Wednesday, 23 March 2011

10 tips for international pension transfers

With increasing pension deficits and retirement ages, the way forward in pension planning after the global recession may already be here, as evidenced by the spread of defined accounts where the benefit depends on individual earnings and UK system of personal accounts.

With all the boundless information available on pension transfers it is not surprising that advisers and private clients alike may feel caught in the headlights when making decisions on retirement related issues

Chris Davies
Managing Director
There is certainly a case for a comprehensive international pension account that may be used as a structure for a consolidated pension transfer and contribution. With offshore ‘tax havens’ becoming more open to scrutiny and taxation, the retiree needs to think long and hard about transfer options.

Yet it is clear what will not change is the onus on the individual to engage completely with the need to provide for retirement, obtain the best possible professional advice and ensure they are up to date with the latest knowledge and options available to make the correct choice.

With all the boundless information available on pension transfers it is not surprising that advisers and private clients alike may feel caught in the headlights when making decisions on retirement related issues.

ECM has therefore devised 10 key considerations for as a guide to advice given and transfers made:

1. Taxation: Ensure the jurisdiction employs double taxation agreements and that non-resident status on taxation on pension income is fully understood.

2. Trustees: Complete comprehensive due diligence on the QROPS scheme trustees.

3. Residency: Be certain of taxation obligations in the country of residence. Also if the pension member is returning to the UK, take the chance explore the all other options available.

4. HMRC conditions: Ensure the conditions for transfer are met, i.e. tax free cash allowance, 70% minimum of transfer value to pay an income for life and the 5 year residency rule. Beware of advice pertaining to any significant increase in tax-free cash available at retirement and ensure crystallisation benefit and unauthorised pension transfer charges are understood.

5. Diversification: Employ the principle of investment diversification and modern portfolio theory once transferred.

6. Custodian: Ensure due diligence is completed and understood on the investment vehicle that will hold the pension transfer value and on the jurisdiction where domiciled.

7. Jurisdiction: Homework needs to be completed on the strengths and weakness of the territory and its regulations, to which the pension scheme is to be transferred.

8. Be in the know: Ensure a QROPS is the right way forward and transfer value analysis is conducted especially for final salary pension schemes. Keep abreast of any changes to related legislation or HMRC rulings such as the UK government’s recent relaxation on compulsion to purchase annuities from age 75 to 77.

9. Review: Keep QROPS clients reviewed at least annually.

10. Life after QROPS: The UK pension landscape is changing: Read the Foot review, Lord Hutton pensions commission report, OECD/EU directives, HMRC website and other related literature to prepare for potential changes to retirement and tax legislation and/or pensions transfer, QROPS or QNUPS retirement opportunities in the future.

For expert QROPS advice go to or call 01664 444625

Guernsey publishes QROPS code of practice

The Guernsey Association of Pension Providers has published a draft code of practice for QROPS providers based on the island.

Published on the GAPP website, the voluntary code outlines a set of principals covering critical areas of the QROPS business including transfers, reporting, tax requirements and investment.

GAPP is encouraging members of the QROPS industry to comment on the proposed code and has given until 28 February for people to submit their views. The draft will then be reviewed and a final code of practice is due to be issued on 31 March.

Plans to create a code of conduct were first announced at a Guernsey Finance event in London in March last year. Since then members of a committee, drawn from GAPP members and others in the industry, have worked to create a first draft.

Roger Berry, chairman of the code group which worked on the draft, said: “The QROPS market is sometimes a confusing place with different people saying different things. We want to minimize that confusion for anyone looking at choosing a Guernsey QROPS by having on our industry body website a code of practice with a list of those providers complying with that code.

“It should prove helpful to clients, introducers and members of the GAPP and allow Guernsey to stay in the forefront of safe and prudent QROPS provision.”

The code of practice follows legislation passed at the end of last year and introduced on 1 January, which aims to protect investors in Guernsey-based retirement schemes.

When the Retirement Annuity Trust Schemes (RATS) Rules, 2010 were introduced, the Guernsey Financial Services Commission faced some criticism for not including QROPS, arguably the largest part of the jurisdiction’s retirement market, within the protection measures.

Nik van Leuven director general of the GFSC said: “The Retirement Annuity Trust Schemes Rules, 2010 were made by the commission and came into effect on 01 January 2011.

“These rules apply to licensed fiduciaries who are acting by way of business in respect of RATS where the members are resident in Guernsey or who have made Guernsey tax relieved contributions. The commission's first consideration was to get the rules in place for the local market, and then consider to what extent something is needed for QROPS at a later point.”

Leuven added the commission had commented on the code of practice and that these comments have been included in the published draft.

Rex Cowley, head of marketing for the international division of Close welcomed the introduction of the code.

"The industry code of conduct, in Guernsey, is an important step forward for QROPS generally as it provides better visibility over what 'best practice' is in relation to the management of a UK pension transfer to Guernsey," he said.

"In the absence of any pension specific regulation in Guernsey, IFA's would do well to use firms that prescribe to the proposed code. It is without doubt that the code will come under criticism from some quarters but anything that aims to ultimately inform and protect clients has to be a good thing."

For expert QROPS advice go to or call 01664 444625

Fairbairn's Overseas Pension in international sales drive

The Overseas Pension, the QROPS from Fairbairn Trust Company, has appointed an international sales manager.

Alex Cockerill has worked in the QROPS sector for the “past couple of years”, according to Overseas Pension, mostly in South Africa. His role will be to expand distribution of the Overseas Pension, particularly in the Middle and Far East and South Africa.

Nathan Lihou, Fairbairn Trust chief operating officer, said Cockerill’s appointment marked the start of a new expansion phase for Overseas Pension, whose ultimate parent company is South Africa’s Old Mutual, which owns Fairbairn Trust as well as Nedbank and Skandia.

Lihou added: “[Cockerill] not only knows the QROPS market but has a key understanding of our home territory in South Africa and will be able to provide support to Fairbairn Trust Company’s QROPS team.

“If you look at what has happened in the UK pension market, the winners are firms that put their clients first and provide first rate service and technical support.

“We have been building our back end QROPS team and believe that we have got to the point that our service and support levels are the highest in the industry.”

For expert QROPS advice go to or call 01664 444625

Tuesday, 22 March 2011

Who can control the mis-selling of QROPS?

The UK financial services industry is littered with mis-selling scandals; personal pensions, endowment policies and payment protection insurance have all made their black mark in history. But these could pale into insignificance compared to the stampede of offshore salesmen into the QROPS market.

If ever there was a mis-selling scandal of huge proportions bubbling under the surface it is the transfer of UK pensions into QROPS by untrained barrow boys and ice cream salesmen recruited...

Robert Parker
Chief Executive
Holborn Assets
Alan Morgan-Moodie, chairman of the Association of International Life Offices, was quoted as saying last year, (with reference to growing disquiet in the QROPS industry):

“I have seen no evidence at all of mis-selling.”

He added: “The adviser is the agent of the client not the insurer. In Europe you are so regulated as an adviser the probability of mis-selling is near impossible. It’s no longer the case of someone shooting around the world with a suitcase. The chance of someone ignorantly entering into some unsuitable Qrops arrangement is highly unlikely.”

