity equivalent calculation and submitting the necessary documentation to the Taxes Office.”

Change welcomed

The Assistant Minister for Treasury and Resources, Deputy Eddie Noel, said “I welcome the Comptroller’s decision to amend the calculation. The fact that individuals saving in a RATS are not obliged to purchase a traditional annuity means that they are already an attractive option for personal pension saving and the Comptroller’s decision to amend the calculation of the maximum annuity equivalent can only bolster that attraction.