QROPS Advisers at AIFSG

10 tips for international pension transfers

2011-03-23T09:56:00.000-07:00

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

Guernsey publishes QROPS code of practice

2011-03-23T09:35:00.000-07:00

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."

http://www.international-adviser.com/article/guernsey-publishes-qrops-code-of-practice

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

Fairbairn's Overseas Pension in international sales drive

2011-03-23T09:31:00.000-07:00

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.”

http://www.international-adviser.com/article/fairbairns-overseas-pension-in-international-sales-drive

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

Who can control the mis-selling of QROPS?

2011-03-22T15:59:00.000-07:00

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

Bob

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.

http://www.international-adviser.com/article/who-can-control-the-misselling-of-qrops

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

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

2011-03-22T15:55:00.000-07:00

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.

http://www.international-adviser.com/article/uk-pensioners-in-france-to-pay-tax-on-taxfree-lump-sum

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

ECJ gender ruling ‘a positive for QROPS’

2011-03-22T15:40:00.000-07:00

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
http://www.international-adviser.com/article/ecj-gender-ruling-a-positive-for-qrops

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

QROPS Advice: QROPS Price War

2011-03-22T15:37:00.000-07:00

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.

http://www.international-adviser.com/article/close-signals-intent-with-cutprice-qrops

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

QROPS Advice: Growing price competition in the sector

2011-03-22T15:34:00.000-07:00

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 http://www.qrops-advisers.com or call 01664 444625

Overseas Pension Transfers

2011-03-22T02:41:00.000-07:00

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 http://www.qrops-advisers.com or call 01664 444625

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

2011-02-04T05:57:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/guernsey-qrops-firms-say-they-can-offer-lump-sums-above-30

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

2011-02-04T05:52:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/hmrc-interest-in-50c-qrops-welcomed-by-new-iom-pension-body

Unscrupulous QROPS advisers face naming and shaming

2011-02-04T05:12:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/unscrupulous-qrops-advisers-face-naming-and-shaming

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

2011-02-04T05:11:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/guernsey-approves-30-taxfree-lump-sum-to-boost-qrops

Boal & Co bat back QROPS critics

2011-02-03T11:06:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/boal-co-bat-back-qrops-critics

70% lump sum QROPS called into question by Fedelta

2011-02-03T11:04:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/70-lump-sum-qrops-called-into-question-by-fedelta

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

2011-02-03T11:00:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/manx-pension-changes-put-island-at-least-on-a-par-with-guernsey-says-ioma

Gibraltar set to resolve QROPS deadlock

2011-02-03T10:58:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/gibraltar-set-to-resolve-qrops-deadlock

First QROPS is launched based on new IoM rules

2011-02-03T10:55:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/first-qrops-is-launched-based-on-new-iom-rules

10 reasons why a NZ Foreign Trust beats a QROPS

2011-02-03T10:48:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/10-reasons-why-a-nz-foreign-trust-beats-a-qrops

Be careful where you QROP

2011-02-03T10:44:00.000-08:00

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.

Gibraltar:
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 http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM14101046.htm).
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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/be-careful-where-you-qrop¤t_page=2

Isle of Man set to challenge QROPS market with new product

2011-02-03T10:42:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/isle-of-man-set-to-challenge-qrops-market-with-new-product

Selecting the right adviser can minimise QROPS risk

2011-02-03T10:39:00.000-08:00

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 http://www.qrops-advisers.com or call 01664 444625

http://www.international-adviser.com/article/selecting-the-right-adviser-can-minimise-qrops-risk

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

2011-02-03T10:36:00.000-08:00

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.

http://www.international-adviser.com/article/feifa-counsels-advisers-on-eu-passporting-but-warns-of-major-issues

http://www.qrops-advisers.com

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

2011-02-03T10:31:00.000-08:00

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.

http://www.international-adviser.com/article/guernsey-to-introduce-30-pension-lump-sum-to-boost-qrops-sector

http://www.qrops-advers.com

QROPS Advice

2011-02-03T10:17:00.000-08:00

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."

http://www.international-adviser.com/article/qrops-experts-urge-ifa-caution-as-australia-changes-tax-regime

www.qrops-advisers.com

New Zealand QROPS

2010-08-17T23:59:00.000-07:00

Much has been written about Qualifying Recognised Overseas Pension Schemes (QROPS) in the press and on the web. Some of the articles I have seen are helpful and accurate, others are less so. The purpose of this article is to set out how QROPS in New Zealand operate in the context of UK and New Zealand law.

The relevant UK law is to be found in the Finance Act 2004, and the accompanying regulations, in particular “The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006” (SI 2006 / 206). New Zealand law is to be found in the Superannuation Schemes Act 1989.

The key attractions in transferring UK pension rights to a QROPS are the avoidance of the effective compulsion to secure income with an annuity by age 75, and the ability to pass on the benefit of the member’s pension fund to nominated beneficiaries after death without the burden of taxation.

New Zealand schemes are also able to offer capital distributions beyond the levels available from UK schemes and beyond the levels available from most other QROPS jurisdictions.

Some QROPS trustees in other jurisdictions have been rather disingenuous about how New Zealand pension schemes work and their QROPS status. It is time to set that record straight.

Setting the record straightIn terms of SI 2006/206 a key condition is that of tax recognition. By that is meant tax recognition in the country where the QROPS operates.

The tax recognition requirements are described as Primary conditions 1 and 2, and conditions A and B. To meet the tax recognition requirements the overseas scheme must meet both Primary conditions, and one of conditions A and B.

Primary condition 1 states the overseas scheme must be “open to persons resident in the country or territory in which it is established”. New Zealand Superannuation schemes and Kiwisaver Schemes are open to New Zealand residents.

Primary condition 2 is concerned with how local residents (New Zealand residents in this instance) receive tax privileges on their pension savings. In other words the nature of the New Zealand pensions system.

There are two possibilities that each satisfy Primary Condition 2:

(i) A system where local residents get tax relief on their pension contributions, and benefits when taken are taxed or
(ii) A system where local residents do not get tax relief on their pension contributions and benefits when taken are not taxed.

New Zealand resident members of New Zealand pension schemes do not receive tax relief on contributions and are not taxed on the emerging benefits. On achieving the scheme retirement age a retirement benefit may be taken from the scheme as income or as a capital sum. New Zealand schemes therefore satisfy Primary condition 2.

However, New Zealand pension funds are taxed on income and capital gains. The provisions are complex and depend on the asset make-up of the fund. But to think in terms of an effective tax charge of about 1.5% p.a. on the fund value is about right. The New Zealand government is expected to remove this tax charge later this year.

Now to Conditions A and B - the overseas scheme only has to meet one of these.

Condition A is that the overseas scheme “is approved or recognised by, or registered with, the relevant tax authorities as a pension scheme in the country or territory in which it is established”.

New Zealand pension schemes meet this requirement so we need not trouble ourselves with Condition B.

This is because Condition B only applies if “no system exists for the approval or recognition by, or registration with, relevant tax authorities of pension schemes in the country or territory in which it is established” and sets out that in the absence of such a “system” the overseas scheme must provide that at least 70% of the fund is available to provide an income for life (the 70% rule)

QNUPS

2010-06-09T14:18:00.001-07:00

Qualifying Non-UK Pension Schemes - QNUPS
QNUPS were introduced on the 15th February 2010 and came about through amendments detailed in Statutory Instrument 2010/51 relating to the UK Inheritance Tax Act regulations. Before changes were made to the pension tax rules in 2006, protection from UK Inheritance Tax (IHT) applied to certain non-UK pension schemes. When the changes were introduced this exemption was unintentionally omitted which resulted in certain overseas pension schemes losing their IHT exemption. With these amendments both QNUPS & Qualifying Recognised Overseas Pension Schemes (QROPS) now enjoy exemption from
IHT.
The Plan is a tax efficient wrapper for pension assets, all funds within the Plan are free from IHT, there are no tax charges on death and the fund will enjoy tax free roll up. Contributions will be made by the member from taxed income or from personal capital, there is no tax relief on payments into the Plan. Contributions can either be single or regular (subject to minimum limits). There are no limits on the amount that can be contributed to the Plan but any transfers into the Plan must be justifiable in line with the client's overall wealth position. QNUPS are not a deathbed planning tool.
Investment choice within the Plan has very few restrictions. Permissible investments include; equities, bonds, gilts, insurance products, bullion, private & public listed company shares, commercial property and previously excluded investments known as Taxable Property; Taxable Property covers investments such as residential property, antiques, fine wine and collectables. Whilst there are virtually no restrictions on allowable investments it is important to remember that the scheme is a pension plan and a low risk strategy must be pursued.
It is possible for the member to borrow up to 25% of the Plan funds, this must be arranged at a commercial rate of interest (which will be paid to the the Plan) and must be repaid before drawdown can commence. It is also a requirement that security must be held against the loan.
Income will be paid gross from Guernsey and subject to the client's marginal rate of tax in their country of residence. It is important that each client receives tax advice in their country of residence to ascertain the tax position there. A lump sum of up to 25% of the fund can be paid to the member (tax free for UK resident members, clients in other jurisdictions will need to seek advice).
Standard retirement benefits and termination events as follows:
■ Normal Retirement Age of 65;
■ Early Retirement Age of 55;
■ Death & Permanent Disability;
However there may be greater flexibility, determined by an individual's circumstances, which will need to be considered on a case by case basis. The member must start to draw an income by the age of 75.
■ A cash lump sum benefit up to 25% of the Plan value, tax free when paid into the UK;
■ A number of flexible benefit income options to be agreed with the client such as fixed term payments and variable income options.
Upon death of the member, all remaining funds within the scheme will be free of IHT. The funds can then be used to pay a dependants pension, be held in trust for future beneficiaries or be paid as a lump sum. Again, it is vital that the member seeks appropriate taxation advice relevant to both themselves and their potential beneficiaries before registering their wishes for disbursement with the trustee. The trustee retains ultimate discretion on any distribution but the member's wishes will be carefully considered before any decision is made.
The Plan is a pension plan that will appeal to high net worth UK residents seeking an alternative to a traditional pension.
Potential clients may have maximised their UK registered pensions and are looking for alternative options or they may be restricted with the new anti-forestalling rules in the UK and are looking for greater flexibility in their retirement plan. It also provides clients with the peace of mind that all funds can be passed upon death to the member's beneficiaries free from IHT and any withholding taxes in Guernsey.
The Plan will also appeal to UK expats with a QROPS that have been non-UK resident for a minimum of 5 complete tax years and are considering returning to the UK, as a QNUPS will prevent their pension funds once again falling under the UK pension regime.
A number of expats may also still be UK domiciled with a potential liability to UK Inheritance Tax. A transfer of assets to the Plan will provide total protection against this potential liability.
In summary the plan offers the following benefits:
■ No UK Inheritance Tax liability;
■ Up to 25% tax free lump sum at pension commencement;
■ No requirement to purchase an annuity;
■ Tax efficiency: no tax on the pension assets within the Plan; pension income paid gross.
■ All remaining funds within the Plan, following death, can be distributed to chosen beneficiaries;
to make contributions with no lifetime limit;
■ Increased flexibility when taking pension income on retirement;
■ Ability to continue making contributions once drawdown has commenced;
■ Up to 25% of the Plan value can be loaned to the member;
■ Choice of investment management;
■ Wide choice of investments, including residential property;
■ Open to all nationalities;
■ No trustee reporting requirement to HMRC;

Contact Derry Thornalley on 0044 1664 444625

QNUPS and QROPS Advice: Regulation & financial stability still key to QROPS advisers

2010-05-18T02:54:00.000-07:00

Regulation and financial stability are still paramount to IFAs when it comes to selecting a QROPS provider, according to a survey by Skandia International.

The firm said the events of the last few years, including the collapse of banks, a global recession and the offshore review, had ensured these two issues continue to be key priorities for advisers when selecting a QROPS provider and jurisdiction for their clients.

Investors protection was ranked third on the list of important criteria to consider, said Skandia, which suggested advisers should consider the protection available not only from the jurisdiction of the QROPS provider but from the jurisdiction of the underlying investment.

The availability of low or no inheritance tax ranked fourth, while the potential to receive a 30% tax-free cash sum allowance came in fifth. The requirement that the QROPS jurisdiction be English speaking and the perceived privacy of the jurisdiction ranked low on the list of essential criteria.

Skandia also found 73% of advisers preferred to use Isle of Man or Guernsey as the jurisdiction for a QROPS while Hong Kong came in as the third most popular.

“Pensions and therefore a QROPS are a long term investment and it is for this reason that it is so important to look at the jurisdiction that the investment is held in,” said Rachael Griffin, head of product law and financial planning at Skandia International.

“When making a decision on jurisdiction, a number of factors need to be considered such as financial security and of course the jurisdiction tax rules. For example it may be that the QROPS provider insists on a member being a local resident, or the particular pension rules of a jurisdiction insist on certain restrictions on investments."

http://www.international-adviser.com/article/regulation-financial-stability-still-key-to-qrops-advisers

QNUPS and QROPS Advice: Malta's entry to QROPS arena offers regulatory certainty

2010-05-18T02:28:00.000-07:00

In April 2006, HMRC enacted 'Pensions Simplification' on what is generically now called 'A Day'. This piece of legislation, amongst other things, replaced the previous regulations governing the application to transfer pensions from UK Regulated schemes to an overseas arrangement.

The fundamental change in the legislation is that HMRC now provides a list of schemes that it is prepared to register as QROPS, which gives scheme administrators a streamlined process in transferring.

If an overseas pension scheme/fund has a QROPS number and is on the list, UK pensions may transfer to it without attracting an "unauthorised payment charge".

Caveat emptorHowever, there is an important caveat, in that HMRC has changed the terminology in relation to what it means to be "qualifying".

The original list published by HMRC had the following heading: "This is a list of Qualifying Recognised Overseas Pension Schemes (QROPS) that have consented to have their details published – not all QROPS will necessarily feature within it. It is not to be taken as a recommendation for a particular scheme or product."

This gave the impression, together with the letters issued to the individual schemes, which stated that: "I am pleased to accept that the scheme is a QROPS with effect from ......" that HMRC had actually individually approved schemes.

HMRC backtrackIt would appear that HMRC has had second thoughts and has dramatically changed its wording, which now reads: "... 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 the 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 QROPS, any transfer that has been made to that scheme, could potentially give rise to an unauthorised payments charge liability for the member (RPSM14102020)"

What this means is that HMRC may at any time remove a scheme from the QROPS list at its discretion.

Jurisdictional riskThe risk, therefore, is in members transferring to schemes in jurisdictions that have lax pensions legislation, and which have abused or been seen to abuse the spirit of the regulations, even if not the actual regulations themselves.

They might find themselves caught up in un-authorised payment charges, due to the actions of their trustees who have not followed the legislation in conducting investments or distributions etc, for themselves or other members of that scheme. A number of overseas/offshore jurisdictions have comparatively lax domestic rules regarding the management of International Pension Schemes, which may lay them open to retrospective action by HMRC.

The Maltese optionMalta has a unique advantage in the QROPS market, in that it has no legacy business, and its pension legislation is based on the domestic UK model and was only passed last year.

The Malta Financial Services Authority (MFSA), requires companies who wish to transact pension business not only to apply for a Pensions Administration Licence, demonstrating their ability to administer pension schemes, but also each and every individual scheme has to be individually approved and regulated. This makes Malta one of the most comprehensively regulated QROPS providers.