My open letter to Alan is this:

Dear Alan, which planet are you on?

If ever there was a mis-selling scandal of huge proportions bubbling under the surface it is the transfer of UK pensions into QROPS by untrained barrow boys and ice cream salesmen recruited and turned in five days into cold calling, script learning, referral demanding, sharp suited direct salesmen who haven’t got a clue what they are doing.

And yes Alan they can sell them in Europe, the UK or anywhere, because a QROPS is a trust and the trust settles the investment and the investment pays the commission and the regulators in Europe have no say in what a Guernsey or Isle of Man trust company does.

Kind regards


The United Arab EmiratesIn the UAE, the situation is far worse than Europe. We recently heard that more than 100 of the 160 plus people globally who transferred into a QROPS that was subsequently struck off HMRC’s list were resident here. In the unregulated UAE anything goes.

Since the introduction of regulation in the UK, pension transfers have been considered an advanced part of the financial planning process. The CII, the PFS and its forerunner the LIA created special qualifications to ensure that advisers were well able to handle the complexities of the market. This required a thorough knowledge of all the old plans - S226, EPPs, S32 Buy Outs, SIPPs, SSASs, COMPs and CIMPs, Final Salary, Pension Clubs et al – it makes the advice process a minefield.

However, for unscrupulous advisers it is a dream market – you are not trying to persuade a customer to invest hard earned cash into a 25 year savings plan. All you are doing is churning old frozen pension money that is languishing away in some dusty unheard of company in the UK, looked after by a bunch of old trustees!

I agree with much of what Sarah Lord wrote in an article in this journal on the 19th November last year. Sarah is a highly qualified adviser working in the Dubai International Financial Centre for Killik and Co.

She wrote that in order for some sort of control to be brought into this vast £500bn plus market: “SIPPs and QROPS providers [must take] more responsibility for the type of business that they accept from the offshore market.”

Self regulation?However, I have to take issue with aspects of Sarah’s argument. Before anyone – trustees or institutions - are given more responsibility, we would first have to ask the question ‘can we trust them?’ and then we would have to ask them whether they want such added responsibility.

I have often put the question, tongue firmly in cheek, to senior executives of our leading insurance companies ‘why don’t you police the market?’

But of course self interest dictates that they don’t want this responsibility. In the UK in the ‘80s we tried self regulation, it didn’t work then and it can’t work now because self interest gets in the way of best advice.

Offshore institutions do not take responsibility for the business they accept; 25 year plans are good for business - after all they generally last only about seven years, by which time the bulk of profit has probably been made.

Recent events have shown that we cannot trust the banks either, so why should we trust a QROPS provider? The majority of QROPS providers are small independent companies. Their size and lack of financial accountability makes them vulnerable to external forces such as weakening their rules or creating questionable products in a rush to grab a share of this huge market. Furthermore, the lack of understanding and the scale and breadth of expertise in this relatively new market has significantly contributed to the misconceptions that prevail around QROPS.

We do not need to look much further than at recent cases of QROPS providers whose scehems have had their status revoked by HMRC, to see the pitfalls.

Singapore was a major case in point where, because the jurisdiction was apparently allowing 100% commutation, HMRC decided that Singapore schemes didn’t qualify as a ROPS – recognised overseas pension scheme.

Holborn Assets recently commissioned a legal viewpoint from a UK lawyer and highly regarded expert on pensions to help us draft our own in house standards.

Among a multitude of other things, the lawyer drew our attention to the other problem in Singapore. This being that though the country has a regulated pensions industry, it is only for government pensions for Singapore residents. Because its regulator didn’t regulate any other type of pension, the non-regulated pensions couldn’t qualify as a ROPS.

A ROPS is the first step to getting QROPS status; it’s effectively done by self-assessment when applying for QROPS status. That’s why HMRC’s website where it shows the list of approved QROPS, now contains the following statement which every adviser should be acquainted with (note the highlight):

This (approved) list is based on information provided to HMRC by these schemes when applying to be a QROPS. As part of its application, the scheme notifies HMRC that it fulfills the requirements for being a “recognised overseas pension scheme”. Publication on the list should not be seen as confirmation by HMRC that it has verified all the information supplied by the scheme in its application.

If a scheme has been included on this published list in circumstances where it should not have been included because it did not satisfy the conditions to be a recognised overseas pension scheme, any transfer that has been made to that scheme could potentially give rise to an unauthorised payments charge liability for the member (see RPSM14102020).

This is why I part company with Sarah, not only can’t we trust the QROPS providers (or institutions) to police the industry; we can’t necessarily trust that the QROPS provider is going to be around next year.

It isn’t all just Singapore and Hong Kong either. Some of the so called leading providers in the more respected markets of the British Isles and its dependencies are now being questioned – with some controversy currently in the Isle of Man, while the actions of some of Guernsey’s apparently most reputable firms are also questionable in my opinion.

An incestuous industryWe have always been an incestuous industry making self interested decisions behind closed doors, creating committees to protect or increase our market share, hence the reason why self regulation doesn’t work .

One of these committees is dealing with a Guernsey ‘code of conduct’ for QROPS providers. Unfortunately, like all of these types of corporate representations, it will mainly be used by the members to try to protect their corporate position and commercial interests, rather than those of the consumer.

To look at one of the most striking differences between the UK Pension Schemes and the International QROPS we should look at ‘exit fees’. The UK Schemes generally do not have exit fees, or if they do they are very low nominal administration costs. This is because the UK Financial Services Authority (FSA) see this as a key factor in the ‘treating customers fairly’ and therefore include it in the code of conduct.

The FSA and industry understands that the majority of work conducted on transfer is done by the receiving scheme that ‘drives’ the transfer and the transferring scheme therefore has very little to do. In contrast to the UK, some QROPS providers have very high exit fees/penalties, typically a 1% minimum or £2,000 is common.

Alarmingly, it is worth pointing out, en passant, that some advisers are selling QROPS to UK residents and UK domiciled clients who have no intention of leaving the UK thus offering highly unsuitable products to this category of client.

QROPS are taxed on UK source income, at 50% if received direct (rather than via an offshore company). While there may currently be a marginal IHT advantage, that is going soon with the UK pension changes.

Unfortunately, until the marketplace matures and codes of conduct are tightened up on the trustees of QROPS, then certain characters and companies will always see themselves as being above bringing the industry into disrepute and introducers and clients will need to be very careful who they place their business with.

Who then?So if the QROPS providers cannot achieve what Sarah would like to see, then who can?

The answer, of course, at the moment is no one.

Unless the FSA brings rules to bear on all pension trustees in the UK to prevent the transfer out of pension funds to QROPS providers without evidence of suitability reports from UK qualified advisers who stand to be struck off by a relevant professional body if their advice is found wanting .

This is not going to happen soon; hence we are at the start of the biggest mis-selling scandal the offshore market has ever seen.

Financial planning is about putting the right money in the right place at the right time. Further issues advisers should consider include jurisdiction, taxation and compliance.

But as long as we as advisers are client centred in our thinking, with quality fact finding and thorough education standards, backed by quality, meaningful, recognisable qualifications, then at least some expatriates have a chance.

