Maltese Retirement Schemes for UK Residents and Non-Resident, UK Domiciled Individuals

Following the restriction of UK tax relief on annual pension contributions to £40,000 from 6 April 2014 and the reduction of the lifetime allowance to £1m from 6 April 2016, the ability to save for retirement through a UK Registered Pension Scheme has been greatly restricted. Any individual with a high level of income is now unable to fund a similar income in retirement through traditional pension planning and therefore alternative solutions must be considered.

In addition to this, there are foreign domiciled individuals who have been resident in the UK for more than 15 years and are worried about having to pay UK tax on their offshore income and gains from 2017. These individuals may not be able to fund a discretionary trust and so will be looking for alternative non-UK savings vehicles.

Qualifying Non-UK Pension Schemes (QNUPS)

As an alternative to UK domestic savings and investment products, such a non-UK pension scheme offers individuals the opportunity to save for retirement outside the UK registered pension scheme regime.

In essence, this is a pension scheme (namely a scheme capable of providing benefits on retirement, death or serious ill health) which is established and administered outside the UK and which satisfies the requirements set out in the Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010.

Benefits and Key Features of the ‘Third Dominion Malta Retirement Plan’ (the Plan)

The Plan is a personal pension scheme which is established and administered in Malta as a registered retirement benefits scheme under the Retirement Pensions Act 2011. The Plan is fully regulated by the Malta Financial Services Authority. It also satisfies the HMRC conditions to be a Qualifying Non-UK Pension Scheme.

The Plan is open to individuals who are resident in a number of countries, including the United Kingdom and Malta.

Being recognised by the Maltese Income Tax Authorities as a registered retirement benefits scheme, the Plan benefits from tax relief in Malta in respect of investment income accruing to the Plan, other than income in respect of rents received from Maltese immovable property.

As it is based in a member state of the EU, the Plan benefits from freedom of movement of monies, legislation and anti-discrimination legislation, as well as a strong regulatory and economically stable jurisdiction.

Retirement benefits may be drawn from age 50, and the various distribution profiles and considerations can be discussed on a case by case basis.

Dominion has obtained legal opinions confirming that a non UK pension scheme which is funded in accordance with normal commercial standards is not a settlement for income tax or capital gains tax purposes.

Consequently, there are several targeted anti-avoidance provisions that should not apply.

The Facts

The Plan provides the opportunity to save for retirement in order to provide benefits over and above those available under UK registered pension schemes. While contributions made to it do not attract

UK income tax relief, it is not subject to lifetime allowance and annual allowance limits applicable to UK registered pension schemes.

Compared to traditional supplementary retirement options, the Plan provides the ability for funds to grow tax-efficiently whilst providing greater inheritance tax advantages, and utilising Maltese pension legislation, allows for on-going lump sums to be drawn in retirement.