Malta therefore offers potential members the important comfort factor, of not only being an EU member state (not a "tax haven"), but also a very strict detailed regulatory system.

http://www.international-adviser.com/article/maltas-entry-to-qrops-arena-offers-regulatory-certainty

QROPS News:HMRC has finally approved the first Maltese Qualifying Recognised Pension Scheme (QROPS).

2010-04-23T08:59:00.000-07:00

The Melita International Retirement Scheme is to be administered by Malta-based -Custom House Global Funds Services, the global funds specialist, and will be marketed by Panthera, according to a statement released by Panthera this afternoon.

As previously reported by International Adviser, a number of Maltese companies have been eagerly awaiting the chance to offer and administer QROPS, which enable UK expatriates to transfer their UK pensions abroad in a way that can be tax advantageous.

HMRC recognised Malta as a jurisdiction to which UK pensions could be transferred at the end of November, following months of negotiations. That development meant that Malta-domiciled pension schemes approved by the Malta Financial Services Authority (MFSA) were eligible for QROPS status. However, until now none had received the UK authority's approval.

http://www.international-adviser.com/article/hmrc-registers-first-maltese-qrops

Expats enjoy a better life, says NatWest Int'l

2010-04-22T00:36:00.000-07:00

Nine out of ten British expatriates say they enjoy a better quality of life abroad, according to the third annual NatWest International Personal Banking quality of life report.

According to the study, which was undertaken in conjunction with think tank, Centre for Future Studies, expats ascribe much of their happiness to maintaining a good work/life balance with 87% of respondents rating theirs as either excellent or good.

The survey asked expats to rate 16 key ‘life experience’ factors in their order of importance and how satisfied they are with them. Interestingly the natural environment, climate, culture and leisure, healthcare and education were all rated ahead of financial security and financial wellbeing which are rated sixth and eighth respectively.

Fewer return to UKNatWest International also found, despite the global economic downturn and the subsequent pressures put on people’s wealth, the number of expats who said they would return to the UK has fallen to 19% from 26% in 2008.

Dave Isley, head of Natwest international Personal Banking, said: “It seems the grass really is greener for Brits living abroad as our study shows.

“The fact fewer expats say they will return to the UK in the future, compared to three years ago, proves that the pace of life, work life balance and earning potential abroad means life as an expat is sunnier in more ways than one – and that they are weathering the financial storm.”

Higher WagesFurthermore, professional expats on average earn over £20,000 more than their counterparts back in the UK, according to the survey, with 92% reporting a salary increase over the past three years. The highest reported salary increase was in Hong Kong at 19% followed by the UAE at 17% and Spain at 14%.

In addition, while moving abroad often comes with fears of financial insecurity, the survey found the majority (63%) said they were comfortable with their financial position, while 27% said they were either very well off (10%) or quite well off (17%). Meanwhile, 59% said they were confident they will be better off financially in five years time.

“The dream shared by many Brits of living a happy life abroad is alive and kicking, despite the global economic factors which have to some extent affected British expats,” added Isley.

“Believe it or not, there seems to be more to having and leading a fulfilled life than just money. British expats have built their lives abroad on solid foundations - with the climate, culture and leisure, healthcare and education all deemed more important than financial security or financial well being for them.”

http://www.international-adviser.com/article/expats-enjoy-a-better-life-says-natwest-intl?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=152613-IA+20+April+10

QROPS Advice: Guernsey moves closer to QROPS code of conduct

2010-04-20T08:46:00.000-07:00

A code of conduct for QROPS providers in Guernsey is one step closer with the sub-committee’s first meeting set for tomorrow.

The sub-committee has been formed by the Guernsey Association of Pension Providers (GAPP) and contains a cross-section of QROPS providers from the jurisdiction. Its aim will be to establish a voluntary code of conduct, with additional input from tax and legal professionals, which will be displayed on the GAPP website along with a list of members aligned to those codes.

Members of GAPP will then be able to refer to their adherence to these codes in their own marketing material and provide additional comfort and assurance to clients and introducers.

Roger Berry, managing director of Concept Group and also chair of the sub-committee, said a code could be established as soon as one month from now.

“GAPP has been working on this for some time, and things are coming along quite nicely,” said Berry.

“I would hope within a month or so we should have something out there which is going to be helpful to not only the providers here, to ensure we are singing from the same hymn sheet, but also the users, intermediaries and members of these schemes.”

Furthermore, Berry said while the code would initially be voluntary there is a possibility in the future it could have some regulatory support.

“Most if not all the providers in Guernsey are now represented on the sub-committee so it has a huge amount of clout and the regulator and the tax office deal with this committee as well,” added
Berry.

“My hope is if we demonstrate to our local government that we are serious and we get this off the ground it is highly likely there may be some time found by the regulatory side and we might get some support from them. It may ultimately end up in something more formal.”

http://www.international-adviser.com/article/guernsey-moves-closer-to-qrops-code-of-conduct?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=152272-IA+19+April+10

QROPS Advice: Full QROPS encashment still taking place

2010-04-10T01:54:00.000-07:00

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.

http://www.international-adviser.com/article/full-qrops-encashment-still-taking-place?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=151491-IA+09+April+10

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

2010-04-10T00:50:00.001-07:00

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?

www.360canaries.com
Email: 360canaries@live.com
0034 680 832 708 / 616 718 903

QROPS Advice: QROPS or QNUPS?

2010-03-30T15:48:00.000-07:00

WHAT IS A QNUPS?
• A QNUPS is a Qualifying Non UK Pension Scheme
• Not to be confused with Qualifying Recognised Overseas Pension Schemes (QROPS).
• Came into force on 15th February 2010 by HMRC.
• Generating opportunities for British expatriates concerning tax efficiency of local taxes and inheritance tax (IHT).

Who would consider a QNUPS?
• UK Expatriates or soon to be Expatriated
• UK Expatriates with existing QROPS schemes.
• Expats who my wish to return to the UK in the future.
• The high net worth UK resident or domiciled individuals with maximised income tax relievable pension contributions.

Benefits of QNUPS?

Retired British Expats Can Benefit From;

• UK inheritance tax and local succession taxes will not be payable from the QNUPS fund upon death.
• QNUPS will avoids local succession law, enabling you control who inherits what and how much. Thus removing the need for PETS (Potentially Exempt Transfers) as part of Inheritance Tax Planning.
• Income can be taken from age 55 (after 6th April 2010)
• Income can be deferred until age 75.
• No need to have any employment income to make contributions.
• Ability to continue investing even after age 80 even though you have been retired for many years giving rise to substantial tax advantages.
• Ability to take a lump sum as you would with any other pension scheme.
• There are no limits on contributions to the fund, nor fund size.
• Income is taken from the fund as drawn, leaving the remaining assets invested with an opportunity to grow in value tax free.
• Investment flexibility, with investments in stocks, bonds, alternative investments, deposits, real estate, private equity, options and life policies. Due to the non reporting freedom the fund manager in essence has the ability to invest in an even wider range of assets in comparison to QROPS, including; art, wine, boats aircraft and even residential property.
• Take income and benefits in currency of your choice reducing currency risk
• Trustee has no reporting requirements or obligations to HMRC on all assets transferred in outside of authorised UK pension Schemes

Disadvantages Of QNUPS
• You don’t receive any tax relief on the amount you invest.

What Opportunities Does QNUPS Offer to High Earners as UK Residents or Domiciles?

The introduction of the highest rate of income tax of fifty percent has meant that Higher Earners (UK Resident or Domiciled) will be experiencing restrictions on the levels of tax relief they can gain via pension contributions. As UK Residents or Domiciled individuals they will have the ability to contribute to a QNUPS and capitalise on all its benefits.

What’s the difference between QNUPS and QROPS?

• A QNUPS has no Double Taxation Agreement between the UK and the country where the QNUPS is therefore it has no reporting requirements or obligations to HMRC.
• A QNUPS is a Qualifying Non UK Pension Scheme
• A QROPS as per of the Double Taxation Agreements in place are required to report to HMRC for the first 5 years.
• Existing QROPS can be transferred into a QNUPS as an more tax effective wrapper.

In essence A QROPS can be definition as a QNUPS and a QNUPS can be (but need not be) a QROPS

HMRC are looking very closely at non-UK domiciles (recent case of Gaines-Cooper http://talkqrops.blogspot.com/2010/02/qrops-advice-qrops-newsgaines-cooper.html ) and you could be resident overseas but still deemed to be domiciled in the UK and liable to pay IHT, if HMRC can establish that Britain was the country which you still regarded as home at the time of your death. QNUPS helps with this issue as it makes your assets exempt from IHT UK domiciled or not even if you have returned to the UK.

QNUPS Jurisdictions
• Guernsey
• New Zealand
• Hong Kong
Others likely to join
• Isle of Man
• Gibraltar
• Malta

Where can I get QNUPS Advice?

Email your enquiry to qrops@aifsg.com or call 0044 1664 444625. For further information go to www.qnupsadvice.com. QNUPS Advice is provided by Argent International Financial Services Group. International is a highly respected financial services group of companies, specializes in comprehensive and independent financial advisory, wealth management, company and trust administration services to private, corporate and institutional investors. For over 22 years we have assisted investors to enhance their financial position and make the most of the opportunities available in the global financial market. For details of all our services including QROPS and QNUPS go to http://www.aifsg.com

QROPS Advice: Which Jurisdiction ticks all the boxes.

2010-03-30T12:50:00.000-07:00

With a number of jurisdictions now offering QROPS, David Piesing from Praxis Fiduciaries and Stephen Ward of Premier Pension Solutions assess the relative benefits and which one comes out on top.

It seems like an eternity since QROPS became available back in April 2006. Four years on prospective client now have plenty of schemes and jurisdictions from which to choose.

The choice for most people is from schemes operating in jurisdictions which are open to both residents and non-residents.

The main markets for QROPS transfers are:

Guernsey
Isle of Man
Gibraltar
New Zealand
Malta will soon come on stream as well. We have not included Hong Kong as there are only 10 active schemes on the HMRC list and those are mainly occupational ones.

Here we assess these main jurisdictions and consider:

benefit flexibility for members who have been non-UK resident for at least five complete tax years;
investment flexibility;
taxation;
costs;
ease of transfer in and out.
Benefits for life
The key advantage of a QROPS when compared with a UK scheme is not having to buy an annuity by age 75. The jurisdictions on our list allow the fund on death to pass to nominated beneficiaries with no UK inheritance tax (IHT) liability.

Maximising benefit flexibility may require an onward transfer to a non-QROPS mirror scheme. This is possible without tax implications if the QROPS is non-investment regulated.

Most Guernsey QROPS have confirmed non-investment regulated status. Gibraltar, the Isle of Man and New Zealand QROPS, as well as those from Malta, generally meet this condition. Guernsey QROPS may allow access before age 50 (55 from 6 April, 2010) as a loan of up to 25% of the fund. Trustees can allow flexibility through a temporary annuity. Full commutation remains possible where the fund is small.

New Zealand schemes are not subject to the 70% income for life rule because of how they navigate the HMRC QROPS conditions. This allows capital payments from the fund. The lump sum from Isle of Man schemes is up to 30% of the fund. Guernsey (currently restricted to 25%) is expected to match this figure soon. Maltese schemes restrict lump sums to 25%, as do Gibraltar's.

Investment path

All jurisdictions offer investment flexibility. Member directed investment is generally avoided as schemes might otherwise be considered investment regulated with indefinite reporting to HMRC. Some schemes have allowed investment in residential property yet surprisingly still claim they are not investment regulated with no tax charge arising.

For the majority, traditional forms of investment are sufficient. More exotic choices are best delivered in a non-QROPS, such as a Qualifying Non-UK Pension Scheme (QNUPS), having received a transfer value from a QROPS without triggering an unauthorised payments charge after completion of the five-year non-residency period by the scheme member.

Taxation issues
The fund accumulates free of tax (except tax deducted at source on some dividend income) in all countries on our list except New Zealand. Fund taxation rules in New Zealand are complex, and are made on a comparative-value basis or assuming a 5% pa 'fair return', with the calculation of asset valuations required in NZ$. But the government is expected to announce it is exempting pension funds.

Isle of Man schemes deduct local tax on pension income, typically at 18%. This creates issues unless the Isle of Man has a double taxation treaty with the country where the member is resident. For example, a Spanish resident can neither offset nor reclaim Isle of Man tax deducted. On death, it applies a 7.5% IHT charge with a £100,000 cap.

The cost of QROPS

There is great variation between schemes and jurisdictions, and between providers within jurisdictions. However, there are two main models:

A packaged QROPS product with a menu of preapproved investment funds and management houses.
These are available in Guernsey, Isle of Man and New Zealand. Some claim to be fee-free. This is achieved through retrocession commissions which are at best only partially disclosed. In a new era of transparency and commission disclosure, it is hard to see how these schemes will be able to be marketed as such in their current form.

A transparent one-off setup fee and an annual fee, sometimes accompanied by a service-driven fee menu. This is found in all jurisdictions except New Zealand.
Some Isle of Man schemes can appear to be slightly cheaper than Guernsey ones, but the menu approach requires careful comparison. Some Gibraltar schemes seem comparatively expensive but volumes are currently small. Maltese schemes are expected to be priced at Guernsey levels. In New Zealand, where the fund remains in place for the longer term, scheme pricing can involve an annual charge of around 1.65% but no setup charge.

Ease of transfer

A look at both directions of transfer is important because personal circumstances can change. UK schemes give members the right to transfer, while overseas schemes do not. The transfer experience can vary from simple to horrific, although whether that is down to the jurisdiction or the provider is arguable. UK schemes can be freely transferred to any overseas scheme which is registered with HMRC as a QROPS.

QROPS providers in all countries generally deal well with the transfer process, which takes anything from a few weeks to several months. Transfers out of QROPS can be expensive. Some schemes apply seemingly punitive exit fees even though their service may have fallen short.

In addition, some QROPS do not state at outset a freedom to transfer out to QROPS in other jurisdictions, even where such transfers are expressly permitted by local law and by the tax authority of the existing scheme, and the new scheme is able to acceptthe transfer.

Conclusion

So which is the best jurisdiction for QROPS? Gibraltar is regarded as expensive, while the jury on Malta – a brand new entrant to the market – is still out, though it has considerable potential and an excellent double tax treaty network.

New Zealand has the most flexible benefit regime, but distance complicates the transfer process and the fund is taxed in a way which includes exposure to currency risk. The Isle of Man can be relatively low cost, but has an irritating exposure to local taxation which has deterred many potential users.

Guernsey ticks all the right boxes, and has sought HMRC input and guidance to prevent potential abuse by its sizeable community of QROPS providers. Ongoing dialogue with HMRC has benefited its status as arguably the world's leading QROPS jurisdiction.

Expatriate Wealth Services

2010-03-30T12:27:00.001-07:00

Qualifying Non-UK Pension Schemes (QNUPS)
New tax planning opportunities for British expatriates

On the 15th February 2010, a new UK HM Revenue & Customs (HMRC) statutory instrument came into force, which creates significant opportunities for British expatriates to save local taxes in the country in which they are tax resident as well as UK inheritance tax (IHT).

The UK legislation created a new type of trust known as Qualifying Non-UK Pension Schemes (QNUPS) - which should not be confused with Qualifying Recognised Overseas Pension Schemes (QROPS).

The tax rules for pension schemes are generally more favourable than other investment structures.