For expert QROPS advice go to or call 01664 444625

UK pensioners in France to pay tax on ‘tax-free’ lump sum

British taxpayers who retire to France will now have to pay income tax on the previously tax-free lump sum element of their pensions, according to law firm Wedlake Bell.

This is expected to cost the typical British pensioner emigrating to Provence, the Dordogne or the Côte d'Azur “tens of thousands of pounds in additional tax”, Wedlake Bell says.

It notes that the new rules, which took effect in January, apply to private pensions or occupational pensions, lump sums generated from deferral of UK state retirement pensions, and Qualifying Recognised Overseas Pension Schemes, or QROPs.

British taxpayers are entitled to take up to 25% of their total pension savings as a tax-free lump sum when they retire, up to a value of £1.8m (reducing to £1.5m from 6 April 2012). Most pensioners opt to take the full 25%.

The change is a result of a provision in the ‘Loi de Finances’, which was passed recently by the French Parliament.

Under the new rules, British expats living in France will now pay French income tax on any private pension lump sum payment worth more than €6,000 (£5,018). The amount that is taxed is after the 10% tax-free allowance for pension income is deducted. The top rate of income tax in France is 41%.

Wedlake Bell urges British taxpayers considering retiring to France to consider taking their lump sum from their pensions “before they arrive in France” to avoid this tax liability.

Explains Emma Loveday, Partner at Wedlake Bell: “Very few British taxpayers who are considering retiring to France will be aware of this change. Many will get a nasty surprise when they take what they think will be a tax-free lump sum payment, only to be presented with a tax bill running into tens of thousands of pounds.

“Anyone looking to retire to France should consider taking the lump sum payment before arriving in France to avoid the tax liability.”

Loveday notes that tax-free lump sum is ordinarily “one of the most attractive benefits of saving for a pension”, and that many pensioners will be particularly reliant on the tax-free lump sum now, with interest rates so low.

“Paying tax on that lump sum could ruin many retirement plans.”

'Always a grey area'Graham Keysell, an adviser with the Spectrum financial advisory group, which advises British expats in France as well as elsewhere in Europe, notes that the question of whether lump sums were liable for tax has "always been a grey area" for expats in France.

"Fortunately, French income tax rates are not particularly onerous for people earning less than €26,000 a year (14%)," he adds. "Alot of our retired clients would fall into this category, since their major income is going to commence after they have have taken their lump sum,that is, when they turn the remainder of their pension pot into a regular pension.

"For someone taking early retirement and having no fixed income as yet, they could draw up to approximately €100,000 in a lump sum, and pay absolutely no tax on this."

Another case, Keysell notes, might be an expat with an initial income of €10,000 a year. "They could receive 25% of a €250,000 'pension pot (€62,500) and would pay €8,750 tax on this.

"Even people earning up to €70,000 only pay 30% tax, so certain of these people might still be tempted to take the cash lump sum. Obviously, each case would need to be looked at on an individual basis."

According to Wedlake Bell, UK Government Service and local government pensions will remain exempt from French income tax for the time being, although it is understood that the French government is considering bringing those pensions into its tax net as well.

More than one million British pensioners live overseas, and France is among their top five destinations.

For expert QROPS advice go to or call 01664 444625

ECJ gender ruling ‘a positive for QROPS’

The ECJ’s recent ruling on sex discrimination in the underwriting of insurance-based products could be positive news for QROPS, according to Close’s Rex Cowley.

The European Court of Justice ruled earlier this week that European insurers can no longer offer policies based on people’s gender, including products such as annuities, where typically men receive a higher income as they are expected to live shorter lives.

However, while many believe this could have a detrimental effect on consumers, as it is expected that women will simply be offered a lower income, rather than men more, Cowley said for QROPS providers operating from countries outside of the EU the ruling could have a positive impact.

“Schemes which are not part of the EU, for example Guernsey domiciled schemes, will not be caught by this European ruling,” he said.

“The advantage of this is that the benefit payable under a QROPS is that the annuity income stream can be tailored to meet the specific individual's set of circumstances. In a world where wealth management is becoming more and more bespoke, tailored benefit payments are desirable, particularly when age, health and gender can all have a bearing on the amount of income one can earn.”

The ECJ ruling, which was made on Tuesday this week, will come into force on 21 December 2012

For expert QROPS advice go to or call 01664 444625

QROPS Advice: QROPS Price War

Close has cut the charges on its offshore bond-linked QROPS proposition to what it believes are the lowest in the marketplace.

The move will be seen as an attempt to gain market share over rivals such as Concept Group, which through a link up with Skandia, had been widely thought to offer the lowest-priced QROPS.

Close has reduced from £1,500 to £750 the establishment charge on QROPS in which the investments are managed via offshore bonds, while the annual charge has been lowered from £1,500 to £1,000.

The company also offers a QROPS with annual administration and establishment charges both of £300. Investment choice is limited to its own multi-asset and multi-manager funds in this option.

Close claimed that, taken together, these charges meant it “offered the best price in the marketplace today.”

It is not simple to verify the claim because not all providers make their charges readily available. However, the new charges compare favourably with those levied by Skandia through its link-up with Concept, in which the establishment and annual administration fees are £995 apiece.

Sovereign – through its Atlantica Lite product – like Close charges £300 each for establishment and administration fees. Atlantica is for investments below £80,000, while Close has a minimum investment of £25,000.

Rex Cowley, head of marketing and products at the international division of Close, said: “Price is an important factor for customers given the drag it places on investment returns and in this respect our proposition offers the best price in the market place today.”

Cowley added that while price was crucial, it was Close’s online capabilities and sophistication in areas such as valuations, as well the technical expertise of its pension division, that set it apart from rivals. He further noted a QROPS examination and formal accreditation was offered to advisers by Close.

It was announced yesterday that Close Offshore Group, of which the QROPS business is a part, is to be sold by its parent company, London-listed Close Brothers Group, to Kleinwort Benson for £29.1m.

Close Offshore Group has operations in Jersey, Guernsey and the Isle of Man.

For expert QROPS advice go to or call 01664 444625

QROPS Advice: Growing price competition in the sector

Skandia International and Concept Group have lowered the charges on their joint QROPS proposition amid growing price competition in the sector.

The change comes in the wake of Close, a leading mass market rival to Concept, reducing its own product fees to what were believed to be – for a few days at least – the cheapest available.

The new charges on the Skandia/Concept Group Aurora Quantum product are a set-up fee of £645 and annual administration charge of £845. Both were previously £995.

Close last week cut its establishment charge to £750 and annual administration fee to £1,000. Combined, this figure is now £260 more than that of the equivalent new Skandia/Concept cost.

Close does, however, offer a product in which the annual and establishment fees are each £300. In this product the investment choices are limited to Close’s own funds.

The tie-up between Skandia and Concept was originally agreed just over a year ago. The new fee structure forms as part of an extension of the contract.

Phil Oxenham, marketing manager at Skandia International, said: “We have seen a tremendous reception for Concept’s Aurora Quantum proposition during its first 12 months in the QROPS market.

“The average number of pension contracts we are seeing transferring into a QROPS is three per customer, which just shows how easy it can be to consolidate retirement planning solutions to make life easier."

Roger Berry, managing director for Concept Group, said: “By refining our new business processes further and forging strong relationships with key UK pension providers, we have been able to identify further efficiencies and are pleased to be able to pass this benefit on to our new customers.”

