Saturday, 16 January 2010

QROPS ADVICE: Investment News: Spotlight on Cautious Managed Funds

The sustained volatility of equity and bond funds, coupled with poor bank deposit returns, has brought a significant increase in interest around Cautious Managed funds which, as their name suggests, offer investors a medium to low risk exposure to a broad range of assets. In accordance with their constitution (from the UK's Investment Management Association), Cautious Managed funds invest in a range of assets with a maximum equity exposure restricted to 60 percent and at least 30 percent invested in fixed interest and/or cash.
Whilst a variety of emerging market equity funds stormed to the top of the fund performance charts in 2009, it was funds that fell into the Cautious Managed sector that proved one of the most popular in terms of investment inflow, second only to the UK Corporate Bond sector, according to figures recently released by the UK fund supermarket, FundsNetwork. This clearly demonstrates investor's appetite for risk and suggests that whilst the majority are happy to re-enter back into the market via equity related assets, they are seemingly more comfortable doing this with a fund manager bound by the restrictions of staying at least 30 percent invested in fixed interest assets.
Those that chose to invest solely in equity related funds will have reaped some rewards for their risk taking in 2009, with the majority of asset classes returning an impressive, positive result. However, the investment profile of the majority is such that they can ill afford to take the risk of placing all of their investment into equities, and instead rely on the investment expertise of a fund manager that has the experience to finely balance their investment between equities and fixed interest stocks, more so during volatile times. This is evidenced in the fact that the average Cautious Managed fund achieved a 15.6 percent gain in 2009 (source: Lipper, 01/01/2009-31/12/2009), a return that, considering the uncertainty in the markets during the period, would be considered impressive by most.
One of the funds that did particularly well last year, achieving 24.2 percent growth was the Investec Cautious Managed fund (C09, available in both HIL and HEL). Alistair Mundy, the manager of the fund looked forward to 2010, commenting "We believe that the easier money has been made on the most cyclical parts of the UK market, but that a number of shares, while likely to remain volatile, still offer good long term value. We particularly believe that many of the largest stocks in the market remain cheap and that their dividend yields and strong balance sheets make them very attractive. We continue to believe that long bond yields are vulnerable to both higher inflation and increased gilt issuance."

Wednesday, 13 January 2010

QROPS Advice: HMRC spells out Qrops property ban

HM Revenue & Customs has issued clarification that residential property is not a permitted investment within qualified recognised overseas pension schemes before or after the five-year reporting period.

The note, published online in an HMRC manual last week, states that an unauthorised payment charge is not dependent on how long a member has been non-resident. It says: “It applies regardless of whether or not a transfer member has been non-resident for more than five tax years. Nor is there any time limit on the requirement that the manager of a Qrops reports to HMRC any payments that are referrable to a transfer member’s taxable asset transfer fund.”

Advisers say HMRC’s decision to reiterate this in its legislation is due to misinterpretations by schemes and advisers is a new step. AES International managing director Sam Instone says: “A couple of Guernsey providers have been putting exotic investments into their Qrops, such as residential property, fine wine and antiques, and bending the rules, so HMRC has issued clarification.”

Global Qrops director Paul Davies says: “There was probably a lot of ambiguity about what you could and could not do after the five-year period for investments so HMRC has reconfirmed its position in plain English. Anyone transferring their UK pension across to a Qrops cannot under any circumstances use that money within a Qrops to invest in residential property.”

By Hannah Stodell

Tuesday, 12 January 2010

QROPS ADVICE: Gibraltar reaches deal with UK government over Qrops

The UK Treasury has agreed to recognise Gibraltar Qrops, following high level talks between Treasury officials and Gibraltar chief minister Peter Caruana, sources told International Adviser.

A spokesman for HM Revenue & Customs declined to confirm the report, however, without providing details or addressing the Gibraltar situation specifically.

He reiterated the Revenue’s previously-stated position that there are “a number of generally-applicable conditions that have to be met in order for a pension scheme to be eligible to be a QROPS”, and said HMRC will “continue to... review and consider whether the conditions to be a QROPS are met by any schemes that have applied”.

The HMRC statement conflicts with reports out of Gibraltar, where a source familiar with the status of negotiations between it and the Treasury said an agreement "has been reached that resolves the issue, to the satisfaction of the industry in Gibraltar and the government in Gibraltar, as well as the UK Treasury”.

Caruana did not return phone calls seeking comment.

Details on the deal were not available, but it is understood that it would oblige some aspect of law in Gibraltar to be amended to satisfy HMRC. The legal change is expected to be introduced early in 2010.

Since the middle of last year, trustees of Qrops in Gibraltar have voluntarily suspended pension transfers from the UK, pending resolution of HMRC’s concerns. The Revenue’s concerns first came in the form of letters received in the spring by Gibraltar pension trustees which asked them for clarification of local rules regarding taxation of retirement income.

Gibraltar taxes the pension income of people over 60 at 0%, and it is this provision that is the focus of HMRC’s concern. HMRC is said to regard a 0% tax as inconsistent with Qrops regulations.

Gibraltar Qrops administrators will be delighted to hear that the agreement has been reached, since news of the UK tax authorities’ interest in the matter and the suspension of pension transfers has damaged Gibraltar’s Qrops industry’s image, while giving rivals in other jurisdictions an advantage.

In recent weeks, many Gibraltar Qrops administrators had become increasingly critical of HMRC’s continued delay in approving Gibraltar as a qualifying destination.

News of the deal between Gibraltar's Qrops administrators and HMRC came as Qrops Adviser, a Brussels-based advisory business, reported on its website that HMRC was considering removing "hundreds" of Qrops from its register of recognised providers as part of a tax crackdown. Again, HMRC declined to comment specifically.

Qrops, or Qualified Recognised Overseas Pension Schemes, are a form of pension based outside of the UK, which is recognised by UK authorities as being eligible to take transfers from registered UK pension funds. They were introduced out of the A-day changes to UK pension regulations that took effect on 6 April, 2006.

QROPS ADVICE: UK expats choosing to retire overseas rather than return

UK expats who move overseas to live and work are increasingly choosing not to return home, according to research by Isle of Man bank Alliance & Leicester International (ALIL).
The cost of retiring in the UK was cited as a major factor for expats deciding not to return, ALIL said. It highlighted a recent estimate that it cost expats more than £400,000 to do so, according to website France remains the top retirement spot, with 18% of those surveyed naming it as their country of choice, followed by Spain, with 13%. The UK was only just behind; 12% of the 600 expats surveyed by ALIL said they would return home to retire. Almost 60% of expats intended to retire in Europe in order to be close to their families, found ALIL, which noted 10% of respondents said the major bar to remaining outside the UK was being away from friends and family. Expats intended to fund their lifestyle overseas through a variety of methods .Better quality of life, weather and value for money were the three top reasons for wanting to retire overseas. But retiring abroad does not come without worries. Among expats’ main concerns were the quality of medical care and facilities, followed by general medical issues – including dealing with an emergency in a foreign language.