Voluntary Defined Contribution Scheme

The Isle of Man Government Defined Contribution Arrangement has been established for IOM public sector employees via the IOM Government DC Policy. The Arrangement will be available to eligible new employees under participating employers from 1 June 2023.

It is the Isle of Man Government Group Personal Pension Scheme and is managed and administered by a third party Aviva. For ease of reference it is called it the DC Arrangement.

Please note that your employer may not be participating and as such, you will not be able to join the DC Arrangement.

Your employer will advise you if you are eligible to consider the DC Arrangement as an alternative pension saving choice.

Participating Employers are listed below:

Public Services Commission
Public Sector Pensions Authority
Manx Utilities Authority
Gambling Supervision Commission
Department of Home Affairs – Police and Fire
Manx Care*

*Manx Care employees are only eligible to join the DC Arrangement starting from 1 September 2023.

IMPORTANT: IOM Government public sector employers are in the process of contracting with Aviva and will be listed as and when Employers are able to offer the DC Arrangement to new employees.

What the Isle of Man Government Defined Contribution Arrangement (the DC Arrangement) is

Unlike public sector defined benefit schemes, employees can choose how much they wish to contribute. The money that is paid in, when added to what your Employer will pay in, builds up a pension fund that can be invested in the range of funds offered by Aviva. How quickly the fund grows will depend on what is paid in and how well the investments perform. Currently, from age 55, the fund can be used to purchase a separate individual annuity. This can be done whether or not the employee stops work.

The fund built up in this arrangement is not guaranteed in any way by the Isle of Man Government. The amount of pension fund will depend on the money that is invested and the performance of the investment funds. It is important to note that the value of the fund can go up as well as down.

Eligible employees will be given 2 months to decide which pension arrangement they want to choose.

All eligible Employees will be given support and help in making their pension decision and must take the advice of an Independent Financial Adviser (IFA). As the pension choice is voluntary for new employees, the IOM Government recognises that choosing between a defined benefit scheme and defined contribution scheme will be a significant decision that will potentially impact on an individual’s future post working income. Therefore, to help with this, the IOM Government has secured the services of Independent Financial Advisers MAC Financial (MAC), who will carry out a comparison assessment and make a recommendation.

The choice to join The Isle of Man Government Defined Contribution Arrangement is a one time offer and only available during the first 2 months from starting employment.

Only employees who meet the criteria of a New Employee as defined in the DC Policy will be offered the choice.

Choosing your pension scheme - Defined Benefit or Defined Contribution

Only first time public sector employees may be eligible to join the new IOM Defined Contribution Arrangement (DC Arrangement).

When you start your employment, your employer will automatically enrol you into either one of the Unified, Teachers or Police schemes (the DB Schemes). But if your Employer is offering the DC Arrangement, it will also ask you to expressly request your interest to join the DC Arrangement. You can do this by completing the IFA Referral Form (this will be enclosed with your employment offer information) and return this to your employer.

You will be referred to MAC to take advice and you will have 2 months from starting your employment to decide if you wish to join the DC.

If you DON’T choose DC, you will remain defaulted in your DB Scheme. Employees will default to membership of the Defined Benefit Scheme relevant to their employment.

If you DO choose DC, MAC will guide you through the contracting with Aviva and advise your Employer. Your Employer will remove you from the DB Scheme and contributions will be refunded to you.

If you take up an additional post to your current post, having already been given the prior opportunity to choose either the DC or DB Scheme, then you will not be offered another choice and will stay pensionable in whatever pension savings vehicle is chosen as outset. To ensure that employees get the best outcomes from their long-term pension savings, it is imperative for employees to keep continuity of membership in their chosen arrangement.

A comparison of the two choices is available in the downloadable documents.

Independent Financial Advisers

Joining the DC arrangement is entirely voluntary. This may be a difficult decision, taking in many unknown factors and it is imperative that employees take professional advice to understand the potential drawbacks and advantages of both pension arrangements and help them make an informed decision.

To help employees make this decision, your employer has engaged the services of MAC Financial Ltd (MAC). MAC Financial Ltd are part of the MAC Group and are based in Douglas, Isle of Man.

The appointment of MAC Financial does not limit employees taking advice from another financial adviser. However, the cost for this will need to be met in full by the Employee.