QNUPS allow retired expatriates to continue to put money into a pension scheme -
Firstly, there is no maximum age at which you can invest in a QNUPS.
Secondly, you do not need to have any earned income from an employment in order to make a contribution.
Thirdly, there is no maximum contribution that can be made into a QNUPS.

The rules are sufficiently flexible to allow someone who is 85 years of age and has been retired for 25 years to put large investments into a QNUPS and immediately create significant tax advantages for themselves.

The benefits of QNUPS for retired British expatriates

A QNUPS is a pension scheme trust and as such you are entitled to take a cash lump sum and income during your lifetime, with the remainder of your fund being able to be passed to your spouse or heirs on your death free from all taxes.

The following advantages are available to you through a QNUPS:
As a pension scheme, a QNUPS is very tax efficient in most countries as it can avoid both local wealth taxes during your lifetime and succession taxes on your death.
A QNUPS also avoids local succession law, so that you are free to choose exactly who inherits your money and in what shares.
Income can be taken from age 55 (after 6th April 2010) or it can be deferred as it does not need to be taken until age 75. In certain countries it can be paid in a manner where a significant portion can be paid to you tax free.
When income is taken it is drawn down from the fund, thus leaving your scheme assets invested. Otherwise the assets grow free from tax.
On death the value of the QNUPS will be exempt from UK inheritance tax and local succession taxes.
A QNUPS offers considerable investment flexibility and choice. Furthermore your assets can be invested and any benefits taken in a currency of your choice, giving you the opportunity to remove currency risk.
The trustees of a QNUPS have no reporting obligations to HMRC unless the scheme also holds any assets transferred from an authorised UK pension scheme. You can have both a QROPS and a QNUPS.

http://www.expatwealth.telegraph.co.uk/template_textonly.aspx?page_info_id=43

QNUPS Advice

2010-03-26T04:30:00.000-07:00

QNUPS - the next major offshore pensions planning opportunity for UK tax-relieved pension funds and the interaction with QROPS.
The Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010 [SI 2010 / 0051] came into force on 15 February 2010 and have introduced QNUPS.

The purpose was to correct an error in the Finance Act 2004. Without these amending regulations UK pension funds once transferred to a QROPS would become liable to UK Inheritance Tax (IHT) charges. These regulations now mean a non-UK resident may transfer UK pension rights to a QROPS and upon death, whether before or after age 75, no Inheritance Tax liability arises.

These regulations apply to overseas schemes generally. But they have wider application for two reasons :
1. taxable property rules associated with one form of QROPS and
2. a restriction on the tax relief available on pension contributions to high-earning UK residents.

The technical side
To be a QNUPS the overseas scheme must satisfy the same conditions necessary for a Recognised Overseas Pension Scheme (ROPS) (SI 2006/206) with the importannt exception that there is no necessity for there to be Double Taxation Treaty (DTA) with the overseas scheme’s jurisdiction if the scheme is outside of the European Economic Area. A DTA is not necessary because there are no reporting requirements from the QNUPS to HMRC.

The outcomes are that a QNUPS benefits from UK IHT exemption in respect of:
(a) UK tax-relieved pension funds that have been transferred to a QNUPS.

(b) contributions to a QNUPS and

(c) assets held by a QNUPS generally.

A QROPS will by definition be a QNUPS. But a QNUPS need not be a QROPS. This leads to the feasibility of using QNUPS as an ultimate destination for UK tax-relieved pension funds to gain further advantage.

A QNUPS (which is not a QROPS), is a good home for UK pension funds which were originally transferred to a QROPS. A QNUPS (which is not a QROPS) need have no specific investment restrictions and may for example invest in residential property and the like. But the key to this is transferring from the QROPS to a QNUPS.

For clarification we need to differentiate between “investment regulated” and “non-investment regulated” QROPS. This is a consequence of SI 2009 / 2047, effective August 2009. These taxable property provisions (relating to investment in residential property, fine wines, antiques, and the like) extend UK investment rules to some QROPS. If the QROPS is “investment regulated” then Paragraph 7A of Schedule 34 Finance Act 2004, provides for a 70% tax charge where investment is made into taxable property out of UK pension funds which have been transferred to the QROPS. But there are further implications.

What follows are direct quotes from the Registered Pension Schemes Manual (RPSM).
“A transfer from a UK pension scheme to a QROPS constitutes a Relevant Transfer Fund” (RPSM13102130). Then we have to consider whether that fund comprises a Taxable Asset Transfer Fund (TATF). All transfers from UK pension schemes to an investment-regulated QROPS since 6 April 2006 comprise a TATF.

This is important because: “A payment to a transfer member has to be notified to HMRC regardless of whether or not they have been non-resident for more than five tax years if it is deemed to have been made from their Taxable Asset Transfer Fund” (RPSM14101070).

An investment-regulated QROPS means that the member is able to direct or influence the investments made. Most Guernsey QROPS have concluded that they are not investment regulated. Some have not declared their hand and one considers the distinction to be “immaterial”. New Zealand QROPS are not investment-regulated pension schemes. Some Hong Kong QROPS have taken the same view. The same is likely to apply to schemes in Gibraltar, Isle of Man and Malta.

QROPS Advice: Expats Pension Defeat Highlight Importance of Advice

2010-03-26T03:58:00.000-07:00

The defeat for the UK state pensioners in the European Court of Human Rights has highlighted the importance of getting sound financial advice when moving between jurisdictions.
The pensioners had their pensions frozen when they moved abroad and they have not been raised in line with increases for their counterparts in the UK. Financial advice may have averted this situation say advisers such as Blacktower Financial Management’s John Westwood.

“It again emphasises the fact that if people are going to leave the UK they do absolutely need to sit down and take some proper advice, preferably before they leave the UK, on their future and intended retirement planning,” said Westwood.

“So often these things are left and are not properly addressed until it is too late and what we are seeing now is expatriates living throughout Europe who are suffering badly because of sterling versus euro conversion rates. We are seeing hardship and unfortunately this only re-emphasises the point that anyone planning to move abroad must and should seek solid and quality financial advice before they make any decision.”

AES International’s Sam Instone echoes Westwood’s concerns and says although this will not put people off moving abroad in retirement, as this is invariably a lifestyle choice, consumers need to fully understand the different options available to them in different countries.

“People need to understand what benefits they are effectively giving up when they move abroad and how they will be treated by the UK government’s pension and benefit laws in different countries,” said Instone.

“Unfortunately people time and again underestimate how much they will need in their retirement and will often end up, despite starting off living the lifestyle they desire, in fairly dire straits. This is particularly the case when proper financial advice is not taken.”

Westwood also doubts whether this ruling will make people reconsider moving abroad as the decision is usually influenced by other factors rather than just for financial motives.

“I do not think people will reconsider. The decision to move abroad is based on a number of factors and it is not just “how big is my pension going to be” there is a whole catalogue of lifestyle issues that are being considered, including family and of course employment issues,” added Westwood.

“It depends on how the retiree views their time horizons – if they view the move abroad as a permanent move as long-term lifestyle option then they should consider the feasibility of removing the pension fund into an international contract, allowing more flexibility and the ability to match currencies versus income and mitigate certain unwanted taxes as well - for example, a QROPS or that type of plan.”

QROPS Advice: 4 Million Expats to return to UK

2010-03-26T03:29:00.000-07:00

Almost 4million Brits living abroad are planning a mass return to home shores after seeing their savings and income stripped by the plunging values of the pound and their property.
The dramatic slump has slashed their income by a third and has turned Brits into the paupers of Europe.
Fears over job security and falling property prices are also giving expats second thoughts, according to research from foreign exchange specialist Moneycorp.
Some 845,000 Brits living in Spain and France have suffered an 8 per cent drop in house prices in the year to August 2009 alone. This wiped €30,000 off the average property on the Costa del Sol.
Enlarge
Sterling has slumped from over €1.50 to £1 in January 2007 to close to parity, taking a terrible toll on the estimated 5.5million British expats, and particularly the 1.1million pensioners living abroad. Moneycorp research shows that 70 per cent of all expats are now considering returning to the UK.
A retired couple living in Spain, for example, both drawing a full state pension of £95.25 per week, will have seen their combined monthly income - on their pension alone - drop by €396 over three years, from €1,263 to €867.
The warning signs that hundreds of thousands of Brits may be ready to return to the UK started when the credit crunch began in 2008. That year, the number of expats returning home jumped by a fifth on the previous 12 months.
The number of British homeowners downsizing or selling up and sending money back to the UK doubled last year, foreign currency specialist HiFX reports.
It has seen an 180 per cent increase in the number of euro to sterling transactions and an 11 per cent increase in the number of U.S. dollar to sterling transactions in the past six months, compared to last year. More people over 65 than any other age group are repatriating.

More...
• Retirement dream shattered for British OAPs in Australia after court bid for pension hikes is lost
• Hundreds of British expats stage march in Malaga over plans to demolish 'illegal' holiday homes
• Homes abroad: News and advice
• What next for the pound?
Mark Bodega from HiFX says: 'The pound's fall to historic lows in recent months has meant the cost of living or running a holiday home on the continent has risen to unaffordable levels for many people.'
A weak property market is also proving to be a nightmare for many of the estimated 1.5million Brits who own homes abroad. Many are being forced to sell their property at a loss, particularly in countries like Spain.
The weak pound has proved a blessing for those who receive an income in euros, for example from renting a property. Sterling's slump means they will get far more pounds for their euros.
Brennon Nicholas, managing director at estate agency Cluttons Spain says: 'We have seen an increase in the number of people coming to us who are struggling because their pensions and savings do not stretch as far as they used to. They're selling up because of the favourable exchange rate but the market is extremely tough and there is a lack of buyers.'
Pensioners abroad have arguably been hit the hardest as they rely most heavily on their savings and pensions built up in the UK. They've been hit by a declining pound and falling interest rates.
One in five expats claims a sterling pension, with more than a quarter of Brits living in Spain (28 per cent) and a third of British expats in Germany relying on this as their core source of income, according to Moneycorp.
More than half a million pensioners living in Commonwealth countries such as Australia, Canada and New Zealand suffer a further blow because their state pensions don't rise each year in line with inflation.
Only those living in the European Economic Area and countries with reciprocal agreements in place with the UK, such as the U.S. and Jamaica, are protected against inflation. Yesterday, these pensioners lost their fight in the European Court of Human Rights to prove this pension freeze violates anti-discrimination rules.
Tim Finch, head of migration at think tank the Institute for Public Policy Research says: 'The weakness of the pound will mean more people will lose jobs and find it harder to live overseas and come home. This is likely to be a growing trend over the next few years.
'Generally, the big wave of lifestyle emigration where people got their place in the sun for a better life was a reflection of the boom years when you had high house prices and decent pensions.'
"When moving to a foreign country which has a different currency it is very important to consider moving one's savings into the base currency of their new country of residence. This is ensure that income and expenses are in the same currency in order to mitigate the effect of exchange rates, which for British expatriates holding sterling and currently residing in the Euro zone is very marked as their income has reduced significantly given the devaluation of the pound. A QROPS enables British expatriates to move their sterling based pensions outside of the UK and hold the underlying investments in the same currency as that of their new country of residence. This helps mitigate the impact of foreign exchange rates on income and the real value of one's pension."

QROPS Advice: Mitigating UK tax hike

2010-03-06T03:46:00.000-08:00

As we have entered 2010 and with the introduction of a 50% tax rate we are now only weeks away from the UK moving back to the realms of a high tax country. There has been much discussion about how the full impact can be averted with some individuals making plans to leave the UK altogether.

Those who are now or have in the past been taxable in the UK on the remittance basis have the opportunity to accelerate income through making remittances to the UK before 6 April.

A reminder of the primary new rules:

• The new top income tax rate of 50% applies to those with incomes over £150,000 from 6 April 2010.

• There is a phased elimination of personal allowances reaching zero for those with incomes exceeding £112,950.

• The national insurance employee rate rises and for individuals from 6 April 2011 this will be increased to a 2% levy in place of the current 1% on income above the main table rate. For employers the rate of charge increases to 13.8%.

• The effective marginal rate where UK national insurance, as well as income tax is due will rise in the next year or so from 41% to 52%.

The ability to shelter from the full consequences of this charge is being further diminished. The generous UK tax relief on pension contributions that has been available since April 2006 has been restricted significantly for those with incomes of at least £150,000 per annum. Whilst these rules apply from 6 April 2011, measures were introduced alongside this to discourage increasing contributions beyond regular patterns in place at the last Budget day (22 April 2009). The Pre-Budget Report followed up in December 2009 to bring about further changes that bring taxpayers within these special anti-forestalling rules where income exceeds £130,000.

For these measures (and for the banking sector) the payroll tax has had a significant impact on the thinking of individuals, businesses, and advisors looking again at what can be done to mitigate this higher tax charge.

Amongst possible solutions that may be considered is the advancement of income or profit shares pre-5 April 2010. Where scope exists this might involve designing subsequent deferral mechanisms into Employee Benefit Trusts (EBTs) and Employer Funded Retirement Benefit Plans (EFRBs). For some organisations this may mean maximising share incentives where capital gains (currently at 18%) can be maximised either under approved plans, or by designing incentive restrictions with a prospectively small income tax burden at present, in favour of longer term capital gains tax on growth thereafter.

Those who are now or have in the past been taxable in the UK on the remittance basis have the opportunity to accelerate income through making remittances to the UK before 6 April.

Particularly where that income has already been subject to US tax, the UK savings that can be achieved through remitting before 6 April can be substantial, but the issues involved may be complex and so we urge that this type of year-end planning be addressed as soon as possible.

The ability to plan against the full exposure to the new higher rates has become more difficult but the desire to pursue a capital gains tax rate of 18% in the UK becomes more powerful whilst this increased differential between income tax and capital gains tax rates lasts.

http://www.international-adviser.com/article/mitigating-uk-tax-hike?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=147707-IA+Mar+03+2010

Qrops Advice: Malta’s regulator approves two pension schemes

2010-03-05T03:56:00.000-08:00

Malta’s regulator has approved two pension schemes, according to a notice on its website. It was not immediately clear whether these schemes are poised to receive approval for transfers of UK pensions.

HM Revenue & Customs recognised Malta as a jurisdiction to which UK pensions could be transferred at the end of November, following months of negotiations. As reported by International Adviser, that development meant that Malta-domiciled pension schemes approved by the Malta Financial Services Authority (MFSA) are eligible for QROPS status.

However, no Malta companies as yet feature on HMRC's list of Qualifying Recognised Overseas Pension Schemes (QROPS), which was last updated on 22 February.

According to the MFSA, the two schemes it has approved are MCT Malta Private Retirement Scheme in St Julians, and Melita International Retirement Scheme Trust of Sliema, an arm of Dublin-based Custom House Group. Custom House is understood to have approved pension administration operations in Malta.

Sandro Bartoli, managing director of Sliema-based Quest Investment Services, a Maltese advisory firm affiliated with Sparkasse Bank, said the announcement of the two schemes’ approval is being welcomed by IFAs and others on the island. He believes Malta’s membership in the EU will be an important selling point.

