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Hello, and welcome to the Guernsey Finance podcast, where we bring you interviews with leaders from the global finance industry, as well as news and developments from Guernsey's financial services sector. My name is Brandon Ashplant, and I am head of technical here at Guernsey Finance. For those of you who aren't familiar with Guernsey, the island is a leading global finance centre. The success of the industry here is underpinned by economic substance, political stability, and asset security, and we are committed to the cause of sustainable finance. To find out more about Guernsey's success in sustainable finance, tune into our sister podcast, the Sustainable Finance Guernsey podcast.
Brandon:Today, I am delighted to be joined by James Quarmby and Emily Osborne of Stephenson Harwood. On the episode, we'll be discussing developments in the world of pensions. Guernsey is a domicile and its offering and the impact of the global elections. So without further ado, welcome to you both.
James:Thank you, Brandon.
Emily:Thank you.
Brandon:So firstly, obviously, you know, many of our listeners hopefully know, you know, who you are and obviously a bit about Stephenson Harwood and, follow you, on on LinkedIn and various other sort of platforms. But, you know, just for those who don't know, just introduce yourselves to our listeners, and just tell us a bit about your background and, of course, how you ended up at Stevenson art Stevenson Harwood.
James:I'm James Quarmby, and I'm the founder of the private, wealth team at Stephenson Harwood, which is we now have, I think, 55 lawyers across, 6 or 7 jurisdictions. I've actually lost count. It doesn't really matter. Emily and I have worked together for a long time, and, one of our specialties has been, pensions, law, and tax, particularly, non UK pensions, and that's still what we do to this day. Emily, what about you?
Emily:Well, I'm Emily Osborne. I have been at Stevenson and Harvard for nearly 10 years now, but I have worked with James since 2008.
James:Bloody hell.
Emily:I know.
James:Long service medal in the post.
Emily:Hope so.
Brandon:Brilliant. So let's kick off. Emily, if we could just start with you, what sort of trends are you seeing in the sort of, the the corporate pension market, if you like?
Emily:So, obviously, pensions continue to be an important way of incentivizing employees. We see particularly, well, I suppose globally, I do a lot of work in the Middle East, and they're although they call them end of service gratuity, so they're not quite pensions, but the idea of making some sort provision for your employees post service is definitely an idea that is passing around well, it is traveling globally, and continues to be important to find somewhere to have that sort of offering for your employees. That doesn't mean that you're doing it in lots of different jurisdictions with different rules and having to coordinate lots of different things. So I think a continued importance of pension. I mean, everyone's getting older, so pensions continue to be a very important part of everybody's financial planning.
Brandon:And, James, would you agree with that?
James:Yeah. I think the interesting when when you look at pensions market, you need to understand that that really the the pioneers of pensions will be those in, common law jurisdictions, that are used to trusts. So when we're looking at and, of course, we're used to those in the States and then the the UK. Over in Europe, they're more contractual in nature. And then when you move outside of that into Middle East and Africa and so on, you you don't really get that separation between what's promised by the employer and what's actually provided after, you leave.
James:So if your employer goes bust, then your pension goes down the toilet, basically. And that's the point of having funded pensions. And and I think what's got interesting about the international pensions market is this idea that let's say you're an employer in the Middle East, North Africa, whatever, that you would fund a pension locally, but the custodian of that pension will be outside of the jurisdiction, somewhere safer, somewhere that does actually recognize trust, for instance. So it it's that intermediation from an asset protection point of view legally, and and just reputationally as well.
Brandon:Yeah. Definitely. And and sort of, I guess that sort of transitions very well into this sense of, you know, a rising globalized world or perhaps it's been on on the on the, you know, on the back foot as of late, politically speaking. But, generally, we speak in speak in terms of being in a globalized world and, increasingly, businesses operate across border and so forth. And, inevitably, that means sort of, you know, corporates employ a workforce that's based in various different geographical locations, countries, territories, that sort of thing.
Brandon:How has that really impacted the need for international pensions, you know, at a global level, I suppose?
Emily:So I think there's sort of 2 parts to that. 1 is that the employer is used to providing pensions generally. So they they do it for maybe in the UK or the US, and so they expect to provide most of them provide the same benefits throughout the world. So you start having people in different jurisdictions, you start introducing them to pensions. And then the second part of that is that you only want you do want an international pension for all of your workforce.