MAC has been appointed to advise and make a recommendation to Employees who may consider the DC Arrangement as an alternative to the DB Schemes. The advice and recommendations made by MAC will be based on the personal information provided by the Employee.

This initial advice, is provided for the purpose of assisting new employees in deciding to join either the DC Arrangement or the DB Scheme and will be free of charge and paid for by the employer**. With the exception of the annual policy review, any subsequent advice from MAC, or another IFA must be paid for by the employee.

** Employees will pay an ongoing annual administration cost in the DC Arrangement and may also be required to pay further fees at retirement - see the FAQ’s for more information.

All eligible employees who wish consider the DC Arrangement must complete and return the IFA Referral Form to their Employer. The Employer will note the interest in the DC Arrangement and send the IFA Referral Form to MAC. MAC will make contact with the Employee, prepare the comparison quotes and arrange for a meeting with the Employee to discuss the options and provide advice and a recommendation.

A link to the MAC Financial webpage will come soon.

MAC and Aviva charges - the cost of the DC Arrangements

The DC Arrangement includes an Annual Management Charge (AMC) of 0.95% of the value of the fund which is paid to MAC and Aviva to cover the cost of the policy administration and an annual review. The AMC is shared between MAC 0.46% and Aviva 0.49%.

Depending on the employee choice at retirement, there may be an ongoing administration charge for choosing the drawdown option**. Detailed information on the charges associated with the DC Arrangement will be explained to employees by MAC or (employees own adviser).

** See the FAQ on Retirement Options for more information.

With the exception of charges for the implementation of a court order associated with Divorce or Dissolution or for multiple estimates, there are no administration charges made to employees who join the DB Schemes. The charges associated with the DB Schemes are set out in the Public Sector Pensions Authority Administration (Fees) Order 2021.

Questions about the Isle of Man Government Defined Contribution Arrangement

About the DC Arrangement

The DC Arrangement will be to new employees in one of the participating Isle of Man Government employers from 1 June 2023.

It is established and approved under a Council of Ministers Policy. The Policy is the Defined Contribution Pension Arrangement Policy (the DC Policy). View a copy of the DC Policy.

The DC Policy sets out the provisions of the DC Arrangement, these include Eligibility criteria, the maximum Employer Contribution Rate, Contribution Pay and Governance.

The DC Arrangement is provided as an alternative pension saving vehicle to new employees who joined the public service on or after 1 June 2023 and are eligible under the DC Policy to participate in the DC Arrangement.

The DC Arrangement is a Group Personal Pension Scheme provided by Aviva. The administration will be undertaken by each participating Employer and Aviva.

Find out more about the DC Arrangement.

This is an entirely independent pension arrangement in which all members hold individual pension funds at their own risk. It is not a statutory scheme and the Isle of Man Government holds no liability on behalf of any participating employees.

Death in Service Benefits will be provided to participating employees via the Defined Contribution Public Service Employee Dependent Benefits Scheme 2023.

How the DC Arrangement works

You will be required to contract directly with Aviva to join the DC Arrangement, which is an entirely separate arrangement and independent on the IOM Government or your Employer.

You will choose how much you want to contribute and your employer will match that contribution twofold, up to a maximum of 15%. Example, if you pay 5% then your employer will double that and pay 10%.

With your express consent, your Employer will send the contributions to Aviva every month and along with the personal data required for the running of the contract.

The contribution will be paid to your pension fund and invested as you have agreed with Aviva. The value of this fund will grow over time to fund your retirement income, or to leave to someone in the event of your death.

Throughout the term of the contract, you will be supported by an Independent Financial Adviser, MAC Financial.

Employers participating in the DC Arrangement

The DC Arrangement will now be going live on 1 June 2023. Currently, the following employers are contracted with Aviva to offer the DC Arrangement:

Public Services Commission
Public Sector Pensions Authority
Manx Utilities Authority
Gambling Supervision Commission
Department of Home Affairs – Police
Department of Home Affairs – Firefighters
Manx Care*

*Manx Care employees are only eligible to join the DC Arrangement starting from 1 September 2023.

Please contact your new employers' recruitment HR team for further information.

Public sector employments eligible to join the DC Arrangement

Persons employed as a public sector employee in a pensionable role that permits them membership of a DB Scheme, by a public sector employer who is able to offer the DC Arrangement.