Qrops Advice on www.qrops-advisers.com or call 0044 (0)1664 444625

http://www.international-adviser.com/article/maltas-regulator-approves-two-pension-schemes?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=147972-IA+05+Mar+10

QROPS Advice: Spotlight on Global Health Care investments

2010-03-04T11:24:00.000-08:00

Such is the vast size of the world's leading pharmaceuticals firms, that many investors will already have a small exposure to the Health Care sector, via their exposure in many of the world's global equity funds. What many investors don't realise, however, is that a niche industry of specialist Health Care-focussed investment funds have been available for over 25 years.
Healthcare funds invest in the stocks of companies that operate within the healthcare sector. This encompasses a wide range of industries, detailed further below. The managers of these funds seek out companies that have upside potential from new drugs, discoveries, patents, products and even procedures.
Historically, the fortunes of Health Care funds have been greatly attributable to two major influences; political events and demographic shifts, both of which are particularly topical at the moment.
The appointment of Barack Obama as U.S President has caused understandable excitement in the Health Care fund industry, given his pre-election promise of a shake up in the American medical system. The provision of medical insurance to the estimated 46.3 million residents currently without any arrangements, and the task of improving what has historically been a much-criticised state system could prove extremely fruitful for the many companies in the vast Health Care industry.
The impact of socio-demographic movements over recent years also looks promising for the Health Care fund industry. Whilst such funds are widely considered as a defensive holding (after all, the need for medical care is universal and often independent of economic cycles), the rise in prominence of 'emerging market' countries ensures that the gap between the standards of medical provision and solutions worldwide, become ever smaller. For example, several India-focused healthcare funds have been launched recently as India's healthcare services market undergoes robust expansion. According to Technopak Advisors, the USD35bn Indian healthcare industry is projected to touch over USD75bn by 2012 and USD150bn by 2017. As medical standards in such countries improve, so do life expectancy rates which, in-turn, favours medical supply companies.
There are highly specialised Health Care funds available, with significant differences amongst them. For example, some specialize in big pharmaceuticals, including some of the world's largest drug companies such as Pfizer Inc and Johnson & Johnson. Other healthcare mutual funds specialise in biotechnology stocks. Such funds invest primarily in companies that use biological processes in the development or manufacture of a product, or in the technological solution to a problem. There are also healthcare funds that own hospital companies, makers of medical devices, distributors of medical supplies, and so on.
Well diversified Health Care funds which invest across the many specialist sectors of the industry prove to be the most popular, particularly when held as an investment via a pension or a holding in a life assurance contract. Derek Tanner, manager of the the Hansard Invesco Healthcare fund (MC22, available in both HIL and HEL) looks back at 2009, and forward to 2010, commenting "The health care sector was favoured during the quarter as investors saw more action around the US health care reform efforts.
It is important to note that not all health care companies will be affected by health care reform in the same way. Some industries, like health care equipment and biotechnology, are less exposed. Managed health care will be among the most directly impacted by efforts of health care reform.However, we believe fear is largely baked into these stocks that are now trading at major discounts. As a result, we continue to overweight these sectors.
We tend to believe the future of health care is in biotechnology rather than pharmaceuticals. Within biotech, our emphasis is in profitable large-cap companies that are generating sufficient free cash flow rather than small-cap start-ups that typically lack liquidity and earnings."

QROPS – Maximising Your UK Pension Fund When You Live Overseas

2010-03-02T04:08:00.000-08:00

When you move from one country to another, you should review your wealth management arrangements to ensure they will work effectively for your new lifestyle and that they are suitable for the investment and tax regime of your new country of residence. You will also want to establish if your expatriate status and/or the local rules provide any new opportunities for increased tax mitigation.

While many people do review their saving and investment arrangements, they often fail to consider their pension funds – perhaps because they know that the UK retains a tight control over them, even if they have left the UK.

However, while UK pension funds may be fairly inflexible and could be liable for UK death taxes even where the owner is non-UK resident, many expatriates do have the QROPS option. If you have left or are about to leave the UK it is now possible to transfer most private pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS).

Deferred pensions, pensions in drawdown and protected rights can all be moved into a QROPS, but you cannot make a transfer if you have already bought an annuity. Final Salary Schemes are only eligible if the pension has not commenced and state pensions cannot be moved either.

Improving pension income and investment opportunities

QROPS can be more flexible in how and when you take your income. You can vary your income (within limits) to suit your lifestyle and financial requirements within your country of residence. A wide range of investment opportunities are available within a QROPS, and with increased control over your fund you can structure it to suit your needs for income and capital growth.

Tax efficiency

Another way to increase your income is of course to pay less tax on it. Your pension can roll up tax free within a QROPS and income will be paid to you gross. You do need to declare it in your country of residence, but in countries like Spain, Portugal and France you can structure your fund so that you pay less tax on it than you would with a UK pension fund.

Removing currency risk

Exchange rate movements between Sterling and the Euro can affect how much pension income you receive each month. While sometimes your income does increase, as we’ve seen over the last few years more often than not you end up with less in your pocket. You may also be paying exchange rate costs.

With a QROPS you can choose which currency your fund is denominated in and which currency you receive the income in. This can be Sterling, or Euro, or indeed any currency. By holding your fund in Euros you will no longer be at the mercy of falling rates. If you want to give the exchange rate the opportunity to improve before you change currency, you can set up your fund in Sterling and transfer to Euros at a later date.

Avoiding the annuity trap

Under current UK legislation, you must either buy an annuity by your 75th birthday or be transferred into an Alternatively Secured Pension (ASP) – but for many people neither is a particularly attractive option.

Annuities are increasingly considered inflexible and annuity rates are currently very low. When you die the balance of your fund dies with you – you cannot pass this asset onto the next generation. Other than perhaps a spouse’s/dependent’s pension, there is nothing to leave your family, even if there is still a healthy balance left in the fund.

With the ASP alternative you would receive lower levels of income than you did when you were in drawdown. While you can leave the balance to your family, it comes at very high price – the tax charges on death can be as high as 82%!

The Conservatives have said that if they win the General Election they will scrap the compulsory annuitisation at age 75. In certain respects this is strange news because, as I have said above, there is currently no legal compulsion to buy an annuity at age 75. However time will tell what George Osborne means by this.

On the other hand, if you transfer your pension into a QROPS it won’t matter whether this goes ahead or not, because with a QROPS you never have to buy an annuity, which means you may be able to leave your family a larger inheritance. If you think an annuity would suit your circumstances, however, the option to purchase one remains open to you.

Avoiding UK death taxes

If you have taken any benefits from your UK pension fund (income or cash lump sum) and have not bought an annuity, it will be potentially liable for a tax charge on death of 35% pre age 75 and up to 82% post age 75. This also applies to non-UK residents and even to non-UK domiciles. Unlike with inheritance tax, there is no exemption between spouses.

However, if you have transferred your pension into a QROPS, and provided you have been non-UK tax resident for five complete and consecutive tax years at the time of your death, your fund will escape the UK charges, that is, both the 35% charge on income drawdown and the up to 82% charge on ASPs.

While transferring your pension funds into a QROPS can provide many benefits, it won’t necessarily suit everyone, so do make sure you understand all the implications before you decide to go ahead. For those whose pension funds total less than £75,000, a move to QROPS is unlikely to be cost effective. You should also make sure that the scheme you choose is approved by HM Revenue & Customs and follows the spirit of the UK legislation which allows pension holders to transfer out of the UK and into a QROPS.

http://www.expatwealth.telegraph.co.uk/NDEN._25_NewsDetails.aspx

QROPS Advice: Expats Plight

2010-02-22T10:55:00.001-08:00

BRITONS struggling to live abroad on pensions as low as £6 a week want their desperate plight to become an election issue.

Of the 1.1 million expats entitled to draw UK pensions, 540,000 are denied their full allowance because of archaic rules.

They have their pensions index linked in all EU countries and in 15 others, including Barbados, the United States and Bermuda.

However, there are more than 150 other countries where they have had their pensions fixed at the rate at which they were first drawn in their new country of residence. Many are being forced to return to Britain.

Labour says it cannot afford the £540million needed to increase the frozen pensions, even though the sum is less than one per cent of the country’s pension fund.

Campaigner John Markham, 76, of the Canadian Alliance of British Pensioners, is visiting Britain to meet officials of all political parties. He said: “In the last general election the expat vote was 10,400, but there will be many more eligible to vote this time around. We want to get Britons living abroad to vote, but only for the parties that support our cause.”

Annette Carson, 67, who emigrated to South Africa just before drawing a pension at 60, is taking the Government to court, backed by 13 others in a similar plight. A judgment is expected in a few weeks.

QROPS Advice: QROPS NEWS:Gaines-Cooper case could prompt migration to QROPS

2010-02-19T10:54:00.000-08:00

The collapse of the Robert Gaines-Cooper case could see high net worth individuals flock to Qualifying Recognised Overseas Pension Schemes (QROPS) in a bid to dodge the taxman.
"Multi-millionaire entrepreneur and Seycelles resident Gaines-Cooper was liable to pay UK tax despite spending less than 91 days a year in England because the country had remained "the centre of gravity of his life and interests", the Court of Appeal ruled in a landmark case this week.

AdvertisementThe decision is being described as the "thin edge of the wedge" for HNW individuals, but they could help protect themselves from HMRC's ire by moving pension assets out of Britain using QROPS.

"UK pensions can be neatly moved to a QROPS scheme and in addition to the many benefits people have over remaining in the UK scheme, for those who have moved abroad there is now the added advantage that it moves a major asset out of the UK," Tim Parkes, director of Carey Pensions and Benefits, says.

Advisers have seen a sharp uptake in interest in QROPS in light of the Gaines-Cooper case.

But specialist QROPS advisers are warning people to beware overseas advisers who make undeliverable promises.

Geraint Davies, managing director of Montfort International, who helped draft guidance on QROPS with the Personal Finance Society (PFS) says: "The facts are you do not have to be a non-UK resident for five years to access QROPS but you do to permanently remove any of the restrictions which exist under UK tax legislation."

"Even then individuals will be subject to the tax regime of the territory of residence and all other areas in which the person has lived."

In addition, he says QROPS are only tax-neutral where the country of residence has been checked by the recommending adviser and there are no tax liabilities levied on unrealised gains or distributions out of the scheme.

"The issue is there is too much advice on QROPS coming from providers and advisers have little experience dealing with the tax regimes of other countries. Plus some unscrupulous overseas advisers are making substantiated claims."

FSA guidelines on QROPS states: "Any adviser who fails to take into account all current material personal circumstances and future plans is failing to treat the customer fairly."
Author: Laura Miller
http://www.ifaonline.co.uk/international-investment/news/1592723/gaines-cooper-prompt-migration-qrops

QROPS Advice: Investment News: Spotlight on Japan

2010-02-19T06:11:00.000-08:00

Anybody that has followed global markets over the past 20 years will know that the root causes attributable to the recent financial crisis are by no means new. As recently as the early 1990s, the world's second largest economy, Japan, was in meltdown as a direct consequence of a 'bad debt' issue, caused, in part, to overly-relaxed lending practices by its local banks. This lending fuelled a property bubble which was unsustainable (resting, as it did, on unrealisable land values), turning many debts bad. This ultimately resulted in many banks having to be bailed out by the government, a very familiar story of late...
The fall-out of the catastrophe was appropriately named "the lost decade", owing to the lack of economic activity that followed in the region. As with technology stocks that famously failed in the late 1990s, Japan became massively out of favour with investors, as the value of the local stock exchange spiralled ever lower. Both local market participants, as well as foreign investors have had relatively little exposure to Japanese equities ever since, with many not appreciating the substantial turnaround in Japanese corporate fortunes, as a deeply unloved and under-owned asset class.
However, indicators suggest that Japan is once again returning to favour. It has been a promising start to the New Year for Japanese equities, with foreign investors piling into the market, buying a net USD17.3bn worth of stocks in January alone, the largest monthly purchase in three years. That compares with a net outflow of foreign money in the rest of Asia of USD3.35bn, according to data from Nomura. Japanese machinery orders rose the most in nine years from a record low, and 'domestic orders', an indicator of business investment in the next three to six months, climbed 20.1 percent in December from a month earlier.
Again, as with Technology company valuations, the lessons learned from 'the lost decade' have prepared many of Japan's leading companies for a promising future, with extremely healthy balance sheets and price earning ratios reflecting excellent value when compared to stocks elsewhere.
Whatever your view of the Japanese economy as a whole, the fact remains that Japanese firms still dominate and lead many global industrial sectors from autos, via specialist materials and capital goods to consumer items, e.g., from Suzuki to Nintendo. Therefore as the global economy regains its composure, Japanese firms should disproportionately benefit from their geographically well diversified sales base, particularly their exposure to the BRIC countries.
Looking ahead for Japan, Chris Taylor of Neptune Investment Management, commented "We expect improved corporate earnings from the global companies that have little dependence upon the domestic economy. They will be helped by their substantial exposure to non-OECD economies which will continue to expand strongly, contributing about two-thirds of likely global economic growth. The combination of these factors should see such Japanese firms collectively turn in the highest prevailing rate of earnings expansion across the globe."

Investment News: 11% per annum with early maturity opportunities, ISA ELIGIBLE

2010-02-19T04:03:00.000-08:00

Prima Platinum Plan 4
Key Features
• Investment returns linked to the performance of the FTSE 100™ and DJ Eurostoxx 50™ (the Indices)
• No Index growth required to achieve quoted returns
• Early maturity will be triggered as long as the level of both Indices are at or above their Opening Levels at any Plan anniversary.
• Investors will lose some or all of their money if one or both Indices have fallen by more the 50% at any close of business during the investment term and the Final Level of one or both Indices is below its Opening Level, or in the event of the issuing bank failing to make the payments due under the Plan.
• Capital will be returned in full at maturity, provided neither of the Indices have fallen by more than 50% below their Opening Levels during the investment term
• Available to 5 March 2010
Target Market
This investment could be suitable as part of an investment portfolio for investors who
• understand and are used to equity investment, and
• are able to invest for a period of up to 6 years, and
• are prepared to accept a degree of risk to their capital in return for a higher potential growth than would be available via a deposit based investment
Key Dates

Offer period
To 5 March 2010, except for ISA transfers, where applications must be received by 26 February 2010.

Strike Date
12 March 2010

Opening Level
Close of Business on 12 March 2010

Final Level
Close of Business on 14 March 2016

Annual measurement dates
14 March 2011, 12 March 2012, 12 March 2013, 12 March 2014 and 12 March 2015, 14 March 2016

Maturity date
28 March 2016

http://www.meteoram.com

You should refer to the brochure which contains full details of the Prima Platinum Plan 4.
Telephone enquiries to: Derry Thornalley 01664 444625 or email derry.thornalley@aifsg.com

Key Facts

Investment Term: 6 years and 14 days, with the potential for early maturity. Early maturity will be triggered if the levels of both Indices are at or above their Opening Levels on an anniversary date of the Plan.
Availability: As direct investments, ISAs and ISA Transfers, and for pension funds, trustees and companies.
Indices FTSE 100™ & DJ Eurostoxx 50™
Investment Return 11% per annum (simple) for each year the Plan is in force, so the returns at each possible early maturity date would be 11% (end of year 1), 22% (end of year 2), 33% (end of year 3); 44% (end of year 4); 55% (end of year 5) or, if the plan runs the full 6 year term, and the Index Levels are at or above their Opening Levels, 66%.