For expert QROPS advice go to or call 01664 444625

Overseas Pension Transfers

For over 24 years Argent International Financial Services Group has been looking after expats (and soon to be expats) financial interests and advising upon QROPS (Qualified Recognised Overseas Pensions Schemes), which is the ability to transfer UK frozen pensions (including Private and Company Pensions) overseas when emigrating.
Argent provide a free of charge report on the benefits of overseas pension transfers (QROPS) to its clients for all jurisdictions throughout world and work closely with tax experts in many regions to do this.
Just two of the benefits of Overseas Pension Transfers
Don’t take your UK TAX burden with you.
As of April 2011 the UK Government increases Death Duty when you retire to 55%. What this means is once you retire and you have started drawing on your pension via an income drawdown plan, if you were to die the UK government would take 55% of your total pension fund savings as tax.

WHY? The government is trying to recoup the tax relief it has paid on your pension fund. The size of the tax charge simply reflects the generosity of the tax relief paid on your pension in the first place.

THE ANSWER: Transfer your pension into a Qualified Recognised Overseas Pension Scheme (QROPS) and UK Death Duty is removed 100% of the pension fund value is passed onto your spouse/heirs.

Don’t pay tax on your pension fund if you don’t need to.

PAYING TAX ON PENSION LEFT BEHIND The amount of Tax you will pay in retirement will depend on the Country in which you retire. If you leave your Pension in the UK and retire in your new Country of permanent residency you can still take 25% of the fund value tax free and the remaining fund will be subject to tax at your specified rate. THE ANSWER: Transfer your pension overseas into a QROPS and you can in many cases pay lower rates of tax on your pension (Cyprus 5%) and even receive it 100% Tax Free in some Countries including; Australia, New Zealand, Panama, Belize, Malaysia, Philippines, Turkey, Dubai, Abu Dhabi & United Arab Emirates.

For expert QROPS advice on overseas pension transfers go to or call 01664 444625

Friday, 4 February 2011

Guernsey QROPS firms say they can offer lump sums above 30%

Guernsey QROPS providers have claimed they can offer similar benefits as available under the Isle of Man’s new pension legislation, including tax-free lump sums in excess of 30%.

Some pension companies in the island, reckoned to be the current leading QROPS jurisdiction, have gone on the offensive since details of the Isle of Man’s new 50c pension legislation was released.

In particular, a scheme offered by Isle of Man actuary and pension trustee Boal & Co, offering potential lump sums in excess of 30%, has received much attention and led to criticism from rival firms, some of whom believe promoting such benefits is irresponsible and may lead to HMRC intervention.

Roger Berry, managing director of Guernsey QROPS provider CGL and chairman of local pension body’s QROPS committee, said: “50c legislation is effectively an exemption provision and is very similar to Guernsey’s 40ee exemption provision, which has been around for very many years.

“Guernsey then, has the capacity to do similar things to that being promoted by the Isle of Man. I would suggest that it should be used for the exceptional circumstance rather than generally…..

“Frequently, review by HMRC follows [the promotion of such schemes] with the potential to lose ‘approval’ of said schemes and all the difficulties for advisers and members that result.”

He added Guernsey’s Tax Office had confirmed that as long as the “correct structuring” was inserted into a scheme’s deed rules, Guernsey QROPS could do “similar things” to Manx 50C pensions.

Boal & Co declined to comment. Despite the widespread consternation among some QROPS providers in Guernsey and elsewhere as a result of the Trinity scheme and 50c legislation, at least one high-profile Channel Islands provider is known to be planning to launch a Manx scheme offering similar benefits to Boal & Co’s.

For expert QROPS advice go to or call 01664 444625

HMRC 'interest' in 50c QROPS 'welcomed' by new IoM pension body

The newly created Isle of Man Association of Pension Scheme Providers has brushed aside speculation that HMRC may investigate the island’s 50c pension legislation.

There have been suggestions from pension providers based in and outside the Isle of Man that the UK tax authority may be unhappy with the way the new international pension regime is being promoted – in particular that it can facilitate tax-free lumps in excess of 30%.

The association, however, said it welcomed HMRC’s “input and interest” in the new legislation, which has been created in a large part to reinvigorate the island’s QROPS industry.

No cause for concernStuart Clifford, chairman of the association, who is also principal of Baker Tilly Isle of Man, said: “The speculation there has been over the interest of HMRC in these changes does not give us any cause for concern.

“It is quite normal for them to take notice of amendments to international legislation related to pension products which may be sold to UK passport holders. We welcome their interest and look forward to their input.”

Fedelta, a Manx pension trustee, last month revealed it had written to HMRC to clarify what was permissible under the 50c regime, specifically whether lump sums limits should be based on the transfer value or sum that had been accrued at the point of retirement.

It is unclear whether Fedelta has yet had a response from HMRC.

The controversy over the issue has been around a scheme promoted by local actuary and pension trustee Boal & Co.

Under its scheme, savers could receive a theoretically receive an uncapped lump sum at retirement, provided that 70% of the initial sum transferred is retained to pay for an income in retirement.

The remaining 30% could potentially grow substantially as a result of investment returns in between when the period the transfer was made and when benefits are taken. Under 50c rules, this 30%, plus all the investment growth accrued can be taken as a lump sum.

Boal & Co has defended its interpretation of the rules, which it said has been signed-off by HMRC.

Clifford added: “As an association we remain confident that the Isle of Man is on the cusp of a strong period of growth in the provision of products which will benefit individuals and families throughout the globe who wish to make sensible plans for retirement, in these difficult times."

A statement from the association added: “The Association aims to create a better understanding of pensions in the Island and to work with Government and fellow professionals to ensure that the industry is properly regulated and controlled whilst being competitive with other jurisdictions in the international pensions marketplace.”

For expert QROPS advice go to or call 01664 444625

Unscrupulous QROPS advisers face naming and shaming

Advisers and QROPS schemes face being shopped to regulators under a crackdown by New Zealand IFAs.

A group of what has been described “senior advisers” in the country has established a working party through which it hopes to clean-up parts of the QROPS industry.

The group will primarily target other advisers and pension schemes that are promoting New Zealand QROPS as a means for savers to receive 100% of their pension pot in a tax-free lump sum.

Those responsible for the initiative fear such activities could see their country suffer the same fate as Singapore, which in 2008 effectively had its status as a permissible QROPS jurisdiction withdrawn by HMRC.

Geraint Davies, chief executive of UK-based QROPS specialist Montfort International, is working with his Kiwi counterparts in the group.

He said: “They are going to put pressure on the local regulator and government and make them aware these things are happening and get them to take action. These are high-profile, well-respected advisers and I’m sure the authorities will sit up and listen.”

Davies added the advisers wanted to create some form of officially backed advice process or code of conduct for QROPS business to ensure it was conducted “properly” for genuine retirement planning.

“They don’t want to see New Zealand get a bad name because of certain so-called advisers and scheme promoters who are just flogging a ‘get your pension cash out’ job and who are only trying to make a fast buck for themselves,” he said.

Davies said the group, whose membership and objectives will be officially made public later this month, would be presenting evidence of poor practice to local pension and tax authorities in a form of naming and shaming.

