The value of that global footprint is particularly significant in the provision of international savings products and other pension related schemes since economies the world over are braced for disruption to existing models as they grapple with the long-term funding problems associated with either citizens who are reaching retirement age or globally mobile employees working in locations where there is no history of pension or savings provision.
The innovative International Savings Plan (ISP) solution was first announced following extensive consultation in Jersey in 2018 and the legislation was effective from 1st January 2019. It was first proposed by the Jersey Pensions Association (JPA), whose members were keen to develop a further competitive advantage that would accrue from providing such a solution. Since the introduction of Article 118D onto the statute, the Jersey tax authority now has the ability to formally recognise the establishment of savings plans in Jersey, for non-resident employees, by multinational and international companies. These ISPs are designed to be tailored to meet the needs of employer and employee, enabling a payout to employees when their employment ends or on the occurrence of a major trigger event such as redundancy or a health issue. Since the introduction of Article 118D service providers in the Island have been exploring the opportunities worldwide for the uptake of the product.
One of the markets first on the agenda had been – and remains – countries in the Gulf Cooperation Council (GCC), where it had already been identified that end of service gratuity (EOSG) schemes were required as a means of supporting the needs of employers who employ vast numbers of expatriate employees working in the region. The Dubai International Finance Centre (DIFC), a key regional hub for financial services, has led the developments across the Gulf in 2020 by implementing a new scheme. Entitled DEWS (DIFC Employee Workplace Savings), its purpose is to provide savings benefits for their expatriate workers, as an alternative to the existing EOSG arrangements. The intention is to give employees more choice in how they invest for the long term and reports indicate that more than 1,000 employers have signed up to the scheme, representing more than 17,000 employees. It is also the stated intention of DIFC to open this opportunity to third-party independent providers, in order to compete with DEWS.
The shift toward auto-enrolment schemes of this nature is likely to extend beyond the confines of the DIFC to other locations in the region. Jersey remains committed to the GCC through its extensive commercial links and its experienced industry workforce which possesses a number of skilled practitioners in the pensions arena who have an insightful knowledge of the region and its requirements. It is expected that Jersey’s nascent ISP regime will be viewed as a suitable alternative option for providers to innovate solutions that meet the requirements of the regional authorities.
However, as we had anticipated, it has become particularly apparent that the scope for such schemes and the role Jersey can play as a facilitator, extends far beyond the Gulf. Jersey practitioners in the pensions and benefits marketplace have been encouraged by the Jersey ISP regime’s attractiveness to a wide cross section of multinational and other commercial outfits, with globally mobile ranks of staff, looking for new solutions to delivering employee reward.
The potential value of such schemes has already become evident in industries that are more disparate in nature, like oil and gas or the seafaring market. In fact schemes have recently been established for leading crew providers to the superyacht market, where there has historically been a lack of provision for such schemes.
Although a Jersey based ISP has wide international appeal, we are also conscious that there are a number of existing schemes available in the marketplace, so it is helpful to examine the factors that helps to set the Jersey ISP apart as a leader in the pack.
First and foremost, the environment in which the ISP will be set up and administered is a vital element. Global companies seek a stable economic and political environment with an innovative but robust legal and regulatory infrastructure that ensures business can be transacted with certainty and confidence. In the unpredictable world in which we live at present, with the pandemic continuing to loom over us all, investors would rather rely on long established, sure footed jurisdictions which can offer the expertise required within a tax neutral environment and which have also invested in the digital technologies that have become an ever more crucial element in delivering results.
Jersey – which in a recent report was shown to have several million clients worldwide and is managing more than one trillion pounds in wealth – has become a jurisdiction of choice for increasing numbers of institutional investors. Additionally, Jersey has the expertise within its workforce and can call upon a close network of highly qualified advisers, lawyers, administrators and pension specialists, to tailor solutions in what is inevitably a complex economic environment. Jersey also has the track record, having providers that already administer the pension assets of approximately 60 million people around the world.
The second string to the bow is the flexibility of the Jersey scheme, designed to adapt to meet a range of requirements. The ISP in Jersey is sufficiently flexible that it can for example, meet the unique demands of institutions working in the Gulf region, while it can also be adapted to suit the objectives of multinational employers wherever they are based in the world. It can be established to offer an end of service benefit but has the scope for adding savings or share options, depending on requirements.
Further regulatory amendments are proposed as we continue to work with the authorities in Jersey to enable us to continue to innovate in this space. Thus, while companies providing pension related services are regulated, there is currently no specific regulations for pensions business itself, so a new framework of pension specific regulation is being proposed which is intended to further protect the rights and interests of clients who use Jersey based pension products. These latest regulations will support business growth in the sector, while providing even greater reassurance to potential clients keen to use a product based in Jersey.
It is evident that the direction of travel in many jurisdictions is auto-enrolment which will force employers to provide some provision for their employees and Jersey is ideally positioned to play a positive role in facilitating solutions. It is building a global footprint with industry expertise and investment in the associated technologies that will ensure it can deliver solutions, with regulations that are robust and offer scope for innovation. At the same time, the ageing population and changing workplace demographic will place an increasing burden on nation states to seek solutions ever more urgently. As a result, we are seeing huge opportunities to market Jersey as a destination of choice for innovative international savings and pension related schemes.