If the Index Levels are below their Opening Levels no investment return will be payable.
Capital Return Capital will be returned in full at maturity as long as the Indices have never fallen by more than 50% of their respective Opening Levels at close of business on any day during the investment term. If one, or both, Indices have fallen by more than 50% and the Final Level of one, or both, Indices is less than its Opening Level capital will be reduced. The reduction will be 1% for each 1% the Final Level of the lower performing Index is below its Opening Level. If one, or both Indices have fallen by more than 50% you will receive a full return of capital as long as the Final Levels are at least equal to their Opening Levels. Please see the brochure for a full explanation of the calculation, plus examples.
Counterparty Risk The securities will be issued by Rabobank, which has a current rating of ‘AAA‘ by Standard and Poor’s. If Rabobank were to fail to meet the repayments due to us, you could lose some or all of your investment. The credit rating is subject to change during the offer period and the term of the investment. Counterparty risk is common to all similar investments. All references to the credit rating are correct as at the date of the brochure.
Tax Under current tax legislation gains on assets held in an ISA will be free from any tax, while gains on direct investments will be subject to Capital Gains Tax.
Interest Interest will be credited on subscriptions received and held in our client account up to the investment date, subject to a minimum interest addition of £10.00.
Charges There are no initial or ongoing charges. Charges are included in the pricing of the investment.

Early encashments and transfers during the investment term will be subject to an administration charge.
Commission 3% initial commission.
Securities Securities will be structured to provide the returns shown in the plan brochure, and purchased for each investor. These will be notes or warrants.

QROPS Advice: Proving residency is simply too taxing

2010-02-19T03:58:00.000-08:00

How do you escape the taxman by proving you are not a UK resident? It is becoming increasingly hard to know, as Seychelles-based millionaire businessman, Robert Gaines-Cooper, has just discovered.

This week the Court of Appeal ruled that ensuring that you are in Britain for only 91days in any year is no longer enough. It seems that having property here, or children in a British school, or horses in a British stable or even regular attendance at Ascot, may be enough to bring you within the UK tax net.

There will be many who applaud the Revenue’s crackdown on the thousands of super rich who are the leaving the rest of us to fill the gaping hole in the public finances. But a system that encourages bizarre arguments about the “centre of gravity” of a person’s life is damaging.

As Barclays’ John Varley said this week Britain’s increasingly uncertain tax regime makes it a less attractive place in which to live and do business.

A vague definition of UK tax residency may have suited the Government in the past, as it has been able to take either a lax or strict approach, depending on which way the wind was blowing.

The Revenue has also favoured this approach because it has made it impossible for clever lawyers and accountants to come up with fool-proof schemes to keep clients outside the taxman’s grasp.

But it is surely time to set out in law what is meant by UK residency. Having a horse should not be one of the tests.
By David Wighton

QROPS Advice: Are You Resident or Not?

2010-02-19T03:54:00.001-08:00

Who stands where in the non-resident stakes

Resident and ordinarily resident People who are resident in Britain and domiciled here pay tax to the British exchequer on their worldwide income and capital gains. People who come to Britain are treated as resident and ordinarily resident from the date they arrive if they intend to live here permanently or for three years or more

Non-resident Non-residents are not generally liable for income or capital gains tax, except on money earned in Britain. They also usually pay national insurance contributions on work in Britain for a British employer. People become non-resident if they leave Britain permanently or live abroad for at least three years, and if their return visits since leaving are less than 183 days in any tax year, and on average less than 91 days per tax year. It is estimated that there are less than 10,000 non-residents

Not ordinarily resident People who are not ordinarily resident are taxed only on the earnings attributable to their British earnings. They are not taxed on the whole of their worldwide income. To qualify, the person must leave Britain after three years

Non-domiciled Non-doms are often people whose families originate from abroad and typically retain affiliations with that country. People born in Britain can claim non-dom status if their fathers were born overseas. Under recent changes to the rules, non-doms can avoid tax on money earned outside Britain and brought back into the country provided they pay the Government £30,000 a year. There are around 65,000 people with non-dom status, around 33,000 of whom are classed as not ordinarily resident

QROPS Advice: PBR - IHT planning with trusts clampdown

2010-02-16T05:50:00.000-08:00

As you will be aware, the Chancellor took advantage of the Pre-Budget Report (PBR) to announce changes in legislation aimed at what it described as two artificial IHT mitigation schemes involving trusts, which had come to the attention of the Treasury.

The first scheme took advantage of the loophole caused by poor drafting of one particular part of the legislation introduced on 22nd March 2006. It is this scheme that will be considered here.

Planning with interests in possession
To explain. Before the changes, it was possible to create an interest in possession trust and have the transfer treated as a potentially exempt transfer (PET). The downside of this type of trust was that the full value of the trust fund was treated, for IHT purposes, as being in the estate of the beneficiary entitled to the income. Since IHT is primarily intended to tax assets once a generation, treating the interest in possession in this way ensured that aim.

Example: John created flexible interest in possession trust for the wider benefit of his family (excluding himself) but with his daughter Emily entitled to any income generated by the trust fund.

Under a discretionary trust, however, no beneficiary has a right to income and so IHT is not dependent on the life of a beneficiary. You could consider the discretionary trust as having an artificial life of its own – a transfer in is a chargeable lifetime transfer (CLT) and periodic and exit charges also potentially apply.

Example: John created a discretionary trust for the wider benefit of his family (excluding himself), under which no one individual was entitled to either income or capital.

In order to avoid a potential double charge to IHT under any new interest in possession trust, it was necessary to make a change in the legislation. The legislation introduced in 2006 provided that a new interest in possession created after that date would not form part of the Settlor's estate for IHT purposes.

It is worth repeating that: a new interest in possession created after 22nd March 2006 will not form part of the Settlor’s estate for IHT purposes.

That is the crux of the planning in this scheme.

Planning with reversionary interests
Before 2003, if a Settlor created a discretionary trust for the benefit of his family, it was possible to claim capital gains tax (CGT) holdover relief. The rationale for this being that if IHT was payable when creating the trust, CGT should not be so.

Those seeking to achieve the advantage of CGT holdover relief without actually incurring an IHT liability were advised to create trusts under which they retained a valuable right. This valuable right depressed the value of the transfer for IHT purposes, meaning no IHT was actually payable but secured CGT holdover relief nonetheless.

Example: John created a discretionary trust as before, with shares worth £1m having gains of £300k. The value of the CLT was £9,990k. No IHT is payable. CGT holdover relief was claimed in respect of the £300k gains, no CGT was payable at this time.

Clearly this was unacceptable to the Revenue and, having lost in the test case of Melville, legislation was introduced to combat this perceived abuse. However, it was accepted that the mechanism of depressing the initial value for IHT purposes achieved its aim.

Putting the two together!
Settlors were encouraged to create trusts under which they retained a reversionary interest but that reversionary interest was not in the full trust fund but in an interest in possession in it, i.e. a right to income for a specified period, typically 99 years. The initial transfer into trust, although being a CLT, was depressed by the significant value of the reversionary interest, i.e. it was negligible.

When the reversionary interest fell in and the interest in possession vested, at the end of whatever period the Settlor had determined, the full value of the trust fund fell out of his estate!

If he died, there would be no liability to IHT on the trust fund.

If he gave away his interest in possession, there would be no transfer of value. Further, there would be no value in the estate of the donee who received the interest in possession – and so on and so on, ad infinitum!

The “solution”
Whilst it had been anticipated that the Treasury would take steps to prevent interests in possession being treated in this way, i.e. to address the poor drafting which allowed this planning, as we have seen, the measures introduced have gone far further than this, impacting on the tax treatment of reversionary interests in general.

The impact for those caught
Bearing in mind that the changes introduced in 2006 intended to ensure that transfers into trusts that were within the relevant property regime actually gave rise to an IHT liability when the sums transferred were in excess of the available nil rate band, the “solution” might seem apt.

If a Settlor has created such a trust under which his reversionary interest has not yet fallen in or been given away, he will face a charge to IHT at lifetime rates when one or other of those events occurs.

In the PBR it was announced that “The Government announces it is also examining wider solutions to the problem of trusts being used to avoid inheritance tax charges.” It is understood that what is meant by this statement is that the Government will review the legislation introduced in 2006 to ensure, as far as possible, no other unintended “loopholes” exist. Clearly, we will have to keep an eye on developments!
By Deborah Moon - technical manager for Royal London 360° 16/12/2009

Solution
PRIVATE INTEREST FOUNDATIONS
Private foundations are legal entities set up by an individual, a family or a group of individuals, for a purpose of providing for the needs and objectives of the individual, family or group.
Foundations are more versatile and can accomplish more than Trusts, Companies, Wills and provide strict rules of confidentiality
No one owns a Private Interest Foundation, so you are not the owner of the Foundation, no one is according to the statutory laws of the jurisdiction in which it is held.
A Foundation is a tried and tested way to protect and shelter your assets including real estate, bank accounts, financial instruments, securities, art, family heirlooms, corporations, cars, planes, boats, etc., from existing or potential financial enemies. There is no limit to what a Foundation can own, and the business affairs of the Foundations are anonymous.
The Foundation’s assets are ring-fenced and are totally separate from the assets and liabilities of the party/ies who establish the foundation.

BENEFITS
A foundation can be used in a manner similar to a trust to pass on assets bypassing estate taxes at the time of death.
A Foundation can hold a corporation and a bank account which makes it the cornerstone of some of the best asset protection structures in the world today.
A Foundation cannot engage in business activities in its own right, like marketing and selling a product. A foundation can, however, own an offshore/onshore company and banking accounts. The offshore/onshore company can then engage in business activities.
Foundations do not pay tax on foreign sourced funds. This makes a foundation a great part of any tax planning strategy
A Foundation is an essential tool for asset protection particularly for those engaged in business and HNWIs

FOUNDATION V's TRUST
Operation of Private Foundation Very Similar to a Trust
Foundation Provides More Protections For Founders
Private Foundation is Multi-Generational, No Limit on Duration
Private Foundation is More Flexible
Founder Retains Full Control
Founder May Add, Remove Assets and Beneficiaries At Any Time
No Taxes within a Private Foundations
It is common for an onshore trust to be broken for any number of different reasons. If you want your wishes followed to the "letter" then a Foundation is your best option.
In the case of a Trust the Settlor has to contend with anit-trust legislation, non-recognition of trusts, sham trusts, defective trusts, thus giving away wealth and losing control. Alternatively, a Settlor or the beneficiaries may wish to change the jurisdiction or the trustees which, in most instances would not be welcomed or be resisted by those effected.
The Foundation, however, provides complete control at all times.
Trust Law a constantly being reviewed, for example in the UK trusts can no longer use trustees based in overseas jurisdictions (which enjoy a low or nil rate of local tax and double taxation treaties with the UK to mitigate capital gains tax)
A Foundation would be immune from such disadvantages.

WHAT CAN A PRIVATE FOUNDATION DO?
Ensure Founder’s Confidentiality
Minimize Taxes on Assets and Investments
Protect Assets and Investments From Creditors
Manage Assets and Investments
Defer Income
Preserve Family Assets Over Multiple Generations
Make Distributions to Beneficiaries Like a Trust
Orderly and Quick Distribution of Assets to Beneficiaries Upon Founder’s Passi

TAX BENEFITS OF A FOUNDATION
No Inventory Tax
No tax reporting requirements
No Income Tax
No Capital Gains Tax
No Interest Income Tax
No Sales Tax
No tax on issuance of corporate shares
No tax on shareholders
No property tax
No estate tax
No stamp duty
No gift tax
No succession tax

FLEXIBILTY
What Kinds of Assets Can Private Foundation Hold?
No Limit
Cash in Foreign or Local Bank Accounts
Certificates of Deposit
Interest-Bearing Claims of Any Denomination
Real Property
Intangible Property
Shares (Tradable and Private)
Beneficiary Interests Example: Right to Receive Dividends
Art and collectibles
Corporations
Boats, planes & cars
Ownership of an existing Offshore Company Can Be Transferred to Private Foundation, No Need to Change Offshore Companies’ Structure, Simply Make Foundation the Owner

WHO WOULD BENEFIT FROM USING A FOUNDATION?
Persons Seeking to Manage Taxes
Persons Wanting to Consolidate Holdings Under
Single, Flexible Umbrella
Persons Wanting to Ensure Confidentiality
Persons Who Want a Discreet, Reliable Way to Provide For Loved Ones
Persons Seeking a Vehicle For Retirement
Persons Seeking a Vehicle For Estate Planning

Call 01664 444625 and ask about Foundations

QROPS Advice: Tax relief for migrants

2010-02-16T05:27:00.000-08:00

Tax tips from a technical Expert Tax relief for migrantsAs we struggle through what may shape up to become the coldest winter for many years, which followed yet another “wettest summer on record in the UK”, I think I would be sympathetic with anyone who decides enough is enough and goes in search of a warmer climate.

In fact I have since discovered that, every year since 2000 in the UK, over 300,000 people* (*Source: UK Office of National Statistics, October 2009leave the cold British weather to work overseas. What many do not realise is that it is not just the weather that can be attractive. An investment in an offshore bond could bring some valuable tax benefits from any absence from the UK.

Chargeable event liability
A UK resident will normally incur an income tax liability on any gain when a chargeable event occurs, for example, when they cash in the full value of an investment bond.

However, a claim can be made to reduce any gain and any associated tax charge in respect of all time spent outside of the UK during the period the bond has been invested. This is referred to as ‘time apportionment relief ’.

Only an offshore bond can generate this relief, as this is a unique benefit to offshore bonds.

So for any individual looking to invest, if there is a chance they may spend some time working outside the UK, the potential tax advantages of time apportionment relief should not be overlooked.

Example

Here’s an example to illustrate what I mean:
Kate invested in an offshore bond in March 1999 and then spent some time working overseas as a non UK resident. She returned to the UK in June 2003 and was regarded as a UK resident from that date. In November 2007, Kate decided to cash in her bond when she was a higher rate taxpayer, with a chargeable gain of £63,500.

Instead of paying tax of £25,400 (40% of £63,500), Kate has used the time she spent outside of the UK to reduce her tax charge to £13,249, a saving of £12,151 because time apportionment reduces chargeable gain to only £33,122.

The formula for time apportionment relief is:

Gain x Number of days as UK resident/Number of days the bond has been in existence

This benefit applies to additional investments into an existing offshore bond as these may also benefit from time apportionment relief, even though the additional investments may not have been made during a period of non UK residence.

In this way it may also be appropriate to continue to invest in an existing bond after returning to the UK. Topping up an investment could be more beneficial than taking out a new bond as it should reduce the tax charge on the gain from the additional investment with the benefit of time apportionment relief.
By Mark Green

For advice on Offshore Bonds Call 01664 444625

QROPS Advice: Concerns over NZ's QROPS status quelled

2010-02-16T04:59:00.001-08:00

Fears New Zealand may follow Singapore in having its QROPS status removed have been quashed after an agreement was reached between HM Revenue & Customs and the country’s government actuary, according to an industry source.

International Adviser reported last month there were growing fears New Zealand could be stripped of its QROPS status because of concerns over some of its registered schemes.

According to Stephen Ward, managing director of pension transfer experts, Premier Pension Solutions SL, the concerns related to a tax break applicable to employer contributions into a scheme known as Kiwisavers.

Ward says he and a number of other advisers flagged the issue to New Zealand’s Government Actuary and, after discussions with HMRC, the problem has been resolved and members of the scheme informed.

While HMRC would not confirm details on the case in its most recent list of QROPS, published on 8 February this year, the New Zealand Kiwisavers scheme continues to appear.

However, it should be noted HMRC states on the list that ‘publication should not be seen as confirmation by HMRC it has verified all the information supplied by the scheme in its application’.

Ward said: “There has been a lot of misinformed speculation about New Zealand as a QROPS jurisdiction.

