International pensions find a home in the Channel Islands

Mark Lindsay, Head of Pensions at Intertrust, explores what Guernsey and Jersey have to offer the international pension markets and how recent trends are playing their part in shaping that offering.

The population of the developed Western world is ageing and, simultaneously, the workforces of developing nations are growing. These factors are resulting in an increased focus on planning for the future and a subsequent examination of international pensions as viable vehicles for forward planning.

The Channel Islands have a long history of providing pension services to a range of international clients as part of their broader financial services offering. These services range from bespoke individual investment management to administration services for large institutional pension schemes, and complement the islands’ associated skills in fund and trust services.

Today, the islands provide the full gamut of pensions services including trustee and administration services for international and domestic pension schemes, legal and actuarial services, payroll support and other fiduciary services.

Yet the landscape is changing. Defined benefit (DB) schemes are neither as prevalent nor as popular as they once were; changes to Qualifying Recognised Overseas Pension Schemes (QROPS) could have a significant impact on the islands; and there’s a greater appreciation among today’s workforce that they need to be aware of their pension arrangements and potentially be playing an active role in managing them.

Change always yields opportunity, however, and the islands have historically risen to the challenge. In recent times, an established, mature financial services industry with a relatively large number of experienced professionals has been the bedrock of stability that has allowed the islands to adapt to and innovate in the face of change, and that should prove to be the case with pensions as well.

The range of services available and level of expertise make the islands the jurisdictions of choice for the provision of pensions and related services, a message that the islands need to highlight more vociferously to the world at large.

Tightening regulation

One of the most significant changes to the industry is an increased emphasis on regulation. The financial services industry has always been highly regulated, but there is now an increased focus on pensions, with factors such as pension release scams and mis-selling of investment products helping to drive better governance.

The recent introduction of QROPS transfer taxes, FATCA and Automatic Exchange of Information regulations are designed to enhance the regulation and governance of all cross-border arrangements.

While this may initially seem problematic, the changes and subsequent drive to regulation have actually been largely welcomed in the islands. There is recognition in the industry that the relative lack of regulation on pensions and providers of pensions-related services is a hindrance to marketing the product, and the islands’ offering can only be enhanced by appropriate levels of regulation.

The very fact that dialogue between industry bodies here, HMRC and other global authorities is ongoing is a positive factor and testament to the islands’ reputations.

Both Jersey and Guernsey are currently looking to extend the remit of their respective regulatory bodies to bring the pensions industry more closely under it.

Greater governance

Aligned to regulation is the issue of good governance. Sponsoring employers of defined contribution (DC) pension plans are under increased scrutiny as a result of the recent changes. This is an important area of focus in the onshore world and is becoming equally important in the offshore world.

So what should sponsoring employers know against the backdrop of increased regulatory scrutiny?

  1. Make sure the trustee has the required knowledge and understanding to fulfil its role;
  2. Ensure your trustee works efficiently with you as the sponsoring employer of the pension scheme;
  3. Work together with your trustee to recognise and manage conflicts of interest;
  4. Demand good administration of the pension scheme and communication with members;
  5. Be clear on the trustee's responsibility around investment governance; and
  6. Understand how the trustee can get value for the pension scheme members.

These are just the basics for good governance, but each point is important and worthy of serious consideration and interrogation in the current landscape.

Three pillars of excellence

If the Channel Islands are to be taken seriously as the jurisdictions of choice for pension services then practitioners and the industry need to be more vocal in stating the credentials of the local sector.

The Channel Islands are particularly suitable for providing pension plans thanks to three key areas of focus: expertise, a stable political environment and supportive governments.

Pensions don’t exist in isolation, they rely on a network of support functions – from administration to large-scale trustee services – to operate smoothly and perform to their optimal level. The Channel Islands have these functions in abundance; there are truly excellent people and firms on the islands to fulfil the needs of sponsoring employers when it comes to requiring those services for their international pension schemes. This certainly helps set the islands apart as jurisdictions of choice.

We’ve heard plenty over the past few months about the virtues of a ‘strong and stable’ government and in the islands we can certainly attest that these attributes are conducive to business. The political systems in both islands benefit from longevity and strong reputations internationally in both political and financial circles.

Furthermore, both governments are supportive of the industry and provide the correct legislative frameworks to help it achieve its goals and objectives. That includes working collaboratively to find solutions to problems and offer innovative products that the market wants.

These three factors engender one key emotion in clients – trust. Trust is especially important in the pensions industry because we, as practitioners, are guardians of people’s future income; people need to know that their money is safe and being invested, saved and managed in a responsible way.

Investing in the future

Jersey recently held its inaugural Jersey International Pension Conference as a means of discussing the industry and putting it front and centre of the Channel Islands’ financial services offering.

The three pillars of the industry were referred to time and again and Intertrust’s experience with our clients shows that these truly are the reasons why the islands are so highly regarded.

Additionally, we believe the future is bright when it comes to the expansion of the pensions industry on the islands as most employers we speak to still have a sense of duty when it comes to providing good, well-managed pension schemes to their employees.

While it’s true that many employers are still very serious about offering high-quality pension schemes, it’s also the case that individual scheme members are increasingly looking to be empowered and take some ownership over their plans.

At Intertrust we’ve recently launched InVision, a financial modelling tool that provides clients with a detailed analysis of expected outcomes and empowers users to feel confident in their decision making.

InVision is interactive and user-friendly and will provide our clients with an indication today of what their pension savings will provide them with in the future, when the time comes to draw down their entitlement.

Plan members taking ownership and being responsible for their future financial planning is music to the ears of employers and many in the industry – and that, together with new work from developing economies such as the Middle East, South America and Africa, suggests that there is plenty of scope for expansion in pensions and pension services in the islands and we’re right to regard ourselves as the field’s jurisdictions of choice.

Originally publish in the July edition of BL Global. To read the full magazine please click here: https://issuu.com/businesslife.co/docs/bl51

For further information
Mark Lindsay
Head of Pensions
Intertrust Jersey
+44 1534 504105
+44 779 875 6881

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