The eligibility criteria is strict and the DC Arrangement is only open to employees who are new to the public sector and those who have been employed in the past and are not in receipt of a public sector pension from a scheme listed below. The DC Policy defines the groups of employees that are eligible. These are the same employee groups who are also eligible for membership of the defined benefit public sector schemes.

Please note that your Employer may not offer participation in the DC Arrangement.

For the purposes of the DC Arrangement a 'public sector employee' is:

Judges of the High Court
The Attorney General
Public Servants within the meaning of the Civil Service Act 2015
Members of Tynwald
Any person, other than a civil servant, employed by a Department, a Statutory Board or a Board of Tynwald
The Clerk of Tynwald
A person employed in the Office of the Clerk of Tynwald
Persons engaged in any of the services mentioned in section 15 of the NHS Act 2001
Coroners
Isle of Man Data Protection Supervisor
Industrial Relations Officers
Persons employed on a full time basis by the governing body of a maintained school (within the meaning of the Education Act 2001) if the Department of Education, Sport and Culture, with the consent of the PSPA, so resolves.
Persons employed by Manx Radio
Persons employed by Hospice Care

Eligibility to join the DC Arrangement

Employees* who are new to the public sector and whose Employer offers the DC Arrangement. Please note that not all employers will offer the DC Arrangement. Eligibility is strict it is only open to new employees to the public sector and this applies across all Public Sector Employers.

*For a new employee to be eligible:

The employment is pensionable (this means the Employer has agreed that the post is eligible for membership of a public sector pension scheme and the Employer will pay a contribution up to 15% of your pensionable pay towards your pension); and
The individual is not currently employed as a public sector employee in another pensionable employment regardless of whether they chose to opt out of the scheme or not**; and
If previously employed, they have had a break of employment of 31 days or more; and
The individual is not a pensioner member of a public sector pension scheme that is managed by the PSPA. Local Government and IOM Post Office schemes are excluded.

To join the DC Arrangement employees must make a choice, taking into account the advice and recommendation of MAC Financial or their own adviser.

**Employees who take up an additional post who have already had the choice of DC Arrangement or DB Scheme will not be eligible for the same choice again. Any subsequent additional pensionable post will be covered by whatever pension saving option the employee chose at outset.

If you are being re-employed and are in receipt of a public sector pension that relates to your former employment

If you are in receipt of a pension from any of the schemes listed below, you are not eligible to join the DC Arrangement. You are also not permitted to join the Isle of Man Government Unified Scheme 2011.

Isle of Man Government Unified Scheme 2011
Judicial Pension Scheme 2004
Judicial Pension Scheme 1992
Teachers Superannuation Order 2011
Police Pension Regulations 1991
Police Pension Regulations 2010
The Superannuation (Manual Workers) (No1) Scheme 1973

If you are employed on a casual basis on the bank/ supply list but have another new job

You are not a new public sector employee so you are not eligible to join the DC Arrangement.

If you are currently employed and take up new employment

Once you have had the choice to join the DC Arrangement (or the DB Scheme) you have made your pension saving decision and you will not be eligible for the same choice again (unless you leave all your employments and re-join at a date in the future at least 31 days after leaving). So that you can be sure of the best pension outcome, it is imperative that your membership remains consistent in whatever scheme you choose.

Contributions to the DC Arrangement

You must decide how much you want to contribute.

'Pay' means in respect of a particular period, the amount of your basic pay, salary wages or fees paid to the Employee from their Employing Authority. 'Pay' does not include any payments made for overtime, bonuses or any element of irregular payment not deemed by the Employing Authority to be your basic permanent pay.

You can opt to increase or decrease your pension contributions once a year in April.

In accordance with your instruction your employer will deduct regular (normally monthly) contributions from your pay and pay it automatically to Aviva.

Your Employer will pay an additional Employer Contribution to match your contributions 2:1 (Employer to Employee) up to a Maximum of 15% of your pay.

Your contributions and those paid by your Employer will be based on your pay, so if you are receiving reduced pay, you will only pay contributions on the pay you actually receive.

Example Matched Contribution Rates

Employee Contribution rate as a % of Pay	Employer Contribution rate as a % of Pay
5%	10%
5.5%	11%
6%	12%
6.5%	13%
7%	14%
7.5%	15%
8%	15%
9%	15%
10%	15%
11%	15%
12% +	15%

Employer contributions to the DC Arrangement

Your Employer will pay an additional Employer Contribution to match your contributions at a rate of 2:1 (Employer to Employee) up to a Maximum of 15% of your pay.