“We were involved in alerting the New Zealand authorities of this minor Kiwisavers tax issue and are delighted with the outcome and that any possible uncertainty surrounding using New Zealand schemes has now been clarified once and for all.”

QROPS Advice: Spotlight on Protected Funds

2010-02-16T04:46:00.000-08:00

Broadly speaking, recent market volatility has split investors into one of two categories; those that are willing to take advantage of the opportunities that market movements represent, and those that are unsure of the future and instead wish to focus, primarily at least, on preservation of their wealth.
Capital protected funds serve as a solution to each type of investor, providing exposure to the upside of equity markets, whilst maintaining a level of protection that gives the investor peace of mind in the knowledge that not all of their investment is at risk.
An 'Investment Sentiment' survey conducted towards the end of 2009 by the UK's Investment Management Association found that almost 70% of investors still want to put money into capital protected funds. For 2008 and 2009, sales by fund type, via an investment bond (as opposed to direct investment into the fund), show that such funds rank as the second and third most popular choice respectively.
The basic principle of most capital protected funds is that the majority of the investors' money goes into an active 'basket' of equity stocks (the basket of many funds available will have a specific focus, e.g. emerging markets), with an amount being kept aside for investment into a capital protection solution; it is this element of the fund that is used to protect a proportion the fund's value, the amount set aside determining the amount of protection available (e.g. 90%, 80% etc).
On this basis, investors in such funds should bear in mind that they will not benefit as much from an increase in value of the active portion of the fund, as they would have done if they were instead invested in a traditional, 100% equity fund. However, the relatively small sacrifice of growth potential, in return for capital protection is what makes such funds so particularly appealing to investors that are approaching retirement, or simply unsure about future volatility.
It is common practice for capital protected funds to be managed by two distinct parties; an investment manager to maximise growth from the active element of the fund, and a specialist provider of capital protection solutions. The latter will have experience in trading sophisticated financial instruments which, ultimately, provides the 'safety net' element of the fund.
Colin Graham of BlackRock, managers of the active element of the Hansard Multi-Asset Protector fund commented "Of the other positions held in the portfolio, the recent strong performance of the BGF (BlackRock) US Flexible Equity Fund has been driven by the Fund's focus on quality stocks, with an emphasis on healthcare and energy, at the expense of financials and consumer staples. Meanwhile, the performance of the BGF World Health and Science Fund was well supported by strong stock selection of the vast majority of sub-sectors, including healthcare providers and services.
While we remain focused on the improving economic outlook, our positions are relatively modest, reflecting the risks to these views and our anticipation of a moderate, rather than buoyant, prospective return environment. As such, and in the expectancy of ongoing economic and market volatility, we continue to allocate risk in a diversified fashion."

Where should I retire to?

2010-02-11T02:59:00.000-08:00

Where should I retire to?

Tax regimes around the world vary enormously. The majority of countries levy tax on pension income at your highest marginal income tax rate.

While some countries have a top rate the same or higher than Britain’s forthcoming 50% — Belgium’s is 50% and Sweden’s is 55% — others are far kinder on your pocket, figures from Gary Heynes at Baker Tilly, the accountant, show.

Hong Kong has a top rate of only 16% and Singapore has 20%. In America, the top rate of income tax is 35%, and in Cyprus it is 30%.

Pensioners living in Cyprus and drawing an overseas pension can opt to pay a fixed rate of 5% on income above a small tax-free personal allowance of €3,420 (£3,136). Alternatively, they can pay the normal rate of up to 30%, in which case the first €19,500 is tax free — so the smaller your income, the better off you are under the normal system.

France and Spain can be less attractive than the UK — unless you expect retirement income of £150,000 or more, which would mean you would be hit with Britain’s 50% tax. France levies a top rate of income tax of up to 40% and Spain 43%.

In New Zealand and Australia income tax is charged at up to 39% and 45%. However, Australia does not charge tax on pension income, provided you are over 60.

Heynes said: “Recent changes to pension rules in Australia allow you to contribute more to your pension if you move there before you retire, and since July 2007, income drawn from retirement savings has been tax free if you’re over 60.”

Consider other aspects of tax regimes around the world, too. Capital gains tax (CGT) is levied at a flat rate of 18% in Britain. However, in places such as New Zealand and Hong Kong there is no charge. In America, CGT is 15%.

In Australia it is a hefty 45% — although residents are eligible for relief on their main home as in the UK.

Expats receive a tax uplift on their worldwide assets based on their date of arrival, so if you bought a painting, for example, for £5,000 and it had appreciated in value to £20,000 by the time you moved to Australia, you would be liable for CGT on growth only from that point.

Australia does not charge inheritance tax (levied at 40% in the UK), but France has rates of up to 60%.

QROPS: Advantages and Disadvantages

2010-02-11T02:50:00.000-08:00

What are the potential benefits of QROPS?

Tax efficiency. Subject to the laws of the overseas country in which you become resident, it may be possible to receive income from your retirement fund at lower tax rates than would apply in the UK.

Investment choice. There is no need to buy an annuity, so you can retain control of your pension savings capital, and you can hold assets such as residential property, which are not usually allowed in UK pension funds.

Passing wealth between generations. QROPS enable you to pass the portion of your pension savings that you do not spend to your heirs and, depending on the tax laws of the country where you choose to become resident, there may be a lower rate of Inheritance Tax to pay or – as is the case in Cyprus – be no local equivalent of this tax.

Avoid or diminish exchange rate risks and costs. You can take income and capital from your QROPS in the currency of your choice.

What are the potential disadvantages of QROPS?

Costs. Legal and administrative fees involved in setting up and maintaining QROPS vary widely and need to be considered carefully in advance. Take account of initial and annual fees when assessing whether their impact on your retirement fund can be justified by increased choice and tax-efficiency.

Investment risk. If you decide not to buy an annuity and to keep your QROPS invested in stock market-based assets, or any other assets whose value is not guaranteed, there is a risk that your income and capital could fall and you may not get back as much as you invested.

Regulation gap. Some countries with lower tax rates than the UK also offer less investor protection in terms of regulation of financial services and they may not offer any statutory compensation scheme. That is why it is vital to seek pension advice only from professionals who are fully authorised in the UK as well as the overseas jurisdiction to which you are considering retirement.

Fiscal change. Some experts reckon the opportunities offered by QROPS are simply too good to last. Critics claim QROPS enable British savers to obtain generous tax relief while accumulating pension funds and then to avoid British taxes when it comes to enjoying the benefits. If too many people take up these opportunities HM Revenue and Customs may act, subject to European Union rules.

Consider your options carefully but without unnecessary delay

No decision affecting your retirement capital and income should ever be taken in a rush. Remember the old maxim: ‘Act in haste – repent at leisure.’ If any adviser seeks to put pressure on you for an immediate decision, then your answer should be ‘No, thank you.’

However, as mentioned earlier, the sooner you start to plan for retirement, the easier it will be to ensure that this really is the holiday of a lifetime. The earliest pounds you invest in a pension will have the longest to accumulate for your benefit. The sooner you begin to consider how – and where – you enjoy the fruits of your prudence, the more likely you are to reach the right decision for you and, where relevant, your family.

Quicker, cheaper and more comfortable international travel has widened everyone’s choice about where to live. People who retire overseas need no longer wave goodbye to friends and family forever.

QROPS extend that choice into one of the most important financial choices many people ever make: how to fund and enjoy retirement. Make sure you consider your options carefully and in a timely manner with a specialist pensions professional who is fully authorised to advise on all the options you enjoy today.

QROPS and Pensions: Retiring Abroad

2010-02-11T02:41:00.000-08:00

Deposits, bonds, shares and investment returns - all these will boost your pension plan during your retirement as a British expat.

Rising numbers of people now spend a quarter or even more than a third of their lives in retirement, enjoying what is – quite literally – the holiday of a lifetime.

However, just like any other holiday, you need adequate funds to make the most of it. As the novelist Somerset Maugham observed: “Money is like a sixth sense; without it, you cannot make full use of the other five.”

Planning ahead and seeking specialist advice sooner rather than later will make it much easier for you to achieve your retirement objectives.

For example, the sooner you start to save and invest for retirement, the better the chances are that you will accumulate the large sums of capital needed to provide an adequate income in today’s economic environment of low interest rates.

What’s inside the wrapper?

There is no particular magic to the word pensions - whether they are QROPS, SIPPs or any other sort of retirement savings – they are only a tax-efficient wrapper to hold assets which can deliver income, capital growth or a mixture of both. So, it is vital to consider carefully, in conjunction with your financial adviser, the different risk and reward characteristics of various assets or means of storing wealth.

No single answer will be right for everybody because individual and family circumstances vary so widely, but it is worth considering investment returns from the main asset classes in the past when deciding which components should play some part in your pension portfolio.

For most people, the appropriate advice will be to hold a mixture of different assets, with the proportions varying on the individual or family requirement for security, income or growth and how long they can afford to remain invested.

Deposits: low-risk, low-income

There is no need to take any short-term risk to enjoy the tax advantages of pensions; you can hold all of your contributions in cash deposits. However, while that might be a reasonable, cautious strategy in the final year or two before you intend to retire and draw benefits – because it will protect you from stock market setbacks - it would be wrong to imagine that this option is risk-free.

The explanation is that inflation tends to erode the real value or purchasing power of money over time. Even with today’s low levels of inflation, this is worth considering because, when planning retirement, you may want to protect the purchasing power of your pension decades into the future.

Banks and building societies promise to return your capital in nominal or face value terms; they do not promise to preserve its real value or purchasing power.

Perhaps unsurprisingly, low-risk deposits have tended to provide lower returns than the other two main types of asset which can be held in British pensions.

Bonds: higher-risk, higher income

Large companies issue IOUs to investors called corporate bonds, which usually promise to pay a fixed rate of interest for a fixed period of time before repaying the original sum invested. Countries also issue bonds and those issued by the British Government are called gilt-edged stock or gilts.

Both types of bond usually pay higher interest than deposits but entail a higher degree of risk; for example, bonds are not covered by the £50,000 per person statutory safety net that protects deposits with banks and building societies registered with the Financial Services Compensation Scheme.

By contrast, no bond is any better than its guarantor or the company that issued the bond. As a general rule, the higher the yield – that is, the income paid by a bond expressed as a percentage of the price for which it can be bought – the higher the risk of the bond.

This could be a specific risk – for example, the risk that the bond issuer might default or fail to pay income and/or capital; or it could be market risk – for example, that inflation is expected to rise and erode the real returns from all fixed interest bonds.

Quantitative easing - an economic policy intended to prevent the recession turning into a slump in Britain and elsewhere - increases the risk of inflation, as that is what has happened on previous occasions when governments printed more money to solve current problems.

Shares: high risk in pursuit of high returns

Shares – also known as equities – are higher risk than deposits or bonds, because they make no promises about repaying investors’ capital or income and enjoy no statutory safety net. However, despite recent setbacks, shares have tended to provide higher returns than other asset classes over most periods of five years or more in the past.

That historical fact is set out in the table, Shares versus Bonds and Deposits. Barclays Capital – a subsidiary of the high street bank – measures returns from these different stores of wealth going back to 1899 and updates its analysis annually. Before going on to consider those statistics in detail, it is important to understand that the past is not a guide to the future. Share prices can go down and you may get back less than you invest.

Investment returns: how long have you got?

According to the Barclays Capital Equity Gilt Study 2009, shares broadly reflecting the composition of the London stock market delivered greater returns than bonds or deposits in about three quarters of all the periods of five consecutive years in that sample of more than a century. To be precise, shares beat deposits on 74 per cent of those five-year periods and beat bonds 75 per cent of the time.

However, it can be seen that if the period of investment was shortened to just two consecutive years, the probability of shares doing best fell to nearer two thirds. In other words, there was a one-in-three chance that bonds or deposits would do better. This demonstrates the risk that short-term setbacks can hit share prices and explains why many advisers say shares are only suitable for money you can afford to remain invested for at least five years.

Over longer periods of time, such as 10 consecutive years, the historical probability of shares doing best increased to 92 per cent relative to deposits and 81 per cent compared to bonds.

Diminishing risk by diversification

Many pension savers remain understandably wary of the risks entailed in bonds and shares, despite the fact that bonds generally pay higher interest than deposits today and that shares have tended to deliver higher total returns than either bonds or deposits over the medium to long term in the past.

One way to square that circle is to consider pooled funds which seek to diminish risk by diversification.

These include unit and investment trusts, open-ended investment companies (OEICs) and other managed funds which bring together individual investors’ money to spread these funds over large numbers of underlying shares, bonds and other assets. This should give investors exposure to income and growth from the underlying assets while setting out to reduce their exposure to setbacks or failure at any one company, country or sector of the stock market.

The value of expert advice

In addition to diminishing risk by diversification, pooled funds also enable individual investors to share the cost of professional fund management. In other words, dedicated staff spend their days trying to keep abreast of today’s fast-moving money markets to make the most of your investments while you get on with making a living or enjoying retirement.

However, with more than 2,000 pooled funds authorised to be marketed in the United Kingdom and many more overseas, it is difficult to know which ones to choose. Just as do-it-yourself investment will not suit everybody, with many people preferring to pay professional fund managers, it may make sense to pay a professional financial adviser to recommend appropriate funds – and to make sure your portfolio of pension investments remains appropriate to your changing needs in the years ahead.

Flexible strategies for the future

For the reasons set out earlier, there is no single portfolio that will suit everybody and no substitute for seeking fully authorised financial advice which will be tailored to your individual – and, if relevant, family – circumstances.

This will entail a fact find procedure, where the adviser will seek information about your attitudes to risk and reward as well as other factors such as your requirements for income, growth or a mixture of both.

This may seem a bit of a chore but should enable the adviser to recommend an appropriate asset allocation or financial strategy to suit you. You should not regard this as a decision to file and forget but as a strategy that should be reviewed regularly.

For the reasons set out in the final chapter, it makes sense to choose your financial adviser carefully and to keep in touch with him or her during your retirement.

There is no single portfolio that will suit everybody and no substitute for seeking fully-authorised financial advice which will be tailored to your individual – and, if relevant, family – circumstances.

By Ian Dowie
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7189808/QROPS-and-pensions-retiring-abroad.html

QROPS Cyprus

2010-02-11T02:36:00.000-08:00

British expats could take their pension plans and enjoy a fantastic quality of life in by retiring in Cyprus.

Like Spain and France, Cyprus is proving a popular destination for Britons retiring overseas, not just because of its weather, low cost of living and membership of the European Union but because it has made its tax structure particularly generous to pensioners.

Each individual pensioner can choose whether to pay a flat rate of five per cent income tax on their worldwide income in excess of a small personal allowance, or to be allowed a larger allowance or tax-free band and then pay tiered rates of tax up to 30 per cent on income in excess of the threshold. There is no Inheritance Tax nor any Wealth Tax in Cyprus.

Under the terms of the UK/Cyprus Double Tax Treaty, all forms of British pension – including Government pensions such as the civil service and local authority schemes –can be paid without deduction of British tax to pensioners who are tax-resident in Cyprus.

Ian Dowie

http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7189590/QROPS-and-pensions-Cyprus.html

QROPS France

2010-02-11T02:33:00.000-08:00

British expats abroad find tax breaks in France can match or exceed those in the UK, after compulsory social charges are taken into account.

However, as in Spain, French fiscal law offers favourable treatment to people with annuities.

So, instead of paying income and social taxes - which can be as high as 51 per cent in total - pensioners can enjoy much lower effective rates of tax on annuity income, depending on their age.