“They also want to get the message back to HMRC that they are treating this matter seriously,” added Davies.

HMRC is believed to have had concerns about some QROPS schemes based in New Zealand for some time, primarily because it is possible to take 100% tax-free lump sums under local rules in the country.

However, it is not known to have acted against any particular scheme by removing it from the list it publishes of self-certified QROPS.

For expert QROPS advice go to or call 01664 444625

Guernsey approves 30% tax-free lump sum to boost QROPS

The States of Guernsey, the Channel island’s parliament, has approved a measure to raise the pension commencement lump sum from 25% to 30%.

The move, plans for which were reported in International Adviser in August, means Guernsey residents and foreign members of Guernsey pension schemes can take a tax-free lump sum of up to 30% when they retire.

The main driver for the change is to make Guernsey’s pension rules as attractive as those of its Crown Dependency neighbours Jersey and the Isle of Man from an international perspective, primarily the QROPS market.

For expert QROPS advice go to or call 01664 444625

Thursday, 3 February 2011

Boal & Co bat back QROPS critics

Boal & Co has hit back at criticism from Fedelta Pensions that its Isle of Man-domiciled Trinity plan may not meet HM Revenue & Customs' QROPS rules.

Director Mark Kiernan said Boal & Co has been “somewhat surprised as to the continued denial of the efficacy of the plan” by the firm “which seems, for whatever reason, to be intent on criticising by innuendo, rather than by fact”.

The validity of the Trinity plan, which offers investors the opportunity to take up to 70% of their pension in a cash lump sum, was last week questioned by Fedelta Pensions’ managing director, Nigel Callin.

Callin released a statement in which he said he had written to HMRC for clarification on whether a lump sum can be taken using the original value of the transferred funds or at the point the investor is to take benefits – a definition which would therefore determine the total lump sum payable.

However, Kiernan said Boal & Co has the written opinion from leading UK pensions/tax counsel (QC) which has “unequivocally affirmed that Boal & Co’s interpretation of the UK legislation (including HMRC regulations and practice) is wholly correct”.

He added that counsel’s opinion has “dispelled, and destroyed, any assertion that Trinity is using some kind of loophole in the rules, concluding beyond doubt that a clear policy decision has been taken by [UK] Parliament to disregard investment growth”.

Kiernan added: “The fact that we have successfully educated a number of parties as to the applicable HMRC requirements is perhaps no bad thing. The law is what it is, and is a matter of public record. With our strategic business partners in place, and top-level QC opinion on the facts of the matter, we continue to re-define the QROPS landscape, with informed opinion fully behind us.”

For expert QROPS advice go to or call 01664 444625

70% lump sum QROPS called into question by Fedelta

The validity of claims investors can withdraw up to 70% of their pension from a new form of Isle of Man-domiciled QROPS has been called into question by Fedelta Pensions.

Nigel Callin, managing director of Fedelta, an Isle of Man-based SIPP and SSAS specialist, said his firm has written to HM Revenue & Customs for clarification on whether a lump sum can be taken using the original value of the transferred funds or at the point the investor is to take benefits.

Callin’s reservations follow the launch of the Trinity Plan by Boal & Co. at the beginning of November which offers investors the option of taking up to, or in excess of, 70% of their pension as a lump sum.

When launching the product, Boal & Co., used an example where a person aged 45, transfers a pension worth £200,000 into Trinity. When the investor comes to retire at 65, the sum has reached £600,000 with investment growth.

Assuming all HMRC stipulations are met, such as being non-UK tax resident for at least five years, they must also use at least 70% of the transfer value – amounting to £140,000 – to provide a retirement income. The remainder, £460,000, is able to be taken as a lump sum.

However, Callin said this was not the intended use of the Isle of Man’s 50C pension arrangements and described marketing material printed by some firms as “sensationalised”.

He said: “We sat on the working party tasked with overseeing the introduction of 50C and the ability to pay a lump sum of more than 30% following a transfer from a UK Registered scheme was not a feature that was asked for nor considered by the working party; this is simply a by-product of the drafting which was done to follow the UK wording and ensure that 50C was fully QROPS compliant.”

Callin is also critical of the way the products have been marketed, even if the assumption is correct, and said there has so far been “no attempt to show the other side of the coin” and the usual “health warning that investments can fall as well as rise is highly conspicuous by its absence.”

To illustrate his point, Callin used a different example where a member transfers £1m from his UK pension into a QROPS and invests the entire fund in a FTSE 100 tracker product when the index is at 5900. Over the following months the index falls to 4130 and consequently the fund falls to £700,000 at which point the member decides to take his benefits.

If this where the case, said Callin, and based on the assumption that 70% of the pension at transfer value can be taken as a pension for life, the investor would receive nothing as a lump sum.

“Accepting the fact that trustees would probably not invest the whole fund in a FTSE tracker, this example does demonstrate that interpreting HMRC guidance in this way may result in an altogether less favourable position for the member and marketing literature should therefore reflect this,” added Callin.

For expert QROPS advice go to or call 01664 444625

Manx pension changes put Island "at least on a par with Guernsey", says IOMA

IOMA Pensions has welcomed recent legislative changes to the Isle of Man’s pension system and said it will put the jurisdiction “at least on a par with Guernsey”.

The new legislation, which was approved by Tynwald, the Manx government, on 22 October, has created a new type of pension plan which does not provide tax relief for contributions but retains tax exemption on investment growth. It also provides tax exemption on pension income in retirement.

Boal & Co has already made use of the changes to launch a QROPS which will allow clients to take a lump sum of up to, and in some cases more than, 75% of the value of their pension pot.

IOMA, which launched a Guernsey-based QROPS called the Lifestyle Pension in July this year, said the changes will put the Isle of Man “on a par, at the very least, with jurisdictions such as Guernsey operating in the multi-billion pound QROPS industry.”

IOMA director Mike Batey said: “The changes do two important things. First, they provide local IFAs with more choice as to how to structure pension provision for their clients, essentially providing the option as to whether the pension member is taxed whilst contributing or taxed whilst taking the income.

“Second, is the advent of the long-awaited competitive positioning for the Isle of Man in the international QROPS market, currently dominated by Guernsey. Generally, the framework for pension planning in the Isle of Man is excellent but the tax treatment for certain types of scheme has been something of a hindrance up until now. With these changes, I feel confident that the Isle of Man can finally establish itself as the premier jurisdiction for pensions, now that there is a suite of retirement benefit solutions that is second-to-none in the global market. ”

The company added it is finalising a new suite of products which take into account the legislative amendments and hopes to launch them this autumn.

For expert QROPS advice go to or call 01664 444625

Gibraltar set to resolve QROPS deadlock

The UK Treasury and Gibraltar have at last resolved the pension tax issues that caused Gibraltar pension fund administrators to voluntarily suspend pension transfers from the UK, beginning in September 2009, International Adviser understands.

Sources close to the discussions said that the necessary amendments to Gibraltar’s pensions legislation are expected to be in place before the end of the year, following high-level talks in London that took place in early October between Gibraltar government and UK Treasury officials.

Gibraltar officials declined to comment on the reports.

