A look at Section 615 schemes, which provide retirement
benefits for employees of UK companies working abroad.
Section 615(6) Trust schemes are UK-based retirement benefits
schemes established under trust law for the purpose of providing
bona fide retirement benefits for employees of UK companies working
overseas. They are not approved pension schemes, so they do not
attract exactly the same tax status as approved schemes –
but this does not make them any less attractive. They do however
have to be established for the sole purpose of providing
superannuation benefits.
Section 615 schemes can be set up easily and both the employer
and employee can contribute. The level of contributions is not
capped and it is possible for employees to contribute through
salary sacrifice which may mitigate tax and social security in the
country they are working in. Money invested grows tax free, is
outside the employee's estate for IHT and beneficiaries can be
nominated. The sponsoring employer should obtain a corporation tax
deduction.
Who is eligible?
The scheme is for individuals of any nationality who are
carrying out duties outside the UK for a UK company or associated
company elsewhere in the world, irrespective of domicile or
residency. They are not only for expatriates but also for
individuals resident in their own country – with the
exception of UK and US residents. However, UK residents with a
separate and distinct contract for overseas duties can be
included.
How does it work?
A Section 615(6) Trust will generally be established in the name
of the employing company, similar to an individual pension
arrangement in the UK for UK-resident employees.
Employer contributions
Provided certain conditions are met, the UK employer will obtain
a corporation tax deduction for contributions made to the
trust.
Qualifying companies
A non-UK company may make contributions into a scheme, but only
if the company is associated with the UK employer (essentially
common ownership between companies or a holding company or
subsidiary relationship).
Investment strategy
Rather like a self-invested personal pension, individuals can
choose their own investment strategy and there is a wide range of
opportunities such as insurance policies, direct equity holdings,
fixed interest securities, collective investment schemes, money
funds, property and cash deposits.
Drawdown
The biggest attraction to a Section 615 scheme comes on drawdown
of the pension. Benefits can be taken as one tax-free lump sum by
UK residents from the age 55, or earlier if the employee leaves the
company, but must be taken by the age of 75.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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