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
ECM
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.

http://www.international-adviser.com/article/10-tips-for-international-pension-transfers

For expert QROPS advice go to http://www.qrops-advisers.com or call 01664 444625

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