Example Matched Contribution Rates

Employee Contribution rate as a % of Pay	Employer Contribution rate as a % of Pay
5%	10%
5.5%	11%
6%	12%
6.5%	13%
7%	14%
7.5%	15%
8%	15%
9%	15%
10%	15%
11%	15%
12% +	15%

Tax relief on contributions

Under current tax legislation you will not pay tax on your own contributions.

Your own contributions and your employer’s contributions are based on your gross pay (pay before tax).

National Insurance payment on pension contributions

You will pay National Insurance (NI) contributions at the standard rate on contributions taken from your pay.

Administration costs for the DC Arrangement

The DC Arrangement includes an Annual Management Charge (AMC) of 0.95% of the fund. This will be automatically taken from the employee’s fund and paid jointly to MAC and Aviva to cover the cost of the policy management. This charge includes the cost of MAC’s ongoing advice e.g. holding an annual policy review meetings to discuss the pension position, in order to monitor and review the employee’s policy.

The AMC is 0.95% of the fund and split between MAC 0.46% and Aviva 0.49%.

With the exception of the annual policy review, any subsequent advice from MAC, or another IFA, must be paid for by the employee.

During the life of the policy there may be such events as the application of a pension sharing order upon divorce or the dissolution of a civil partnership that will incur additional administration and/or advice charges. Likewise, a transfer in of pension benefits from another pension scheme may incur an administration charge and will incur a charge if advice is taken.

At retirement

Depending on the employee choice at retirement, there may be an additional charge. Currently, if the employee wants to take a Drawdown of cash as an income, there will be an ongoing administration charge. This is because the Aviva policy does not provide this facility on the Isle of Man and employees will have to find another provider who does and transfer their fund to the new provider’s arrangement.

For example, Aviva has an arrangement with MAC Financial Pensions Trustees Ltd (MFPT) who are part of the MAC Group, to offer this type of arrangement with an ongoing administration charge of 0.14% of the fund. Other arrangements are available on the Island and the costs will vary.

See the FAQ on Retirement Options for more information.

With the exception of a set charge for the implementation of a court order associated with Divorce or Dissolution or for multiple estimates, there are no administration charges made to employees who join the DB Schemes. The charges associated with the DB Schemes are set out in the Public Sector Pensions Authority Administration (Fees) Order 2021.

If you are considering the DC Arrangement, MAC (or your provider) will make you aware of the investment and retirement options and the associated costs that will occur through the life of a DC arrangement. This information reflects the current options and charges, all of which may be subject to change.

The process for deciding which scheme/arrangement to join

If you are eligible, your Employer will tell you in your Statement of Written Particulars (SOWP). This is the information your Employer will send to you as confirmation of your new job and the terms and conditions of that appointment.

Initially, you will be offered the choice between joining either one of the three Defined Benefits Schemes listed below that is relevant to your job and the DC Arrangement.

Defined Benefit Schemes

The IOM Government Unified Scheme 2011

The Teachers’ Superannuation Order 2011 (Teachers and Lecturers only)

The Police Pension Regulations 2010 (Serving Police Officers only)

If you are sure at this early stage that you do not want to consider the DC Arrangement and want to stay automatically defaulted into one of the existing Defined Benefit Schemes listed above, then please tell your Employer.

If you are interested in finding out more about the DC Arrangement, fill in the IFA Referral Form enclosed in your Statement of Written Particulars (SOWP) and return it to your Employer.

Your employer will send this to the MAC Financial the Independent Financial Adviser.

Completing this form does not commit you to joining the DC Arrangement.

After you have considered MAC’s recommendations you decide that the DC Arrangement does not suit you then you will remain defaulted into your Employers Defined Benefit Scheme.

Alternatively, if you do decide to join the DC Arrangement, you will be required to contract separately with Aviva and independently of your Employer and the IOM Government. You will be required to instruct your Employer’s Payroll to pay your contributions and the respective Employer Contributions directly to Aviva and share relevant personal data with Aviva for the purposes of honouring the contract.

Timescales

You have up to 2 months from your date of starting your new employment to make your pension choice.