Emily:You don't want a pension in every country that you have employees because that would be a bit of a headache to administer. And then I think the other side of it is that you also end up having employees who are perhaps used to having pensions, who are working in jurisdictions you don you don't want a local scheme. So, ideally, you set up something that works for everybody. I mean, it's probably not it's quite tricky to work for everyone, but that's the the goal is to try and find something that works for everyone. And then it is a a genuine international scheme that you only have to have one, which perhaps a few tweaks to make it work in the various places.
Brandon:Yeah. And and and I have to ask, of of course, how are international financial centers like Guernsey, suited to meet the needs of the current sort of market in the context we're talking?
James:That sounds like a leading question, Brandon.
Brandon:So
James:So I I think they're perfect. That's probably the answer. Just stop. Yeah. I'm not saying just stop there.
James:Completely perfect. I I think it goes back to the point Emily was making a minute ago. If you're an international employer with employees in 26 different countries, you really don't have the time or energy to set up 26 different pension schemes. And your employees, as they move between different countries, also do not want to collect 6 or 7 different pensions, based on their service in, you know, jurisdiction a, b, c, d, and e. It is an absolute pain for everyone.
James:And there's also this thing called political risk, which is extremely important these days. Yes. It might be fantastic to work and earn highly in a Middle Eastern country. I'm not gonna name any, but just choose a random one. And if there's a big political risk and your scheme is located there and that jurisdiction decides to abolish pensions or snaffle all the assets, so you've you've got no come back at all.
James:You're going to feel a lot safer if the pension pot that you worked so hard to accrue is in a jurisdiction with a proven track record of respect for law. And rules, and is highly regulated. And no one's gonna run away with your money. Or if you're the government, confiscate it.
Emily:Something like Guernsey, perhaps.
James:Well, I hear Guernsey is okay. Yes. As I said earlier, it's probably perfect. I mean, as it happens, Guernsey is extremely experienced in the pencils market. And and when curaps were a big thing in its height, I mean, there must have been there were, like, tens of thousands of curaps a month being created.
James:And and 2 thirds of that business was going to Guernsey. There's a reason for that. And and that's because there's the infrastructure of service providers, to to set up and run those pensions. So to answer your question, I I think Guernsey has set itself up quite efficiently as a preeminent, location for, international pensions.
Emily:You mentioned that? Yeah. Sorry. Yes. Sorry.
Emily:I don't think they've got obviously, there's good pen there's good law, so you can have all your different types of pensions. You've got quite a lot of certainty. There are people who are experienced in running pensions. And I mean, just to sort of go back on the international thing, the reason that curaps were very popular was that it just reflects the reality that people don't stay in one country all their life anymore. So the reason people were transferring is that they left the UK.
Emily:They were somewhere else. They sometimes didn't want the sterling risk anymore because Yeah. Currency fluctuation's not ideal when you think that your pot's worth x and then you find it's not and it's just because of the currency. Having somewhere like Guernsey to park the money safely was a Mhmm. A really good option for it's less so for Qurops now, but the the point stands for international pensions that you can have you don't want to be exposed to sterling necessarily.
Brandon:Yep. Yeah. No. Definitely. And I was just gonna mention there pick up on your point, James, there about, you mentioned the regulatory environment.
Brandon:How is Guernsey's pension legislation and and and regs different from other jurisdictions? And and in addition to that, what role does the Channel Islands Financial Services Ombudsman play in in that within that sort of wider picture?
James:I think one of the most important things is having the legislation in the first place. And and I think Guernsey was the leader in having the right kind of legislation to enable us to run a pensions there without, without any problems. Now there there are other islands who've been much slower in adopting the kind of legislation that's needed to, to to run a pension. And on the regulatory front, one of the things that happened on the CURAX side when the the revenue over here has been trying to, restrict their usage was to impose a requirement that there's a pensions regulator. And, Emily, you've done a lot more work on on that side, and that was quite an important move, wasn't it?
Emily:Yes. And and Guernsey responded to that and has regulation of pensions now, which, I mean, whilst regulation can be somewhat hard work to comply with, it does in the end drive service levels and custom well, client security, really, isn't it? That that you know your money is safe? So I think it is a factor when you're looking at where you might put your pension scheme, especially if you are an international employer. You need to justify to all your employees why you've selected somewhere.