For example, up to 70 per cent of the annuity income can be taken tax-free by annuitants who are 70 years or older; up to 60 per cent can be tax-free for those over 60 and up to 50 per cent can be tax-free for those who are 50 or older. Even annuitants who are aged less than 50 can take 30 per cent of their annuity income tax-free.

However, the complexity of French fiscal law makes it vital to take expert advice from professionals who are fully authorised in that country. For example, wealth tax remains an important consideration but the capitalised value of annuities may be exempt from French wealth tax, provided the fund was set up in the context of a professional – that is, paid – activity and the savings period lasted for more than 15 years.

Pensioners who wish to pass wealth to beneficiaries after their death should also seek professional advice on French Succession Tax.

There are too many important differences between this and Inheritance Tax to tackle here – but also valuable opportunities, such as the usufruct (called usufruit in French) to make tax-effective lifetime gifts, while retaining the right to remain in occupation or receive income.

HM Revenue and Customs (HMRC) renders such gifts with reservation ineffective for IHT avoidance purposes in Britain but they can continue to work in France, demonstrating the importance of people who retire overseas taking locally authorised advice.
By Ian Dowie
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7189353/QROPS-and-pensions-France.html

QROPS Spain

2010-02-11T02:27:00.000-08:00

Brit expats love the better weather and a lower cost of living make Spain the most popular destination for British expats who retire abroad – and it can also provide a tax haven for the well-advised.

Most British pensions can be paid into Spanish bank accounts without deduction of British taxes after you have obtained a certificate to show that you are resident in Spain and paying tax there. This is called a certificado de residencia fiscal NEN – Espana Convenio.

However, British Government service pensions – including civil service and local authority schemes – are important exceptions to that rule; UK tax will always be payable, even after you are resident in Spain. This does not affect NHS pensions and may not include teachers, police and fire brigade pensions; once again, specialist advisers can provide guidance relevant to your individual needs.

International money transfers As a general rule, Spanish fiscal law provides a personal allowance of between 2,600 euro and 4,000 euro before income tax is applied at rates varying between 24 per cent and 43 per cent on income above the allowance. However, where a personal pension is used to buy a whole of life annuity – known as a renta vitalicia – then much lower rates of tax may apply.

Unfortunately, unless you are in QROPS, the annuity is limited to sterling; and so you are at risk of it losing its local purchasing power in future if the pound continues to lose value compared to the euro.

For example, someone aged between 60 and 65 years old who received 25,000 euro a year from an annuity might only pay 18 per cent tax on 24 per cent of the income.

That could produce a tax bill of just 1,080 euro or an effective tax rate of just 4.32 per cent. Once again, it is worth repeating that it is vital to seek fully authorised pensions advice to steer clear of the potential pitfalls and make the most of the legal opportunities overseas.

Other factors that might be considered include tax-efficient trusts and new opportunities created by the 100 per cent exemption of wealth tax in Spain since the start of 2008. However, it is important to note that wealth tax has not been abolished; the Spanish government could recommence these charges simply by reducing or eliminating the new exemption.
By Ian Cowie
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7189169/QROPS-and-pensions-Spain.html

QROPS Advice: Advice for expats

2010-02-11T02:23:00.000-08:00

British expats abroad can now get more control over their pensions 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, 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.

Needless to say, these important new opportunities are subject to extensive legislation, which will be discussed in detail later. However, the important point for now is that a Qualifying Recognised Overseas Pension Scheme (QROPS) can enable savers to enjoy the best of both worlds.

Portugal You can receive valuable tax reliefs while working and saving toward retirement in the United Kingdom, without needing to pay higher taxes when you draw benefits or submit to UK restrictions on how you invest and spend the fund.

What is a Qualifying Recognised Overseas Pension Scheme (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, that the pension has not commenced.

Better still, 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.

For example, as set out in Clause 2 Schedule 34 of the Finance Act 2004, there is no need to report what HMRC would regard as “unauthorised payments” and tax of up to 82 per cent that might be levied on such payments in the UK can be avoided. However, it is important to understand this does not mean trust busting is acceptable.

Who might benefit from considering a QROPS?

Anyone considering retiring overseas and becoming resident in a foreign jurisdiction or country for five years or more. The amount of tax you pay on income and capital received from your QROPS will be determined by the taxation of the country in which it is based and you are resident.

These laws or fiscal statutes vary from country to country but many are more favourable to pensioners than those in the UK.

For example, pensioners resident in Cyprus can opt to pay a fixed flat rate of five per cent tax on all income above a small tax-free band or personal allowance; alternatively, they can choose to receive a higher personal allowance and pay higher rates of income tax on any income in excess of the allowance.

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.

You cannot transfer British Government or State pensions to a QROPS.

Do I need to leave the UK forever to benefit from QROPS?

No. Rising numbers of people who decide to retire overseas – perhaps to enjoy better weather and a lower cost of living – can take advantage of a QROPS. You can continue to visit friends and family or return to Britain for any reason, provided you remain a non tax resident of the UK. So, you could return to the UK whenever you wish but the maximum length of time you can spend in Britain will be limited before UK taxes apply.

For example, you must beware of the six-month rule and the three-month average rule to avoid becoming resident in the UK again for tax purposes and losing the advantages of QROPS.

If you are present in the UK for 183 days or more in any tax year – which starts on April 6 and ends on April 5 – or you are present in the UK for an average of 91 days or more per annum, measured over up to four years, then you may become resident in the UK for tax purposes.

But be careful because, these days, rules are not the law. It is possible to remain a UK tax resident even if you spend less than 90 days in the UK, so it makes sense to take advice that is specific to your individual circumstances in this very tricky area.

Since April 6 2008, if an individual is present in the UK at midnight, that counts as one day’s residence. In practice, days of arrival in the UK are counted but days of departure are discounted. Where an individual arrives and departs on the same day, this will not count as a day’s residence for tax purposes.

Are QROPS suitable for everyone?

No. Most British pensioners retire as UK residents and so must pay UK tax. There is no statutory limit on the minimum value of pensions that can be transferred to a QROPS but only funds worth more than £100,000 are likely to generate sufficient tax savings to justify set-up costs, which vary between one per cent and five per cent of the fund transferred.

Pensioners who have plans or policies with Guaranteed Annuity Rates (GARs) higher than returns available today, may also find QROPS do not justify giving up their GARs. As mentioned earlier, Government pensions – excluding the National Health Service scheme - British State pensions and final salary or defined benefit pensions already in payment cannot be transferred to QROPS.

Why it makes sense to take specialist advice

Given the complexity and variety of different countries’ tax laws, this guide can only serve as a general introduction to the new opportunities created by QROPS. Specialist financial advisers, who are authorised in the UK and the country to which you intend to retire, can answer questions specific to your individual circumstances.

Remember that the fundamental purpose of a pension is to provide retirement income. So, it is vital to ensure that your money does not run out before you do – and to avoid taking unnecessary risks with your income or capital. For these reasons, it makes sense to consult fully-authorised, specialist advisers before making any decisions about QROPS.

But the first step for most people will be to build up the maximum pension they can within the UK’s tax rules, and this is the subject of the next chapter.

Remember that the fundamental purpose of a pension is to provide retirement income. So it is vital to ensure that your money does not run out before you do – and to avoid taking unnecessary risks with your income or capital.
By Ian Cowie
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7188812/QROPS-and-pensions-advice-for-expats.html

QROPS Advice: Beware Global Grasp of IHT

2010-02-11T02:18:00.001-08:00

Beware global grasp of IHT

IHT is assessed on the worldwide assets of people domiciled in the UK, including foreign countries where there are no or low death duties. You could be resident overseas but still deemed to be domiciled in the UK and liable to pay IHT, if HMRC can establish that Britain was the country which you still regarded as home at the time of your death.

For this reason, specialist advisers will often recommend that you consider selling your UK home and other British property when transferring to a QROPS. However, it will also be important to consider ways of preserving the real value or purchasing power of your pension overseas – before and after you draw benefits from your retirement fund - and these are the subjects of the next chapter.

Many countries overseas impose lower taxes on pensions than the United Kingdom and allow pensioners more choice about how they spend their savings. Quicker and cheaper international travel also makes it easier to consider retiring abroad while retaining the ability to return to the UK if you wish to do so.

QROPS enable pension savers who have left or intend to leave the UK and become non-resident in the UK for tax purposes, to enjoy the best of both worlds. They can take their retirement savings with them to a lower-tax jurisdiction and obtain greater freedom about how they spend or invest their savings than would be the case in the UK.

For example, after transferring to QROPS a pensioner who has been non-resident in the UK for at least five full tax years, could use their pension fund to buy residential property as an asset for their QROPS – and, it is worth pointing out, residential property is a form of asset which cannot usually be held within British pensions. You do not have to buy an annuity, you can have your fund in sterling or any currency and avoid up to 82 per cent tax against the fund imposed in the UK. The entire fund can be left tax-free to benefit your heirs.

By Ian Cowie
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7188890/QROPS-and-pensions-before-you-go.html

Why HMRC will not be happy bunnies this year

2010-02-09T10:14:00.000-08:00

QROPS are very much in the news at the moment. Recent newspaper articles have screamed at readers “Take your money and run” (The Telegraph) and “Get your money out of Britain” (Sunday Times). Much to the annoyance of HMRC, it seems people are doing just that. Recently released figures showed there was a 154% increase in transfers to QROPS in the 2007/08 tax year compared to the year before, while
uptake of new QROPS was said to have doubled in the last three months of 2009.
HMRC, which has already penalised pension rules abusers and closed down Singapore as a QROPS jurisdiction for misrepresentation, will not be amused by the headlines or pleased by the growth of a market that diverts revenue from government coffers.
Regardless, for the right person in the right place QROPS are highly attractive.
Since April 2006 it has been possible, providing you have been non-resident for five years, to:
■ receive your pension free of tax (dependent on where you transfer it to);
■ avoid purchasing annuities;
■ avoid an Alternatively Secured Pension at 75, resulting in losing 82% of fund in taxes on death;
■ unlimited fund size;
■ pass on to your beneficiaries the balance tax-free.
But to continue to enjoy such benefits, more respect needs to be given to HMRC
– quite simply, do not abuse the rules and do not delay making a transfer. Pension legislation changes like the breeze, and all the current inflammatory press attention
could bring an ill wind sooner than you think.

QROPS Advice: QROPS very much in the News

2010-02-09T10:11:00.000-08:00

QROPS are very much in the news at the moment. Recent newspaper articles have screamed at readers “Take your money and run” (The Telegraph) and “Get your money out of Britain” (Sunday Times). Much to the annoyanceof HMRC, it seems people
are doing just that. Recently released figures showed there was a 154% increase
in transfers to QROPS in the 2007/08 tax year compared to the year before, while
uptake of new QROPS was said to have doubled in the last three months of 2009.
HMRC, which has already penalised pension rules abusers and closed down Singapore as a QROPS jurisdiction for misrepresentation, will not be amused by the headlines or
pleased by the growth of a market that diverts revenue from government coffers.
Regardless, for the right person in the right place QROPS are highly attractive. Since April 2006 it has been possible, providing you have been non-resident for five years, to:
■ receive your pension free of tax (dependent on where you transfer it to);
■ avoid purchasing annuities;
■ avoid an Alternatively Secured Pension at 75, resulting in losing 82% of fund in taxes on death;
■ unlimited fund size;
■ pass on to your beneficiaries the balance tax-free.
But to continue to enjoy such benefits, more respect needs to be given to HMRC – quite simply, do not abuse the rules and do not delay making a transfer. Pension legislation changes like the breeze, and all the current inflammatory press attention
could bring an ill wind sooner than you think.

QROPS Advice: Survey: the good life ‘turns sour’ for many expat Britons

2010-02-09T10:00:00.000-08:00

Expatriate Britons are struggling to cope with the mostly weakening pound in a number of key offshore markets, a survey by foreign exchange provider Moneycorp has found, with those in Spain described as suffering the most. Émigrés in Australia and
New Zealand, however, appeared “relatively unaffected by the weakening pound”, the survey noted. It also found expats “hit hard” by problems in many foreign property markets.
The findings echo those of other recent surveys, as well as the recent comments of
many financial advisers with expatriate clients. The survey was conducted in October and November for Moneycorp by consultancy Vanson Bourne. It sought the opinions of some 250 Europe based UK expats, and another 250 British expats from Canada, Australia and New Zealand.
Expats living in these last two countries appeared to be faring better than some other Brits living far from home. “Less than a quarter of British expats in Australia
(23%) and New Zealand (24%) said their spending power had decreased,” Moneycorp said.

Other findings of the survey:
■ More than four in five (85%) Spanish expats say the value of sterling has impacted them financially, with three quarters (79%) saying that their spending power has decreased as a result.
■ Britons living in Germany and Italy are also being significantly impacted by the fall in sterling, as 67% and 66% of expats in these countries, respectively, reported
feeling the pinch.
■ In France, the story is similar, with nearly half reporting they are being
impacted by the fall in sterling; the figure in the
US was 61%.

BY HELEN BURGGRAF

QROPS Advice: Equity Trust challenges QROPS decision

2010-02-09T07:02:00.000-08:00

Equity Trust, trustee of the Panthera ROSIIP pension fund, is taking the UK tax authority to court to challenge the removal of Singapore’s QROPS status in May 2008.
The trust company, which established Panthera in a joint venture with Credit Suisse subsidiary Clariden Leu, said it has tried to come to a mutual agree-ment with HMRC over the future status of the scheme but has so far failed. In a letter to policyholders dated 20 January, Equity Trust said it issued a letter to HMRC under the ‘Pre action Protocol’ within the Civil Procedure Rules in December but received
no response. It has subsequently made an application to the UK’s High Court for ROSIIP to be restored to QROPS status.
The letter from Equity Trust director Fredrik van Tuyll also said ROSIIP had always been managed within QROPS legislation. The reasons for the decision to bar Singapore have never been fully explained due to the Revenue’s silence on the matter. Industry
sources suggested at the time the problem could lie with Singapore’s taxation of pensions, rather than a single scheme’s actions.
BY SIMON DANAHER

QROPS Advice: QROPS News: Time to move?

2010-02-09T01:08:00.000-08:00

The screws are tightening on the bank accounts of high net worth individuals, particularly those in the City. With effect from April, anyone earning more than £100,000 will see their personal tax allowances reduced, and those with an income of more than £150,000 will be taxed at a top rate of 50 per cent. Individual bonuses to bank workers of more than £25,000 paid before April, meanwhile, are subject to a 50 per cent levy paid by the bank; the employees also pay income tax on the money they receive.

So, who's leaving?

There's been talk of an exodus of high net worth individuals since the Chancellor first outlined his tax hike plans in last April's Budget. David Anderson of London law firm Sykes Anderson thinks the new regime "may be the last straw for high net worth individuals who have already been directly targeted by the changes to non-domicile taxation and the abolition of taper relief for capital gains tax (CGT) purposes."

However, Paddy Dring, head of the international residential department at property consultant Knight Frank, believes that only a relatively small number have actually left the country so far. "Others are making preparations but are waiting to see what happens over the coming year," he says.

"There are without doubt some who will leave London, but many are realising they have underestimated the complexities of going," adds Jonathan Hewlett, head of Savills' London office. "More and more, we are hearing about people who've looked at moving but can't find the right place to go - a place where their partner will be happy and there are good school choices. The young are more transient, however, and there is a perception that they will go wherever the good deals are."