If you have not made your pension choice by the time you start in employment, you will remain automatically defaulted into your Defined Benefits Scheme.

If within 2 months, you decide to join the DC Arrangement, your Defined Benefits Scheme pension contributions will be refunded and you will commence in the DC Arrangement from the date you made your choice. Your DC Arrangement service will not be backdated.

Please note that if you do not return the Pension Choice to your Employer in the 2 month timescale you will automatically be defaulted to the Defined Benefit Scheme relevant to your employment.

For this employment, you will not be given the option to join the DC Arrangement again.

Choosing the DC Arrangement

The choice to join DC Arrangement is a one- time offer and only available at the time of joining.

Only Employers who are participating will be able to offer you this choice, if you are not sure check with your Employers HR Office.

Only employees who meet the criteria of a New Employee as defined in the DC Policy will be offered the choice.

Any questions regarding your eligibility to have this choice should be referred to your Employer directly.

You have up to 2 months from your date of starting your new employment to make your pension choice.

If you have not made your pension choice by the time you start in employment, you will automatically be defaulted into your Defined Benefits Scheme.

Switching schemes/arrangements

Joining either a DB Scheme or the DC Arrangement is a one-time opportunity. You can only have the choice to join DB or DC again, if you become and 'eligible employee' by leaving your employment and being re-employed again in the future after a break of 31 days or more.

Switching from the IOM Government Unified Scheme to the DC Arrangement

You can only join the DC Arrangement if you resign from your employment, are re-employed through formal recruitment and have a break in your employment service of 31 days or more and do not claim a pension from the IOM Government Unified Scheme.

What happens when you leave the DC Arrangement

When you leave your public sector employment, your employee and employer pension contributions will stop, as you will no longer be getting paid. Your Employer will notify Aviva that you have left employment.

However, this is your pension fund, so you can make arrangements with Aviva to carry on making contributions if you wish.

Retirement options and costs from the DC Arrangement

If you are considering the DC Arrangement, you must be made aware of the options and the associated charges that you will have when you retire. This information reflects the current options and charges.

The DC Arrangement is a Group Personal Pension Scheme with Aviva.

Currently, at retirement, employees will have two options:

Option One

Take an Aviva Annuity and Tax Free Lump Sum: you can take a lump sum of up to 40% of your fund value and use the balance to secure a guaranteed income. There are currently no other providers on the Isle of Man that offer the annuity option.

Option Two

Transfer your Fund to another provide and Drawdown: once transferred to another provider* (Aviva does not currently offer this option) you can draw down cash from the fund. Up to 40% is tax free. You can then drawdown the balance of your fund as a regular income. You can still secure an annuity with Aviva at a later time.

It is recommended that to do this you will need the advice of an Independent Financial Adviser.

* Currently, to access cash, you will need to transfer away from Aviva to another provider, of your choice. If you do not have an adviser or an existing Income Drawdown arrangement, there are a number of suitable arrangements on the Island that you can choose from.

For example, MAC Financial Pensions Trustees Ltd (MFPT) who are part of the MAC Group has a Self-Invested Personal Pension (SIPP) which is available on competitive terms. Currently, if you choose to do this and transfer to the MAC SIPP there is an ongoing administration charge of 0.14% of the fund value. You are not tied to this option at retirement and you can choose to transfer to another drawdown plan and or take advice from another adviser and the charges will vary.

What happens to your benefits in the event of your death

If you die in service whilst contributing to the DC Arrangement, under the Public Service (Defined Contribution) (Death Benefits) Scheme 2023, a lump sum is payable to the person(s) you have nominated on your beneficiary nomination form. If, at the time of death, you have not completed a nomination form, your lump sum is payable to your surviving adult dependant or personal representative.

Any funds still in the scheme at the time of your death will be handled directly by Aviva, who can advise you of what happens to the funds in the event of your death.

To find out more information contact your employer’s HR representative or visit the Public Sector Pensions Authority website.

More about the DC Arrangement

Visit the Aviva website to find out more about the Isle of Man Government Group Personal Pension Scheme (the DC Arrangement).

If you want to find our more and consider your options please complete and return your IFA Referral Form. You will be referred to an Independent Financial Adviser (IFA) - MAC Financial who are qualified to help you make an informed decision. This initial service will be free of charge.