Emily:A a a jurisdiction that has a strong regulator, that has a financial services ombudsman, so you can take your complaints if you're not happy with what's happening, especially because that's what we would be used to doing in the UK. It's an important part of the factors that make you choose to use Guernsey.
James:I think it was one of those rare cases where it was a regulation we were actually happy with because we needed we needed Guernsey to say its pensions business is regulated. Otherwise, we couldn't qualify as a cure Securinapse. Normally normally, regulations, when they come in, we grit our teeth and say, okay. That's another one we're gonna have to put up with. In that particular case, it was actually something it's a rare rare case of where we said
Emily:It's very rare
James:case where James welcomes regulation. I never welcome regulation listeners, but I'm set in that case.
Emily:So well done, Guernsey.
James:Yeah. We've
Emily:got James to like regulation.
James:Hats off. I thought we'd never
Brandon:be go. One more question on Guernsey before we sort of move on to to some other sort of topics. You mentioned earlier on, sort of, in the conversation that, Guernsey does have a long standing pensions industry. When you speak to the decision makers, or the movers and the shakers, to what extent is this sense of longevity of an industry within a particular domicile a deciding factor when choosing to select a a domicile?
Emily:I think it's really important because whilst we like to imagine that nothing will ever go wrong, if something does go wrong, you want to be somewhere where you know that the courts and the lawyers and the system knows what a pension is, and you know what the answer's going to be because they've got a history of dealing with it. You know that the people managing your pension know what a pension is, know how to run it, have been doing it for a long time. But I think it is really important when you're I mean, new things are cool. Right? But you don't necessarily want to be at the forefront of risking your pension.
James:I I'd agree with that. I I I think clients will rely on their lawyers to tell them the kind of pension they need and where it should be. And I don't like my clients to be guinea pigs for new jurisdictions and new products. I don't enjoy that ride at all. I think if you if if you want excitement, there are other ways of finding it, but not not with your pension.
James:I think we all accept that a pension is there, as as a safety net for you.
Emily:Yeah. I mean, it's a security blanket, isn't it? So you want to know that it works Yeah. And that it's safe. So it's important that that you can show that there's a track record of dealing with things in a certain way.
James:So Guernsey should carry on doing what it's doing.
Brandon:Brilliant. There we go. Talking less directly to to to Guernsey, are there any other sort of considerations that really come in to the mix, when deciding on a jurisdiction? And how important are the jurisdiction structures in this decision making? Because, obviously, we've talked about the sort of the importance of, you know, strong and stableness, if you like, and sort of and the importance of political and economic stability and important and stable, but well respected and flexible regulation and all these sort of points that come up in a time and again.
Brandon:But, yeah, really on the on on the on the structure side, what's the where does it sort of, tilt the table for you?
James:Selfishly, I like the jurisdictions to be within 1 hour, plane journey of Gatwick. So, but no. Seriously.
Emily:Well, so I was gonna say before you got got flight time into why you might choose a jurisdiction
James:That's important.
Emily:That in terms of structures, I think Guernsey I know this wasn't directly a Guernsey, but the thing Guernsey had to talk about was that you can have a contract based scheme. Yeah. Because, obviously, we're all common law lawyers. We love trusts. We know what trusts are.
Emily:They are perfect for pensions. But in some jurisdictions, particularly in Europe, they are not perfect because they don't know what they are and they end up being taxed really badly. And it's better if you can arrange something in a contract form to bring yourself within the, rules that they know what it is and how it gets taxed. And, certainly, when I've worked with various providers in Guernsey, they've been quite, you might say, innovative, or certainly flexible in creating products and structures that work for different jurisdictions. So you might have a contract based scheme and it uses a ICC or a PCC or something like that.
Emily:So there's definitely I think having a range of structures, particularly because we're talking about international pensions and international people, you can't just have one thing and expect it to work for everyone because the world is different in different places.
James:Yeah. And come I think it goes back to a point we made earlier about having the right kind of law. Mhmm. So, you know, trusts have typically been pensions for we, Commonwealth people. But some jurisdictions do not recognize pensions, and that already creates a problem.
