Jersey pension scheme tax guide

​​Types of​​ pension scheme available in Jersey

We can't give advice on pension planning. You should go to a person or organisation regulated by the Jersey Financial Services Commission.

Pension administrators and scheme managers should refer to the full practice notes.

Pension administrator tax guidance notes

Occupational pension scheme (superannuation funds)

These are employer based schemes which you may be entitled to join as an employee of the company. The scheme may be contributory or non-contributory. 

If you're making contributions into an approved scheme, you can claim your payments as a deduction against your related earnings. Contributions are controlled by the rules of the scheme.

Your scheme rules may allow you to take a refund of contributions if all criteria are met:

• you have been a member of the scheme for less than 5 years
• you have ceased to be employed by the employer
• you have not started to receive any benefits
  

Retirement trust scheme (RTS)

Retirement trust schemes are trust arrangements which act as administered private pension schemes.

You're entitled to income tax relief on contributions paid into a retirement trust scheme (RTS). This relief is claimed by showing the sums you paid on your annual income tax return. If an employer pays contributions into your scheme, you cannot claim tax relief on these contributions.

When you exercise your option between the age of 50 and 75, you can:

• purchase a lifetime annuity
• receive an annuity equivalent paid as an income
  
• continue to pay into the scheme up to the age of 75
• make any number of elections to commute an aggregated maximum 30% of accumulated benefits tax free​
  

Retirement annuity contract (RAC) with a qualifying UK insurance company through a local agency

These schemes are approved under Article 131B of the Income Tax (Jersey) Law.

An RAC is a personal pension plan which is underwritten by an insurance company.

Tax relief on contributions are the same as for a retirement trust scheme, described above.

The individual who takes out the retirement annuity contract (RAC) will contribute to the policy by paying a regular amount to the insurance company.

On retirement, the policy will allow for the purchase of an annuity which is an income that lasts for the rest of your life (and dependants if the policy allows).

Self invested pension plan (SIPP)

These schemes are approved under Article 131B of the Income Tax (Jersey) Law.

SIPPs, in Jersey legislation called self administered retirement annuity contracts, are formed by the creation of a Jersey company which provides for a pension plan for an individual (and a spouse or civil partner, if necessary). An annuity contract is drawn up between the company and the individual, which must be approved by the Taxes Office.

An individual can make annual contributions to a SIPP. Tax relief is claimed in the manner as described above for a RTS or RAC. An employer can also pay into the scheme.

It is important to note that the (SIPP) company cannot pay out an annuity on retirement. It is necessary to transfer the fund to another pension scheme which can pay out benefits upon retirement.

Benefits may be exercised between 50 and 75. 

For a full list of the permitted investments that can be made into a SIPP see appendix 2 of the full guidance notes.

Taking your benefits

Pension schemes may pay out from the age of 50 but must commence by the age of 75.

Schemes may allow a tax free lump sum of up to 30% of the net fund value.

Drawdown

The income tax law allows you, by entering into an approved drawdown contract, to withdraw amounts from the pension fund at retirement. The drawdown​ manager will deduct 20% tax at source as and when you take the money out.

There are strict rules that have to be followed, including that you have to be in receipt of a minimum retirement income or minimum retirement capital.

A regulated drawdown manager must be appointed to administer the drawdown itself.

You must declare the gross amount (before tax) of each withdrawal from a drawdown contract and the tax deducted in your annual tax return.

This is taxable income and may result in further impacts to your overall tax and​ long term care liabilities and future class 2 Social Security contributions.​

Transfers

The whole of the fund value of a Jersey scheme can be transferred to another approved Jersey scheme or, if certain conditions are met, a drawdown contract.

You can transfer a fund from outside of Jersey to a Jersey equivalent scheme, but we do need to be notified when this happens.

You may be able to transfer your Jersey scheme to an equivalent scheme out of Jersey provided you are not resident for Jersey tax purposes. This needs our written approval before the transfer is made.

Permitted commutation of your pension fund

Your scheme may allow for a full commutation of the pension for a lump sum in cases of serious ill health or for triviality.

Serious ill health commutations​

In the case of serious ill-health, when a registered medical practitioner has certified life expectancy of less than 12 months, your scheme may allow for the whole of the fund to be commuted with no restriction.

If you have not commenced benefits, there is no tax charge. If you have commenced benefits, there is a 10% tax deduction.

Trivial pension commutation

Your scheme may allow you to commute the whole of the fund value if:

• ​​​you have reached the age of 60, and
• the lump sum does not exceed a total aggregate value of £50,000. This includes all previous elections to trivial commutation from occupational and private pension schemes as well as the value of the fund you are commuting at the time

​You may receive up to 30% of the fund value tax free. Tax at 10% tax will be deducted by the scheme mana​ger from the remaining sum. The payment you receive under the trivial commutation rules shouldn't be declared on your annual Jersey tax return.

Small pot pensions

Your scheme may allow you, at any age, to commute the whole fund if:

• the value of the fund to be commuted doesn't exceed £15,000, and
• if your employer contributed to the fund, you are no longer employed by the employer

Any sum received under the small pots rule will have tax deducted at the standard rate of 20% before you receive it. You must also declare it by including the gross amount (before tax) and the tax paid in your annual tax return.​

Lump sum payments from overseas pension schemes

Any lump sum you receive from an overseas pension scheme is taxable in Jersey and must be declared in your annual tax return. However, you may be entitled to the same tax free cash (of up to 30%) as if the payment was from a Jersey pension scheme.

Tax relief for pension contributions

The contribution that you make yourself into an approved Jersey pension scheme can be claimed as a deduction against your relevant earnings.

Pension contributions and tax relief 

Glossary of terms