Isle of Man will be introducing pension freedoms to allow "pensioners to look after their savings", treasury minister Alfred Cannan announced yesterday (20 February).
The legislation for these changes was included in the island’s 2018 budget and will allow savers to access their pension pots after 55, as they do in the UK.
Mr Cannan said: "These new measures […] will allow island residents the freedom to access their pension funds more flexibly should they choose to do so, and help many transition themselves into retirement."
He added that proper guidance would be given to financial advisers "to assist those in making those decisions" and he promised steps to guard against fraud.
The Isle of Man's current rules mean a pension pot smaller than £50,000 after tax-free cash can be fully accessed.
But this legislation will now be amended so this limit is raised to 100,000 net of tax free cash, which means full access for a pension pot of up to £142,000 without having to pay the transfer charge
Mr Cannan also announced that the island would have a new pension scheme which will allow full access after age 55 and which will accept transfers from current approved schemes for a 10 per cent fee.
He said: "This new scheme will allow full tax relief on contributions and will be taxed at the usual rate but will have a large tax-free lump sum of 40 per cent."
These new measures has been under discussion on the island since 2015, and were the subject of a consultation last year.
The consultation said that if parliament adopts the budget in February, then pension providers on the island would be able to introduce the new scheme from 6 April 2018.
After the introduction of pension freedoms in the UK in 2015, the volume of defined benefit pension transfers has soared, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution schemes to access their cash.
HM Revenue & Customs data showed more than £14bn has been unlocked from defined contribution pensions since pension freedoms came into effect.
According to Hymans Robertson, around one million individuals will transfer out of their DB pension schemes in the next 25 years.
Last year the Financial Conduct Authority published its review into how the pension freedoms were working and found most consumers had chosen the "path of least resistance" and accepted the drawdown option offered by their pension provider without shopping around.
It also found the proportion of drawdown bought without advice has risen from 5 per cent to 30 per cent, while annuity providers had left the market, reducing choice for consumers.
maria.espadinha@ft.com