James:And then if you go for a contract based scheme that's quite small, people then worry about cross contamination of risk because a contract is not a trust. And then you've actually got legislation that's on the books in Guernsey already because PCC's protected cell companies were created for the insurance business in in in in Guernsey. And I think ICC's similarly, but I think it just shows you that that there's a there's a menu of, options available that Guernsey has been quite innovative in creating. And, actually, the PCC legislation, which I think started in Guernsey, has been copied by quite many
Emily:In other places.
James:It
Brandon:started here in 90 7, the 97, I think, it launched.
Emily:Well done.
James:There you go. Now you done done your homework. I didn't know that.
Emily:You do now? Yeah. My daughter tells me you should learn something new every day, so that can be your lesson today.
James:There you go. 97 PCCs.
Brandon:Yeah. So you mentioned, well, I guess that sort of is the answer to the next question, isn't it? What structures in particular tend to influence these decisions? I guess PCCICC is a protected cell company, incorporated cell company are, of particular interest. Is there any is there any others sort of again, or
Emily:But no. I mean, I think that's having that with a combination of a contract based scheme or having a trust based scheme for
Brandon:Yep.
Emily:Other, things. But, really, it's about having flexibility and and adapting the solution to the problem. So any there are any other structures
James:Well, I mean, there's there's only so many options you need for pensions. It's either trust based or contract based. Yeah. And the rest is just a little bit of noise, really. I mean, that's that's that's all you need.
James:But we mustn't forget that a lot of jurisdictions cannot offer that. Or even if they do, the the local professionals are not really on top of it. And that's the other point. There there are a number of examples in the international finance world where jurisdictions have introduced quite interesting legislation to attract business in. But, unfortunately, the professionals in those jurisdictions, don't really know how it works.
James:And so you got you got to have the legislation itself and the professionals who know how it works. And and running a pension is different to running a family trust.
Emily:I was also gonna add that it's not only the professionals, but also, for example, in Guernsey, the Guernsey tax office because I guess it's the benefits being a small island, right, that you can go and ask the Guernsey tax office how a particular pension payment out to somebody will be treated, whether you whether they've retired. I mean, talking there are certain professions, obviously, that Guernsey the Guernsey tax office accepts that people in those professions luckily get to retire pre 50 5. But you can just go and have a discussion with them. So you've got the regulator and the tax office, and they're actually they're doing their job, but they're also very accessible, so you can find out the answer. I mean, you can't get an answer from HMRC.
Emily:I mean, they don't even answer the phone, I think, according to the press. So
James:Well, they were they were gonna shut down the helpline for 4 months a year.
Emily:Yeah. Oh, no. So I think that's another so it's part of that adding to the professionals and and everyone else in the island is having the regulators being approachable.
James:Town's office And knowledgeable. Yeah. I'm I'm quite tired of getting advice in other countries, and I I hear, well, the tax authority doesn't know how to treat that trust, that product, that whatever. That's incredibly irritating. What you want is a certain answer.
James:And that kind of ruling where you can just ring up the Guernsey Revenue Service and ask them, it gives a lot of comfort to clients.
Brandon:In recent years, we've seen, pensions increasingly being used as part of sort of succession planning. Emily, what's driving this?
Emily:Well, I mean, partly, I think it's, everyone's getting older. You need to make some provision for retirement. Partly, it's because they have been an efficient way of structuring things. I've had a few you know, you kinda get those entrepreneurial clients that have not their business is their pension and then they sell their business and they're probably gonna do something else because entrepreneurs are incapable of not starting another business with their next great idea. They're irritatingly successful sometimes, or I'm just jealous.
Emily:But they also there's a I have had a few of those where, like, I need to lock some money up. Eventually, I'm going to retire. I do need to have some money. Let's put some money aside. And I don't you can't just put it in an account somewhere.
Emily:I want it in a pension so that I know that I can't spend it beforehand and it will be there and the people that will run it will do it properly. So I think there's a sort of a part of succession is making for your own succession, not necessarily for the next generation. And I suppose in a certain way also, there is more limited options now in what else you might do. So you people have looked at at pensions, and and certainly in the UK, your ability to put money into a a registered pension scheme is severely limited, so which is sort of crazy because we're all gonna live longer and everything's expensive, and we're going to need to fund stuff later. So you do need to make provision for your retirement.
