It certainly is not, there are other jurisdictions that have the ability to pay significant lump sums, not least of all New Zealand, but people will be surprised to understand 50c legislation is effectively an exemption provision and is very similar to Guernsey’s 40ee exemption provision which has been around for very many years. Guernsey then, has the capacity to do similar things to that being promoted by the Isle of Man. I would suggest that it should be used for the exceptional circumstance rather than generally, but it is possible with the correct structuring and if within the Deed Rules.

Yes, for example if a client is not UK domicile or breaks their UK domicile. Perhaps they are unwell or have other wealth on which to rely in their retirement. Similar proposals are being made in the UK to allow accelerated access to pension funds in certain circumstances and those proposals may well become law. The difficulty is that taking significant lump sums sounds exciting but generally it contradicts best advice as the funds in a QROPS are IHT exempt, taking them out and putting them back in your IHT estate is not ideal.

Obviously, the IHT position is an important factor but given that course of action is warranted there are other issues, for example, in some jurisdictions the receipt of a lump sum is taxed more heavily than an annuity – so care needs to be taken. Is the member returning to the UK – a member becoming UK resident needs to take great care as HMRC will treat all distributions as first coming from the tax relieved “pot” irrespective of if the Trustees and member understand the distribution is being paid from a separate growth “pot”, so a unauthorized member payment may arise. In addition, unlike the IOM Guernsey has a Vesting date which I believe is beneficial for those who may return to the UK.

The Isle of Man is a relatively small player in both overall offshore finance centre terms and in QROPS. Its assets under management are a tiny fraction of its Crown dependency counterparts of Guernsey and Jersey. To compete in the QROPS market today you need volume business and you can understand that the quite aggressive use of the new 50c legislation is one possible way a critical mass of business can be achieved. Currently many Guernsey schemes are significantly cheaper, due to their membership size and economies of scale. Some have sub £1,000 flat fees and have the benefit of no VAT, in the Isle of Man VAT is charged on such fees and will soon rise to 20% in January and is not recoverable.

Not to my knowledge but unofficially it appears they have taken notice, it would be hard not to given the heavy promotion. Interestingly, it appears complaints to HMRC have been made, allegedly, from within the Isle of Man. Its anyone’s guess what the outcome will be but believing you are technically correct has been the root cause of many failures in QROPS brief history.

Well, whilst I am Chairman of the local industry QROPS sub committee I emphasize my comments are my own personal view. My view is that given we know we can do similar things, this has been confirmed by our Tax Office, its important to consider the risks of openly promoting this type of arrangement. My preference will be to see it as a possibility in certain exceptional circumstances by way of a discretionary option by the Trustee, not the norm. It is important to remember that this perceived benefit is only for those who have not commenced benefit and can accrued a significant growth pot. The fact is that from the statistics we have the vast majority of people transfer to QROPS have already commenced benefit or near to that date and/or will not have any significant growth pot to consider in any case. It is then in some ways, much ado about nothing. But we will make it clear the Isle of man do not have anything exclusive it is just the case that Guernsey has decided to be more prudent in their approach.

Is the Isle of Man 50c style of legislation exclusive to them?

Are there circumstances when a greater than normal lump sum is reasonable?

What other issues arise when looking at segregating fund growth and allowing its
distribution without limit?