If true – and there was a false alarm in January – the resolution of the tax issue will mean the end of a frustrating 14-month period for trustees of Gibraltar QROPS, and their clients.

The wait has been particularly difficult for Gibraltar pension administrators because their period of voluntary removal from the QROPS market has coincided with the emergence of a new rival jurisdiction, Malta, which – like Gibraltar – counts among its competitive advantages its EU membership and the fact that it is English speaking.

HMRC first recognised Malta as a jurisdiction to which UK pensions could be transferred at the end of November 2009. Its website now lists four Maltese QROPS schemes, administered by such companies as Custom House Global Funds Services, compared with 10 Gibraltar schemes, of which three are STM Fidecs plans and two bear the name Victor Chandler International, a Gibraltar-based online betting organisation.

Under UK pensions law, in order for HMRC to recognise a jurisdiction as suitable for UK pension transfers, it must meet one of three criteria, of which one is simply to be an EU member state. Gibraltar is not a full member but meets three of four basic conditions of membership, and is considered a member for most purposes as a result of its relationship with the UK, of which it is officially considered an ‘overseas territory’.

As reported, Gibraltar QROPS moved to suspend pension transfers from the UK after reports that HM Revenue & Customs had concerns about Gibraltar’s tax regime for 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
For expert QROPS advice go to or call 01664 444625

First QROPS is launched based on new IoM rules

The first QROPS scheme established under the Isle of Man’s new pension legislation has been launched, offering investors lump sums in excess of 75% or more in some circumstances.

Boal & Co’s Trinity plan, which the firm said was fully approved by Manx authorities and the UK’s HMRC, is able to pay such lump sums on the basis of investment growth generated post transfer.

The company, which offers a range of actuarial and pension services, used an example where a person, aged 45, transfers a pension worth £200,000 into Trinity. When the investor comes to retire at 65, the sum has reached £600,000 with investment growth.

Assuming all HMRC stipulations are met, such as being non-UK tax resident for at least five years, they must also use at least 70% of the transfer value – amounting to £140,000 – to provide a retirement income. The remainder, £460,000, is able to be taken as a lump sum.

Gary Boal, managing director of Boal & Co, said the scheme benefited from all other features of QROPS, such as the ability to pass on any remaining pension money to beneficiaries on death without paying UK taxes, among others.

The Isle of Man’s 50C legislation, the creation and imminent approval of which was exclusively revealed by International Adviser last month, also contains a provision that pension income for non-residents is tax-free, unlike under a previous regime in which a 20% levy was charged.

The new Manx pension regime is likely to pose a serious challenge to Guernsey, which has in the past two years established itself as the leading QROPS jurisdiction, a fact acknowledged even by

Boal & Co, which created a scheme based in the Channel island as a result of its previously better tax treatment.

Boal now claims the Isle of Man has the upper hand and has predicted that not only will new QROPS money start to come into Manx schemes, but that advisers should consider transferring out of existing QROPS schemes to 50C products “on any form of best advice.”

For expert QROPS advice go to or call 01664 444625

10 reasons why a NZ Foreign Trust beats a QROPS

I have spent the last six months developing a route by which long term UK tax relieved pension funds can migrate to a New Zealand Foreign Trust (NZFT) and one of the inescapable conclusions is that this is a better, indeed much better, solution than a traditional QROPS.

This option is only available to those who have been non-UK resident for five complete UK tax years – but for those who satisfy this condition here are the ten reasons why the NZFT wins out:

1.The ability to access up to 100% of the fund at any time either through a capital distribution or via a loan which may be interest free.
2.Total investment freedom - no restrictions, none at all.
3.Complete confidentiality outside of New Zealand.
4.No issues if the member of the NZFT later returns to live in the UK. The NZFT is not however suitable for anyone who lives or intends to live in New Zealand.
5.Tax free income and capital growth within the NZFT.
6.Income or capital paid from the NZFT is without deduction of tax at source.
7.The NZFT allows the member to be a trustee of the arrangement (more on this below).
8.The NZFT member is empowered to change the New Zealand resident trustee if they wish.
9.All decisions associated with the NZFT require the unanimous agreement of the trustees - so the member, if also a trustee, has control.
10.On death, the assets of the NZFT are distributed to the classes of beneficiaries selected at outset by the member. This may result in the creation of a further NZFT on death for the beneficiaries enabling the advantages of the NZFT to continue for the benefit of the next generation.
For me the question of trusteeship is the most important.

We were in the QROPS market very early and a major disadvantage of the usual model is that the sole tustee is a corporate trustee of the QROPS provider. If you fall out with the corporate trustee your only recourse is to transfer to another QROPS.

This will involve an exit fee (typically up to 1% of the fund value), and an entry fee (typically £1,500 or more) into the new QROPS.

The NZFT enables the member also to be a trustee and in that capacity they have the power to replace the New Zealand resident trustee (corporate or otherwise) with another. There is no need to throw out the baby and the bathwater.

NZFTs form a part of the strategy of the New Zealand government to develop as a major financial centre. They are specifically for non New Zealand residents.

We have, after extensive legal advice in New Zealand, helped to deliver a facility whereby UK pension funds may (via a QROPS) migrate to an NZFT without at any stage in the process the fund leaving the protection afforded by a trust based structure.

For expert QROPS advice go to or call 01664 444625

Be careful where you QROP

The 2006 changes in UK pension legislation prompted an explosion of pension related transfer opportunities. The accompanying divergent views and investor speculation on QROPS transfer options only served to polarise opinion and confuse even the most competent financial advisor.

Four years on, with experience under our belt, it is still beneficial to go to back to basics if we are to understand the current opportunities offered by QROPS.

It all began with the advent of the 2003 European Union’s freedom of transfer of monies directive, which gave private investors the opportunity and flexibility to invest across the EU and choose those jurisdictions that appeared more attractive by virtue of lucrative tax benefits and incentives.

This directive represented the first step on the way to an internal market for occupational retirement provision organised on a European scale. Indeed with the UK pension regime overhaul in 2006, great industry attention has been given to those investors who hold dormant UK private and company pension schemes and the opportunity to transfer the value overseas through the HMRC authorised QROPS system.

With now over 170 authorised schemes investors are offered a multitude of options if they wish to transfer their pensions to an authorised jurisdiction.

Traditionally, the most popular options for clients advised by their financial advisers have been the crown dependent channel-islands: Guernsey and the Isle of Man. Schemes are also now available in mainland Europe through Gibraltar, Malta, Latvia and Lichtenstein, and further afield in Australasia, namely Hong Kong and New Zealand.

With such rich and attractive transfer opportunities brings the quandary – which jurisdiction is the most suitable and why? Which jurisdictions offer the best value and benefits and how is any potential risk minimised for investors’ hard-earned pension transfer values?

The first port of call must surely be the client’s financial objectives and personal situation. If clients have been non-UK resident for more than five consecutive tax years then a QROPS could certainly be beneficial. Trustees of the overseas pension scheme are no longer required to report back to the UK Inland Revenue and so the client’s offshore tax position remains only in the jurisdiction where they reside. Qualifying Non-UK Pension Scheme (QNUPS), which in effect is an unregulated version of a QROPS and provides looser boundaries are also an option.