Emily:So I think all of those factors have made pensions, more I was gonna say exciting, but
James:I don't think pensions are ever exciting.
Emily:Why I hesitated.
James:Over breaking that pudding.
Emily:More, Interesting.
James:Yeah. Anyway, move on.
Brandon:There we go. Move on.
Emily:So we're gonna talk widely adopted, maybe.
Brandon:Well, there you go. Yeah. We're gonna talk about something that's slightly maybe more interesting now. Obviously, the hot topic on everyone's lips is the general election. The Labour Party, in the UK has announced that it will not seek to reintroduce a lifetime allowance on pensions.
Brandon:What do you think, the implications of such a policy will be on the industry, both domestically in the UK, but also sort of, you know, with an international outlook as well?
James:Well, it's obviously good news that labor's not gonna reintroduce the lifetime allowance. That's not because they're particularly generous to pension savers. I think they're actually worried about the impact on consultants in the NHS and other people, on, that kind of, employer funded pension. So but that's good news for other savers, anyway, that the lifetime allowance, is a pain.
Emily:But, I mean, it would be really good as I understand it. The I don't think they're quite at that level now, but until recently, the revenue have been issuing almost guidance almost weekly on how the removal of the lifetime allowance and the replacement thing will work, and it doesn't seem to still be quite right. So, hopefully, we'll get some clarity on that now that Labour said they won't reintroduce it. They could perhaps fix the mess that's been created from having removed it. Because I mean, I'm not joking.
Emily:Some in some circumstances, the current official guidance is just don't draw down. It's not really a solution. I mean, I want my pension. I've got to I obviously, I'm not 55. I know it's a podcast, so people can't see that, but I'm not.
James:She's not. The, I can vouch.
Emily:Thank you, James. But you don't wanna be told that you can't take it because even the people that create the rules don't know how what the interpretation of it, which kind of goes back to our earlier points about Guernsey and certainty. And, I mean, and all of those things that you want from your pension, we don't currently have. Yeah. So labor could definitely just make that a little bit clearer.
Emily:What else that I mean, this kind of an IHT possible risk in relation to labor and pensions, do you think, James?
James:I I think I think labor's got its eye on IHT and how it can squeeze a bit more out. I think it's gonna be influenced by some of the utterances from the IFS on the topic of pensions and IHT. So I think I think there will be, I think there will be some a couple of challenges, but I don't I don't think, that it's going to be a big deal because, ultimately, Labour does not want to scare the horses. They want to proceed, cautiously and carefully, and that's certainly the, message that I've received from some of my contacts. So I don't think we should be in the business of scaremongering.
James:I think it would be a good thing if, the pension's legislation was rationalized and we all knew where we were. That's the least we can ask from our politicians.
Emily:We want for for pensions as we've been talking about.
James:We don't wanna end the podcast on that, though. That's fine. I think Brandon's god to fire things up a little bit.
Brandon:So finally, you are both speaking at, a joint Stephenson Harwood and and Guernsey Finance pension seminar at 12 Hay Hill in London. What can people hope to learn by attending the event? Why should people come along?
James:Who are
Emily:we gonna learn? Well, I think we've got quite an, interesting array of of, topics being covered, including, like, the you can learn more about what all the random acronyms, some of which we've been using today Yeah. Mean in the pensions world, a discussion about what's happening in Guernsey, the changes in Guernsey in the pensions world. Right.
James:It's going
Emily:to be bit of a global what's happening in Yeah. Other places like Dubai and Middle East.
Brandon:Brilliant. Well, thank you very much both for your, your time today and for joining us on the podcast.
James:Thank you, Brandon.
Emily:Thank you.
James:It was really great to talk through
Brandon:the changes taking place across the pensions landscape, trends seen across the globe, and what we might be in store for the future. Thanks also to you for listening. If you enjoyed this this discussion, we have a backlog of interviews on the Guernsey Finance podcast channel. You can check them out by searching for Guernsey Finance on your preferred podcast platform. We also have links to James and Emily and, as as, of course, as well, Stevenson Harwood in our show notes.
Brandon:So check them out to hear more from them. To find out more about Guernsey and its specialist financial services industry, head over to our website, guernseyfinance.com. We look forward to welcoming you back to the podcast soon, but until then, it's goodbye from Guernsey.