Isle Of Man To Examine Pension Taxation

by Philip Morton, Investors Offshore.com

24 October 2006

The Isle of Man's Income Tax Division has published a consultation document on the taxation of pension schemes on the Island.

The document, unveiled earlier this month, outlines Treasury’s intention to implement improvements and aims to gather views to inform the policy process and the drafting of new legislation.

According to the Income Tax Division:

"It is primarily concerned with the income tax issues associated with pensions. This includes tax relief for individuals who wish to save for their retirement, relief for employers who contribute to schemes, approval of schemes, and providing clearance for the industry providers and trustees on scheme related transactions. It does not aim to cover the broader economic debate on pensions or their affordability."

"It is hoped that this consultation will generate debate about changes in the Isle of Man which were proposed some time ago, the changes which the UK has recently made and the degree to which the UK changes might, or might not, be appropriate for introduction here."

Changes proposed in the consultation document include:

• Tax-free lump sum: The taking of a tax-free lump sum of up to 25% of a pension fund will be permitted in the Isle of Man.
• Triviality: Commutation of a trivial pension or pensions into a taxable lump sum will be permitted up to an overall fund or aggregate fund valuation of GBP15,000.
• Concurrency: A person will be permitted to hold a personal pension plan alongside membership of an occupational pension scheme subject to an overall annual contribution limit of 15% of net relevant earnings.

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