Clients who have not been non-UK resident for the five year period or who may return to the UK should think carefully about whether a QROPS is an option for them or whether a Self Invested Personal Pension transfer is more beneficial.

So if a QROPS is preferred, then where to go?1. Crown dependant territories:
Channel Islands:
With their rural village-like ambiance and historical importance to the UK’s financial services industry, the Isle of Man (IoM), Guernsey and Jersey give the appeal of solid regulatory foundations and bespoke tax and financial planning solutions.

Almost all island pension arrangements, whether local or overseas, fall to be considered by the local Income Tax Authorities. The Income Tax legislation imposes a regulatory framework within which these “approved” arrangements must operate to maintain their tax favourable status. The rules vary depending upon the type of arrangement concerned.

In addition, the Income Tax Authorities issue codes of practice, or guidance notes, with which different types of scheme must comply (such as the practice notes for local occupational schemes, the code of practice in Guernsey for Retirement Annuity Trust schemes (or RATS) and the special regime for small self-administered schemes in Jersey).

Pension arrangements, both overseas and local, which are established under trust, are subject to trust statutes and other financial legislation in both islands. It also determines the rights available to members of those schemes. This can have significant implications for trustees and employers. In addition, where in either island schemes are provided or administered by insurance companies, those companies will be subject to the islands’ insurance legislation.

Similarly, the IoM Retirement Benefits Schemes Act 2000 established a broad framework catering for all schemes operated in or from the Isle of Man. Under the Act, separate sets of regulations have been introduced catering for international schemes (those being schemes that are managed from the Isle of Man yet do not have any Isle of Man resident members) and domestic schemes providing benefits for Isle of Man residents.

Michael Foot the ex FSA chairman produced a substantial white paper focused on the crown dependant offshore tax havens that have for so long tempted private investors to invest or indeed up sticks and reside there.

Foot’s paper suggests four key recommendations:

1.Increased financial supervision and transparency
2.Increased taxation to promote financial stability, sustainability and competition
3.Pro-active financial crises management and resolution
4.Increased international co-operation
In essence, Foot focuses on bringing these jurisdictions in line with the mainstream international community. Interestingly, this means tax information exchange agreements (TIEA’s) are already being adhered to and the possible introduction of withholding, value added, capital gains and corporation taxes.

This is echoed with the forthcoming EU Code of Conduct group’s recommendations for zero-10 tax systems and compliance with any new tax directives given. Indeed, the IoM has already introduced withholding tax and TIEA’s are in force with a commitment to automatic exchange of information by July 2011. Guernsey and Jersey have TIEA’s and are also considering their positions on taxation related issues.

When considering QROPS, it is worth noting non-residents will currently pay full income tax on pensions received in the IoM, with Guernsey rates at nil at present and Jersey to open pension planning to non-residents in the near future. The relevance of changes in tax legislation and scrutiny of offshore financial shelters is also an important issue to bear in mind when transferring pensions away from the UK.

Highlighted in the Foot report as a crown dependency, the above recommendations will also apply to this jurisdiction. Gibraltar has fairly or unfairly been targeted by HMRC due to its nil taxation rate for retirees at 60. This position has recently been resolved and Gibraltar is returning as an authorised QROPS jurisdiction.

2. Member states of EU, Lichtenstein, Latvia:
New to the QROPS scene, Malta offers an alternative to the crown dependencies due to its independence as a EU domiciled jurisdiction. The Malta Financial Services Authority have also worked with HMRC over the last two years to ensure a robust QROPS system is in place (unlike other jurisdictions where the authority is initially granted and then scrutinised at a later date). Indeed, each individual scheme is approved and regulated to ensure a comprehensive structure is in place.

Liechtenstein and Latvia are interesting, with the latter proving popular with ex-service personnel. However, the service personnel and veteran’s agency (SPVA) is now in liaison with HMRC on the suitability of this jurisdiction. The Liechtenstein disclosure facility (LDF) is one example of how the UK Inland Revenue is giving jurisdictions considered as ‘opaque’, a tax haven amnesty for investors to declare savings. On this basis, both jurisdictions maybe considered less attractive to the pension investor.

3. Wider Jurisdictions:
QROPS maybe domiciled where the UK has completed double taxation agreements (helpfully listed at
Such agreements contain provisions as to exchange of information and non-discrimination.

In the past few years, we have seen HMRC flexing its muscles and withdrawing status from those trustees deemed unfit to hold the authorised QROPS status. Singapore based QROPS provider Panthera and most recently Hong Kong based Beazley trustees, suffered such a fate. Those investors who transferred their pensions could then be charged a crystallisation benefit charge and an unauthorised transfer charge totalling 55%.

A former Crown colony, Hong Kong itself remains authorised and is generally recognised as a non-EU authorised jurisdiction. This may appeal to those investors looking for non-EU based tax havens, as this jurisdiction gives resident and non-resident investors favourable tax treatment. Schemes are fully authorised under the mandatory provident schemes ordinance and thus are domiciled in a well-regulated jurisdiction. Hong Kong has also made great changes to its social benefit structures and thus begins to boast a new and innovative regulatory structure compared to other jurisdictions.

New Zealand (NZ) has also fallen under HMRC’s spotlight amid claims of trustees allowing pension-busting schemes. Nonetheless, this remains an authorised jurisdiction and indeed is defended by some IFA’s as a suitable jurisdiction for pension transfer with the territory allowing more than 25% commutation of pension rights if the member is to remain a non-NZ resident. Along with Australia, NZ offers some of the most comprehensive regulatory arrangements for retirees.

The future
Along with the EU directives, the OECD has produced white papers on the concern for retirement provision for member countries. With public sector income levels in decline, many governments are encouraging individuals to supplement income with private pension savings.

For expert QROPS advice go to or call 01664 444625¤t_page=2

Isle of Man set to challenge QROPS market with new product

The Isle of Man is poised to challenge Guernsey’s dominance of the UK Crown Dependency QROPS market as early as this month, as its legislature is expected to consider a new type of international pension structure open to residents and non residents,

Unlike existing pension products available on the Isle of Man, this new pension product would enable non-IoM residents to avoid having to pay 20% tax on income – as is already the case with non-resident pension schemes in Guernsey and certain other jurisdictions that are popular with QROPS providers.

Such jurisdictions offer the zero-percent tax rate to non-locals on the understanding that some tax is ultimately paid to the country in which the relevant pensioner currently resides. Isle of Man QROPS administrators have been lobbying persistently for this tax – which in the last budget was raised from 18% – to be removed for non-residents, in order to be more competitive.

Tynwald will formally consider the new pension structure at its next scheduled three-day session, which begins on 19 October, IoM QROPS industry sources told International Adviser. Because the new pension is constructed as an amendment to existing pension regulations, it could be available for use by pension administrators within days of Tynwald’s approval, which is widely expected, these sources added.

It was not clear at presstime whether HM Revenue & Customs will classify the new pension product as a QROPS, but if it does, there would be a time lag of several weeks to months before it would receive this designation.

Government officials declined to comment, citing Tynwald regulations that require members to be fully informed of such matters before other parties are briefed.

News of the changes to IoM tax legislation comes as Jersey officials continue to work on changes to that island’s pension’s legislation that are intended to enable it to offer QROPS to non-Jersey residents for the first time.

