Pension Freedom Schemes (PFS)
On the 6 April 2018 Tynwald introduced a new pension scheme which allows pension freedoms. This new product also offers very generous conditions and tax relief for clients wishing to save for retirement. The main features of the scheme are as follows:
- Pension transfers can be made into a PFS from other Isle of Man approved schemes (with the exception of defined benefit schemes) subject to the payment of a 10% transfer fee. Please note that a pension transfer is not a pension contribution for income tax relief purposes
- Income tax relief is available to Isle of Man residents at their marginal rate of income tax up to a maximum of 20% on contributions made into a PFS
- Contributions to a pension scheme are limited to the level of the clients relevant earnings (see below for definition) or the annual allowance (2018/19 £50,000), whichever is the lower of the two amounts:
- Investment returns can roll up tax free
- A one off tax free Pension Commencement Lump Sum of 40% can be taken
- Relevant benefits in the form of a total fund commutation or a number of income withdrawals can be taken, from age 55
- Income withdrawals will be included in your income tax assessment and taxed or not taxed depending on your overall income level after taking into account your allowances, deductions and tax rates
Further information relating to Pension Freedom Schemes can be found in:
Practice Note 201/18—Pension Changes Practice Note
Statutory Document 2017/0375 Income Tax (Pensions) (Temporary Taxation) Order 2018
Statutory Document 2017/0376 Income Tax (Approved Pension Schemes) (Amendment) Regulations 2018
