Jersey has launched a new product to enable multi national and international companies to set up savings plans in the jurisdiction for non- resident employees, estimating an inward investment of £15bn over the next years.
The ISPs are designed to be tailored to meet the needs of employer and employee, enabling a pay-out to employees when their employment ends or on the occurrence of a major trigger event which might include redundancy, ill health or divorce.
If multi national and international companies choose Jersey to set up their ISPs, they will be able to provide benefits to employees before the normal minimum pension age, which is currently restricted to 50 in Jersey.
ISPs are innovation at its best"
"ISPs are innovation at its best," said Lisa Springate, head of Technical at Jersey Finance during the product presentation in Saint Helier. She told International Investment that the estimate inward investment that these ISPs will generate for the jurisdiction is around £15bn.
Nancy Chien, chair of the Jersey Pensions Association, mentioned a report that stated that more companies are moving away from traditional pension type arrangements towards shorter term objective plans. "This is because employers recognise that they have to offer something meaningful to employees", she added, saying that companies from all over the world are looking to set up these schemes in well-regulated jurisdictions.
The flexibility of these ISPs makes it more attractive than a pension scheme because they allow a pay-out to employees before the minimum pension age, either on termination of employment or on the occurrence of a major life changing event such as redundancy, ill health or divorce.
The fact that they can be tailored made to fit the needs of a specific company is also another key factor. "The question is if we can accommodate A, B and C and the answer is yes, these plans are quite flexible and with some sensible legal advice almost anything can be structured," said Peter Culnane, from Fairway Group.
"It is pretty much down to what the company wants," he added.
The Jersey ISP is set to create a lot of interest in the GCC region as it is anticipated the provision of schemes such as ISPs may become mandatory for end of service benefit payments.
In the UAE the government is under pressure to implement stricter gratuity payment legislation
"We've heard figures that 88% of companies have no plan at all in place to fund the end of service gratuity. So, for multi nationals who are operating in the UAE, you can see a very sound rationale for using a Jersey ISP," James Campbell, from international law firm Ogier, said.
"There may well be domestic solutions on offer but for those multi nationals that want their contributions to be kept in a safe harbour, away from political uncertainty, Jersey offers a really good solution," he added.
Mark Lindsay told International Investment that there might be some regional competition offering similar products but for the Intertrust client director, employees know that "Jersey is immune to political uncertainty", adding that he has seen interest from the GCC region for this product, including Saudi Arabia, Oman and Bahrain.
Intertrust is also seeing interest in the ISP from the Far East. "They appreciate that Jersey is looking to address those needs, helping the employer" he said. Singapore, Hong Kong and China have been some places where Intertrust has seen a keen appetite for the Jersey ISP.
There is no minimum requirement for the number of employees needed to set up an ISP.
Example scenario of how an ISP works
Company A is a large company with offices in London, New York and Dubai. They employ a total of 5,000 people. Using a Jersey-based firm, Company A sets up an ISP for all 300 employees working in their Dubai office to provide for the end of service benefit (EoSB) due on termination of employment as required by UAE law.
Company A tailors the ISP to suit the needs of their Dubai-based employees by allowing employees to take out their EoSB payment prior to termination of their employment or on a 'trigger event' which includes ill health, divorce, children's education or to assist with buying property.
Employee X works in their Dubai office and has an ISP. Employee X is 45 years old and has a son who has just graduated from university. Employee X's son is keen to get on the property ladder in London. Employee X decides to cash in on their ISP and put their savings towards a deposit on a property for his son.