In line with a number of offshore jurisdictions, the Isle of Man has begun to gear up for an expected explosion in international pensions provision. New legislation is in place, and subsidiary bills have already been drafted affecting both international and domestic pensions. There has also been some tinkering with the existing acts covering state pensions, following changes in the UK. Further regulations incorporating UK changes are likely in the future.
To deal with the latter first of all, recent changes such as the introduction of stakeholder pensions have not been consolidated in law by the island parliament, the Tynwald. Back in 1997 the parliament did approve the 1997 Order to the 1995 Pensions Act. This covered protection of state scheme rules, and contracting out, and was designed to ensure compatibility with the UK rules. The Order also dealt with the equalisation of retirement age for both sexes at 65 by 2010.
At about the same time, the Isle of Man Insurance and Pensions Authority (IOMIPA) revealed a new regulatory framework for international and domestic pensions. There followed a period of consultation, and in 1999 a draft bill was issued by IOMIPA for consideration by parliament. The bill finally became law at the end of last year and was enshrined in the Retirement Benefits Schemes Act 2000. As was the case with the 1995 Pensions Act, this was an enabling law, paving the way for further regulations.
Before looking at the main provisions of the act and the later regulations, an overview of the approval regime is useful. The position is broadly similar to the Channel Islands (see IPE September 2001), with provision for exempt approved schemes for local employees (whether the employer is IOM-resident or not), statutory schemes established by resolution of the Tynwald, and international schemes for the benefit of non-IOM-based employees. There are also an approval regime for personal pension arrangements, both local and international, and retirement annuity trust schemes. Reciprocal arrangements for the transfer of pension rights between IOM and the UK and vice versa.
The act requires all retirement benefit schemes with IOM resident members to register with IOMIPA, whereafter they will be categorised as “exempt”, “recognised” or “authorised”. The first group, those with 10% or less of members, including actives, deferrals and pensioners being IOM resident, will merely be required to register. The second parcel of schemes will be those established outside the IOM with more than 10% IOM-resident members, but managed or authorised under the law of a “designated country or territory”. Finally “authorised” schemes will be any that do not fall into the first two categories, but have IOM-resident members.

IOMIPA’s Michael Lightfoot confirms that the bulk of the new act and the proposed regulations will relate to authorised schemes, for obvious reasons. “We are currently preparing regulations, subordinate to the 2000 Act, which will relate to international schemes and those are going through at the moment. Those relating to domestic schemes will go through in the middle of next year.”
Lightfoot describes the first act as a “springboard” and says that compared with the 1995 Pensions Act, parts of which appear in the IOM legislation, IOMIPA has tried to draft more flexible legislation. “The main act is a foundation for a new raft of legislation which is coming through, which will allow international schemes for global workers to be established here, even though they are not domestic tax payers. The regulatory framework for those schemes to be domiciled and managed in the IOM will be in place in January 2002. The consultation process is complete, the final draft has been produced, and that will be approved by Tynwald early in the New Year. Once that is out of the way we will then be looking at a revamp and upgrading of legislation relating to domestic schemes.”
This is an attempt to attract what is likely to be potentially a large amount of business, in what will be an extremely competitive marketplace. One concern has been that rather than being seen as providing the necessary protection for domestic and international pensions administered on the island, the new act and subordinate regulations may be considered over-prescriptive and unnecessarily complex. The fear then would be that local IOM employers may choose to wind up existing schemes and the IOM would also see its international business fall.
“I don’t believe anyone operating schemes on the Isle of Man should be concerned,” says Lightfoot, refuting such suggestions. “There are some areas where we have decided to upgrade the regulations but we have had lengthy discussion with the business community, and there has been hefty consultation on all aspects of it. It is generally accepted in the market over here that the new_legislation is workable and does add value to what was in place before.”
On the international side, Lightfoot believes that the appeal of the island as a base for global benefit structures is growing. “What we have tried to do is create a core regulatory framework; set rules for production of statement of benefits, auditing controls, regulate who can be appointed to the schemes in a professional capacity, in order to provide a bedrock. There is then a secondary tier of regulations that are advisory, or flexible. We have created a platform that we as regulators are happy with. This ensures members of schemes have proper redress through official channels, that the schemes are run properly, and that accounting and management are monitored. Because we are operating in a multi-jurisdictionary environment we also have to ensure industry has enough scope within the trustee and scheme rules to create a structure which either complies with, or takes component parts from whichever jurisdiction the company operates. Consequently we have tried to be flexible. For example, we specify that any international scheme must have a retirement date, but we have not specified what that should be. The main reason being that the company may need to bow to domestic circumstances when choosing such a date.”

The impression is that IOMIPA has not wanted to be too prescriptive in the fine detail, but is concerned that the schemes should be run in an appropriate manner, and subject to official scrutiny.
Lightfoot sees a new market evolving, and gives a hint of the island’s ambitions. “We are not necessarily looking solely or primarily at pan-European pensions. We are looking at the global market, and do not want to focus our attention on just one sector of that market. We believe we have put a global structure in place and that is the market we are going for. I don’t think any jurisdiction wants to sit around and wait for pan-European pensions, there is still a lot of debate to take place over quite a period of time.
“We still see Europe as a market, but we don’t see it exclusively as our market. One only has to look at the trading links the IOM has with other parts of the world. Europe is important but a glance at the businesses that are already operating from the IOM confirms that we have to widen our efforts. The insurance companies, lawyers, and service providers operating across the Far East, the Middle East and Africa provide us with a wider target for our services.”
So far as IOM plc is concerned Lightfoot believes the island has many strengths to play to as a financial centre. “I feel we have produced legislation which reflects those strengths, and that will help create an inventive and diversified market for international pensions.”