QROPS, or qualifying recognised overseas pension schemes, are a type of international pension scheme located outside Britain that HMRC deems acceptable for former UK residents to transfer their UK pensions to. Guernsey dominates this market, and sources there say it has benefited from a surge in transfers over the last 12 months.

In addition to now being taxed at 20%, the same rate as Isle of Man residents’ pensions, the pension income of non-resident Brits living outside the UK also no longer enjoy a non-resident’s allowance of £2,120, which was abolished in the last budget. The 20% tax has been a thorn in the side of the Isle of Man’s QROPS industry, which evolved after the UK overhauled its pensions legislation in 2006, now known as A Day.

For expert QROPS advice go to or call 01664 444625

Selecting the right adviser can minimise QROPS risk

Recent events, including the action taken by HMRC against an unregulated QROPS scheme operating in Hong Kong, have focused attention on the risks to internationally mobile individuals seeking to transfer their UK pension funds out of the UK.

In our view, a client who is seeking advice on QROPS will benefit from engaging a fee-based, independent adviser who will undertake the following:

•Assess the suitability of QROPS to each client on a case-by-case basis and in a number of cases, best advice will be to leave the pension fund in the UK.
•Identify which QROPS jurisdiction is most suitable to the client’s circumstances. For example, should they utilise a scheme operated in the EU rather than a Channel Islands based scheme?
•Identify which QROPS provider to recommend. The adviser should demonstrate what due diligence has been undertaken on the provider. For instance, if the provider is privately-owned, who are the shareholders and what is the track record in pension administration?
•Confirm all advice in writing in a ‘QROPS Suitability Report’ which will also confirm the set up and ongoing fees to be incurred. The fees charged should be 100% transparent and the cost of advice should be unbundled and distinct from the QROPS plan charges.
The pension advice process referred to above is standard practice among most UK-based advisers, and would serve to protect the interests of internationally mobile clients and help put a stop to clients taking up unsuitable schemes.

For expert QROPS advice go to or call 01664 444625

FEIFA counsels advisers on EU passporting but warns of "major issues"

FEIFA CEO Paul Stanfield has warned advisers thinking of passporting their business back into the UK post RDR to carefully consider all the implications before taking any action.

Stanfield, who launched the Federation of European Independent Financial Advisers in August last year, was in part responding to a recent suggestion by the Association of Independent Financial Advisers that IFAs should not rule out passporting back into the UK post the RDR. He said while FEIFA had been receiving some enquiries about passporting previously this had increased owing to these comments.

He warned, while in some cases this cause of action could be beneficial to an IFA firm, there were a number of serious and far reaching considerations which need to be taken into account before such a decision is made. Stanfield said these can be broken down into a number of “headings” which include: regulatory and legislative, costs and savings and competitive considerations.

Foremost of Stanfield’s regulatory and legislative considerations was the need for the adviser to establish under which rules it would passport, either Freedom of Services or Freedom of Establishment, as this will dictate where an adviser can be based, live and the types of employment regulations under which the firm is governed.

Stanfield also warned on the cost implications of moving abroad as, while the IFA would no longer need to pay any FSCS levy, if an office is required in another EU state this will generate costs and possibly greater liabilities in areas such as staff benefits and entitlements.

However, one of the biggest considerations highlighted by Stanfield was the potential commercial implications of such a move. Stanfield said: “In all of this, an IFA evidently needs to ensure that the location of their regulatory status does not put them at a commercial disadvantage to direct competitors.

“This involves an appraisal of both the “image” of their regulatory status and proposed new jurisdiction, as well as assessing the perception of no FOS or FSCS in the eyes of clients. Of course, similar, if not even greater client protection may be available via regulation in another EU State, but potential language barriers may be seen very negatively by some clients.”

On a positive note, Stanfield said a move to another EU jurisdiction could open new business avenues for the IFA not least of all cross border pension advice such as QROPS.

Guernsey to introduce 30% pension lump sum to boost QROPS sector

Guernsey appears set to raise to 30% its pension commencement lump sum - or tax-free cash as it used to be known - next year in order to match Jersey and the Isle of Man.

A proposal to increase the current 25% level has been through several stages of the pre-legislative process and is awaiting a date to be voted on in the States of Guernsey, the island’s parliament.

The main driver for the change is to make Guernsey’s pension rules as attractive as those of its Crown Dependency neighbours from an international perspective, primarily the QROPS market.

Local pension companies expect the change – the passage of which onto the statute books is said to be a formality - to be made before 2011.

Roger Berry, managing director of Guernsey QROPS provider the Concept Group and chairman of the local pension trade body’s QROPS committee, said: “There’s absolutely no reason why Guernsey should not offer a 30% pension commencement lump sum as part of a modern pension regime and create a level playing field with the other Crown Dependencies.”

In July, International Adviser revealed that Jersey was hoping to pass legislation to kick-start its own QROPS industry by 2011.

QROPS Advice

Australia has abolished its so-called Foreign Investment Fund regime and in the process, has made choosing whether to move UK pensions there more complex, QROPS experts say.

The repeal of the Foreign Investment Fund (FIF) rules, which had been expected, is seen as benefittng offshore retirement funds, such as Qualifying Recognised Overseas Pension Schemes (QROPS), by reducing onerous reporting duties and tax burdens that until now have been a headache for UK expatriates who have moved to Australia for good.

However, QROPS experts say, it makes advising Britons and returning Australians who are considering moving their pensions to Australia more tricky, because major disincentives to moving pensions back to the UK remain.

“It is a complete and utter minefield” for advisers now, said Geraint Davies, managing director of Surrey, England-based Montfort International, a QROPS provider.

According to Davies, even though the abolition of the FIF regime is essentially a positive development for Australia-resident investors, IFAs must ensure that they are up to speed not only on the new regulations and how they could affect an Australian QROPs, but also on their individual clients’ plans, and their potential to change their minds at some point and wish to return to Britain.

As reported, the FIF regime, which dates back to the late 1980s and was a wide-ranging anti-avoidance regime aimed at preventing Australian residents from deferring tax through the use of overseas investments, is being replaced by a more narrowly-defined anti-avoidance rule.

“If an adviser does not understand how the regime works, and its consequences, he could end up putting his client’s QROPs in the wrong jurisdiction, and could have problems all over the place if that client later comes back and says he was given the wrong advice,” Davies adds.

“Let’s say you advised someone to move their pension to Australia, and failed to tell them that there is no reverse gear, that they can’t move it back to the UK; or that you recommended that they put their money into a fund that is going to cause tax problems. Would it be reasonable to have expected that you would have understood and factored in the Australian rules [when giving this advice]? – Yes.

“It just shows how complicated this really is.”

QROPS expert Rex Cowley, who is head of marketing at Close International, said the change to the Australian tax regime was “a reminder of the fluidity of tax systems around the world” and how such changes may affect individuals.

“For anybody looking to hold a QROPS, they need to remember that the implications on tax are typically three-dimensional,” he added. “In other words, they need to be cognisant of the implication from a UK perspective, the jurisdiction in which the QROPS is domiciled and the tax environment in their country of residence.

“This again shows the complexity of International pension planning and anyone looking to transfer their UK pension to a QROPS should only do so under advice."