What is a Retirement Annuity Trust Schemes?

Retirement Annuity Trust Scheme (RATS) are an alternative to the traditional insurance company based pensions and refer to any trusts that are established under the jurisdiction’s tax/ retirement laws to provide retirement benefits for the members. In essence the law will treat Retirement Annuity Trust Scheme (RATS) in the same way as personal pension plans.

Retirement Annuity Trust Schemes (RATS) is a tax efficient retirement plan that offers an attractive retirement planning solution for Guernsey & Jersey residents and related jurisdictions.

Can anyone set up a Retirement Annuity Trust Scheme (RATS)?

Depending on your jurisdiction, Retirement Annuity Trust Scheme (RATS) offers an attractive retirement planning solution for Guernsey & Jersey residents and related jurisdictions.

What are the advantages/disadvantages of using Retirement Annuity Trust Scheme (RATS)?

Benefits of RATS

  • Principal beneficiary does not have to give his/her pension to a banker to manage your pension. With RATS principal beneficiary can manage his pension himself.
  • An annuity can be paid directly from the trust fund without the need to purchase an annuity from an insurance company ie an annuity not compulsory.
  • Tax efficient- Unlike conventional annuity arrangements, on the death of the principal beneficiary or beneficiaries, any assets remaining in the Retirement Annuity Trust (RAT) pass on to their heirs. All income and growth derived from the investments are exempt from income tax in Guernsey while they remain in the Retirement Annuity Trust (RAT)
  • Investment flexibility options –the principal beneficiary can benefit from increased investment flexibility options as he may have far greater involvement in the management of the investments, investment policy, assets held within the Retirement Annuity Trust (RAT), and other terms.
  • the principal beneficiary can take loans from the Retirement Annuity Trust (RAT) including a mortgage, personal loans etc
  • The principal beneficiary has flexibility in taking retirement benefits because, as it is not compulsory to purchase an annuity from a life assurance company, the pension element is not fixed. However normal age rules may apply to start taking retirement benefits.
  • A Retirement Annuity Trust (RAT) may be deployed together with conventional pension plans

Cons of RATS

  • The Retirement Annuity Assets/ income may not meet your financial needs
  • If the principal beneficiary enjoys a very long retirement, there may not necessarily be a guaranteed pension throughout their lifetime.
  • Authority approval many vary. However RATS are designed to suit the principal beneficiary’s particular needs at different times. The Tax/ Pension authority many not always approve your RATS.