Saturday, 10 April 2010

QROPS Advice: Full QROPS encashment still taking place

Intermediary firm Windsor Pensions has said it will accommodate British expats wishing to fully encash their pensions immediately upon leaving the country, despite this conflicting with UK regulations.

In particular, the firm said certain New Zealand-based QROPS schemes are willing to allow the practice. According to HMRC, QROPS must be treated exactly like domestic pensions for five years after the holder has left the UK, otherwise they will be liable to tax charges of up to 55%.

Steve Pimlott, an intermediary at Windsor Pensions, said: “Strictly speaking it is against the rules [to take full immediate encashment] but there are some schemes that will allow it. Most schemes which will allow this are based in New Zealand. We have used them, but I cannot go into details of the specific schemes.”

Windsor’s business largely comes from clients and IFAs based outside the UK and the company will not share its commission with UK intermediaries.

The claims by Windsor follow a report by IA in January that concerns had been raised by HMRC about the conduct of schemes in New Zealand.

Axa Life head of pensions and savings policy Steve Folkard offered a word of warning for those considering undertaking full immediate encashment.

“Potentially HMRC could try to recover the tax charge from the client, although this will depend on what jurisdiction they are in and whether there are any double tax treaties in place and so on – this aspect is complex and clients should seek professional advice,” he said.

In addition, Pimlott mentioned two Latvian-based schemes that have attracted some client money. One is the Wenns International Pension Scheme, which has proven particularly popular with ex-military personnel.

“The Latvian schemes are much more rigid in their rules – Wenns International is typically used by ex-servicemen – they have a lot of good packages, as well as the pension transfers for ex-servicemen,” he added.

QROPS Advice:Canary Islands pensioners able to enjoy life as planned

British expats abroad can now get more control over their pension plans thanks to new rules that remove many restrictions for people who retire overseas.

They can pay lower tax on income drawn from a relatively new form of pension (Qualifying Recognised Overseas Pension Scheme) QROPS avoid being forced to invest capital in an annuity which dies with the purchaser and pass their wealth to friends and family free of tax on death.

QROPS, as its name suggests, this is a form of pension based outside the UK which is recognised by the British authorities as being eligible to receive transfers from registered UK pension funds. Reputable advisers will only recommend transfers to countries which provide consumer protection equivalent or greater than the safeguards in the UK.

People who are living inside or outside the UK can transfer their deferred company and personal pensions to a QROPS. Any pension can be transferred as long as an annuity has not been purchased or, if it’s a final salary scheme which the pension has not commenced.

Where the pensioner has not been resident in the UK for five complete and consecutive fiscal years – and the tax rules determining residence will be examined in detail later in this guide – HMRC restrictions on how income and capital are spent no longer apply.

The best option for you will depend on your personal circumstances and it makes sense to take professional advice which can take account of your individual needs and objectives.

British pensions that can be transferred to a QROPS include former employers’ occupational schemes (but not final salary or defined benefit schemes already in payment); Superannuation Schemes; Executive Pension Schemes; Self Invested Personal Pension Schemes (SIPPSs); Small Self Administered Schemes (SSASs); Section 226 Personal Pension Schemes; Section 32 Pension Transfers and Personal Pensions.

Although QROPS is a relatively new product, what has become clear is that both Professional Advisers and clients should be cautious regarding their choice of QROPS provider and QROPS jurisdiction and a poor choice can lead to frozen pensions, high tax bills or both.

To discuss this further and to get the best Professional QROPS Advice please e-mail or call direct today for full details and to find out how we can assist you and start living the life you planned for……….

Post Script.
It does not matter what nationality the UK pension fund holder is, for example I am dealing with a French National who worked in the UK for 5 years and took out a pension plan. Now she lives in Spain with her Portuguese husband and we are looking to transfer her fund into a QROPS. What is important is do they hold a UK registered pension fund? what are their circumstances? Where have they expatriated too? And which jurisdiction suits the client best for tax purposes?
0034 680 832 708 / 616 718 903