Tax issues

Those complexities extend well beyond school choice. Paul Garwood, head of personal financial planning at London accountant Smith & Williamson, points out that HM Revenue & Customs (HMRC) has not been making it any easier to escape the UK tax system recently.

The test for residency (which governs the requirement to pay UK tax) used to be that if you were in the UK for more than 183 days in a tax year, or more than 90 days a year over a four-year period, then you were UK resident. But as Mr Garwood explains: "Now, if you haven't qualified for resident status in another country and you keep your UK home, they may just count you as UK resident anyway if you return at all, so you really need to plan carefully and burn your UK boats if you're serious about it."

That may well mean selling your home, rather than renting it out. It also means ensuring you spend enough time in your new jurisdiction to qualify as tax resident there. You can no longer work in Paris during the week but nip home to see your family in Britain at the weekends if you want to escape the UK tax regime.

The tougher regime is a particular problem for people trying to move directly to a tax haven such as Monaco, says Mr Anderson. "First, it is harder to prove you've left the UK for good, as the Revenue is far less likely to accept you are moving your life away from the UK," he explains. "Secondly, Monaco has no double tax treaty in place with the UK, so you could find you’re a dual resident for tax purposes, and therefore remain liable for UK income tax. (Double tax treaties contain a test to establish your residency for tax purposes in either one country or the other; dual residency is not possible.)

"It can be much simpler therefore to move to a country which has a more favourable regime than the UK but also has a double tax treaty with the UK, such as France," Mr Anderson suggests.

Pension planning

Apart from tax residency itself, you need to plan other tax-related aspects of your finances. Pensions are one key consideration. If you are in your employer's pension scheme, you will be able to remain in the scheme when you're working abroad for a maximum period of ten years; after that you may be able to negotiate a move into a local equivalent scheme.

If you are moving overseas indefinitely, you could consider transfer your UK pension into a Qualified Recognised Overseas Pension Scheme (QROPS) - an overseas pension scheme approved by HMRC. The advantage is that they are governed by the local tax rules, and these tend to be more flexible than the UK system. For example, you may not have to buy an annuity with the bulk of your fund; there may be less or no tax to pay on pension payments; or it may be possible to take the whole lot as a lump sum.

by:Faith Glasgow
http://www.investorschronicle.co.uk/InvestmentGuides/FinancialPlanning/article/20100208/b01de62e-125c-11df-bbca-0015171400aa/Time-to-move.jsp

QROPS Advice: Investment News: Spotlight on India funds

2010-02-03T08:14:00.000-08:00

A vast majority of investors are aware of the phenomenal economic growth that India has achieved over recent years, with most benefitting from this via an exposure in a traditional 'BRIC' fund. However, whilst the majority of BRIC funds have posted excellent returns, a growing number of investors have instead recently chosen to invest directly into Indian-focussed equity funds.
The outlook for the Indian economy is very positive, uncommon amidst a global recession. This is confirmed by the recent revision of the IMF's economic growth forecasts for 2010, adjusting that of India to 7.7 percent from an original forecast of 6.4 percent (the same forecasts predict an average of approximately 3.9 percent, at a global level).
One of the reasons behind the excitement around India lies in its current economic state, unlike other most other economies labelled 'emerging', India is truly in its economic infancy. It is the country's place towards the bottom of the development ladder that makes it compelling for investors, representing relative immaturity and therefore greater growth potential.
Each of the four BRIC constituent countries owes its growth to different roots; the phenomenal rise of China can be greatly attributed to a thriving export and manufacturing industry, whereas Brazil and Russia's boom relied on a natural abundance of much-needed commodities.
In comparison, India's story is very much a domestic one. Private domestic consumption accounts for 57% of GDP in India compared with only 35% in China. Additionally, India's population is soaring: by 2025, it's projected to surpass China's. The demographic changes will provide a well educated, English speaking, young and vibrant workforce to India, in contrast to the ageing population problem that China currently faces.
Whilst a loyal and expanding domestic economy are essential to the growth of any country (the Chinese government is actively looking to create such conditions, such is the domestic demand for western products), India recognises that it has to look outside of its own boundaries to enact long-term economic development. Plans are afoot with much-needed significant development in India's infrastructure, which would stimulate the development of a manufacturing sector that lends itself to a vast resource of young workers.
Foreign investment (also known as 'speculative' or 'hot' money) inevitably follows any success story, more so against an economic backdrop such as the current one. Following similar steps to China, it is thought that the Indian government is likely to introduce measures to control unprecedented foreign investment ($17 billion of funds flowed into Indian equities last year, appreciating the Indian Rupee over 10% since Q1-end 2009); a higher reserve ratio requirement to its banks or a curb on interest payments to non-resident investors are just two of the ways that this could be achieved. Whilst this may have a short term negative effect on stock markets, it demonstrates a responsibility that puts India in a much better place, long term.
Sanjiv Duggal, manager of the Hansard HSBC Indian Equity fund (MC101, available in HIL & HEL) commented "The consumer discretionary and real-estate sectors have underperformed recently on concerns of measures by the central bank. But we expect interest rates to normalise following the sharp easing by the central bank in 2008. We think consumption should remain robust in 2010. GDP growth forecasts for the current fiscal year ending March has been steadily revised up from around 5% to around 7%. This upward revision has come despite the poor monsoon affecting farm output as industrial production has been strong."
Hansard has a variety of fund links across a diverse range of asset classes, whether your clients have a conservative, balanced or adventurous outlook. To find out more about any of our fund links please contact your Hansard Account executive who will be able to assist you further.

QROPS Advice: Investment News: America economic recovery taking hold

2010-02-03T08:08:00.000-08:00

The dollar declined as stocks rose amid signs that the economic recovery is taking hold, fanning demand for higher-yielding currencies such as the South Korean won and the South African rand. The Dollar Index, which tracks the U.S. currency against those of six major trading partners, dropped for a third day before a report due to be published that is thought to show U.S. service industries expanded at the fastest pace in more than a year. The pound rose versus the euro and the dollar after data showed U.K. consumer confidence jumped. The euro extended two days of gains against the dollar on Wednesday as European Commission President Jose Barroso said the body will back Greece's plans to cut its budget deficit.

QROPS Advice: Investment News: Gold Gains

2010-02-03T07:57:00.000-08:00

Gold gained for a third day on Wednesday as the dollar extended a decline, fuelling investor appetite for the metal as an alternative asset. Silver also climbed. "Price levels below the $1,100 an ounce level apparently attract buyers who consider this level as a lucrative entry point," said Eugen Weinberg, a senior analyst with Commerzbank AG.

QROPS Advice: Investment News: Sales up in Germany

2010-02-03T07:53:00.000-08:00

Retail sales in Germany, Europe's largest economy, increased in December as the improving economic outlook bolstered Christmas spending. Sales, adjusted for inflation and seasonal swings, rose 0.8 percent from November, when they dropped a revised 1.7 percent, the Federal Statistics Office in Wiesbaden said on Wednesday.

QROPS Advice: Investment News: Brazil Up

2010-02-03T07:47:00.000-08:00

Brazilian stocks gained on Tuesday, completing the biggest two-day rise for the Bovespa index since November, as commodities rallied and industrial production increased more than analysts' forecast. Brazil's industrial production jumped to a greater than expected 18.9 percent in December, after having contracted 14.7 percent a year ago, the national statistic agency said on Wednesday.

QROPS Advice: CHINA "Speed bump"

2010-02-03T07:42:00.000-08:00

The tumble in China's stocks is a "speed bump" and won't last for more than three months before rallying, said Christopher Wood, chief strategist at CLSA Ltd. The benchmark Shanghai Composite Index has declined 8.3 percent this year, the second-worst performer among 94 global stock gauges, on concern government measures to curb credit growth and control inflation will hurt growth. "The reason China is down the most is because the Chinese government is the first to make tightening moves," Wood said. "This correction, which may run for two to three months, is the opportunity to invest in banks, property, consumer stocks in China."

QROPS Advice: Finance News: World Recovering Faster Than Expected

2010-02-03T07:38:00.000-08:00

The world economy is recovering at a faster-than-expected pace but still needs government stimulus efforts to keep it going, the International Monetary Fund said on Tuesday. The IMF raised its forecast for world economic growth in 2010 to nearly 4 percent, up from an estimate of 3.1 percent last October. It expects the U.S. economy to grow by 2.7 percent this year, significantly higher than its previous forecast of 1.5 percent.

QROPS Advice: Investment News: Big Ideas for 2010

2010-02-03T00:48:00.000-08:00

This month I thought I'd share with you with my hit list of individual shares for 2010 – these are companies or funds that have been promoted on to my watch list and are likely to find their way into my portfolio at some point during the year.

Three themes dominate - the first and most important is emerging markets, but with a very selective twist. I want really interesting growth stories that have a great long term story. I'm also keen to keep building up my existing heavy utility/infrastructure holdings and my oil equipment, mining and oil company investments. Lastly I'd like to slowly build up a stronger value tilt but around special situations as I like the idea of a larger margin of safety in what I think will be very dangerous markets.

In the emerging markets space I'm interested in

• VinaCapital Vietnam Opportunities (VOF) which is a closed-end fund last seen trading at around $1.50 compared to an NAV of close to $2.40 a share. Everyone I talk to in the fund management world really rates the fund management firm Vinacapital as the best in the sector and I'm a long term bull on Vietnam. I'm waiting for an entry point below $1.35

• I've been carefully watching Agriterra for some time now and I think the point may soon come where I take a punt. This is run by a bunch of CAMEC veterans and is probably the purest London listed play on African agriculture and food processing. I've held back from taking the plunge up until now because of worries about the company's low profile in London, but at two recent fund conferences I talked to professionals who said they had recently built stakes in Agriterra.

• Ocean Wilsons is a brilliant way of buying into the Brazilian story at a reasonable price. This London listed vehicle has two major assets, the first is a dominant shareholding in the highly regarded local Brazilian infrastructure and marine services firm Wilson & Sons plus there's also a massive wad of cash and market investments sitting on the balance sheet as an added extra. Wilsons could be a big beneficiary - via its tugs division - of the massive investment by Petrobras in its deep-water fields.

• The Indonesia Fund is a US-listed, Aberdeen-managed closed-end fund. It's not especially cheap and Indonesia has had a good run, but again I'm very interested in the big, long term picture here. Indonesia has a large range of quantity of blue chips with strong financials and a great growth story. I'd like a small investment in this but I'll probably wait until emerging markets pull back a little more.

Over in the infrastructure and resource and resource equipment space I have four potentials…

• I like the look of an US-listed infrastructure fund called Brookfield Infrastructure Partners. This closely resembles British listed peers such as 3i Infrastructure and HICL (HSBC's infrastructure vehicle) but it boasts a more diversified portfolio, a better yield and a greater discount to NAV.

• International Power is likely to find its way very soon into my portfolio. The whole shennanigans about its abortive takeover doesn't faze me - either it does get taken over for north of 400p or it will continue to produce some very solid results, and a great dividend yield. I also like it's very diversified mix of utility assets

• Avanti Communications is not your usual infrastructure play in that it's expensive and loss making, but a number of the UK brokers have been featuring this as one of their big bets for 2010 based on the firm's HYLAS satellite roll out plans over the next few years. This is my best UK growth punt

• Last but no means least I like the look of Pressure Technologies which is a relatively cheap, UK based manufacturer of high pressure, seamless steel gas cylinder. This is a play on a number of themes including biogas, the government's new-for-old boiler initiative and the oil equipment industry. All for a PE of well under 9, a decent balance sheet and a growing order book.

My last big theme is that value bias. I have my sights set on two ideas, both US based (I have a growing US bias because I believe the American economy will recover very strongly over the next year).

• Hedge fund Third Point Offshore has shares listed on the UK market at a chunky 20 per cent dividend to NAV. I've been watching Dan Loeb's idiosyncratic but successful fund management style for some time and I strongly recommend that investors have a look at his quarterly letters. Mr Loeb is famous in the US for his outspoken shareholder activism but I'm more attracted by his unconstrained contrarian take on a range of asset classes including beat-up corporate bonds and mortgage-backed securities.

• Mr Loeb's also put me onto a US firm called TransDigm, which is an aerospace aftermarket supplier and a classic value stock with strong margins and great recurring revenues.
Written by:David Stevenson
http://www.investorschronicle.co.uk/Columnists/GuestColumnists/article/20100202/cdc2eebe-0fe5-11df-ba8b-0015171400aa/Big-ideas-for-2010.jsp

QROPS Advice: Use your allowances to cut IHT

2010-02-03T00:35:00.000-08:00

Following a change in the law in 2008, when a widow or a widower dies their estate can benefit from any unused inheritance tax (IHT) allowance their partner had - as well as their own. Estates up to the value of £325,000 do not incur IHT, but those above this will incur a 40 per cent tax.

Therefore if neither partner had used any of their allowance - and the first of the couple to pass away left everything to their spouse (assets passed between spouses do not incur IHT) the remaining partner would have a nil-rate band of £650,000. If the one partner had used some of their IHT allowance, their spouse would get however much of their £325,000 they had not used in addition to their own £325,000.

But the ability to transfer the nil-rate band between married couples does not apply to individuals whose spouse died before March 1972.

"Essentially, before March 1972, when a modest spouse exemption was brought in, someone who died and left their property entirely to their surviving spouse was always chargeable to estate duty, the forerunner of modern day IHT," says John Whiting, tax policy director at the Chartered Institute of Taxation. "They used up all of what we today call the nil-rate band, which means that under today's rules the surviving spouse has no additional nil-rate band available on their death."

Although this only affects a small number of elderly widows and widowers, the Low Incomes Tax Reform Group has been campaigning for the rule to be changed. It says those affected are mainly long-widowed elderly women who had to cope as single parents for many years and feel unfairly treated.

The Low Incomes Tax Reform Group drafted amendments to the Finance Bill 2008 which it discussed with HM Revenue & Customs (HMRC) and the responsible minister, Stephen Timms, but this was rejected at the end of 2009. HMRC's main objection is that opening up and sorting out old estates would be difficult and could create inconsistencies with estates on which tax was paid at the time.

The Low Incomes Tax Reform Group in turn argues that it does not want to reopen estates but to treat the cases as other deaths of spouses after March 1972. The group argues that the change would be very simple, and as so few people are affected the government would lose a negligible amount of money.

The campaign is backed by Rob Marris, Labour MP for Wolverhampton South West, one of whose constituents is affected. She is a widow whose husband died in 1969 whose only asset is her house. As this is worth more than £325,000 she cannot leave it IHT free to her children.

I HT mitigation strategies

Whatever your situation, you have a number of allowances that can lower your IHT bill.

Everyone can give away £3,000 a year IHT-free, and if you have not used your allowance in the previous year you can carry this forward and give £6,000 in that year. "Many people do not use this - there are low levels of awareness," says Julie Hutchison, head of estate planning at Standard Life. "Another hugely under-used allowance is gifts from surplus income."

If you have excess retirement income you can make gifts from it that are immediately tax exempt. This is in addition to your annual £3,000 gift allowance.

You can do this by looking at your income for the year and giving away what you don't need for your spending requirements. It can be declared via the IHT 403 form which you can download from the www.hmrc.gov.uk website. The website also provides advice on the detailed paperwork required to support this claim.

"You do not need to give away the same amount to the same person every year," says David Kilshaw, head of private client advisory at accountants, KPMG. "But it is advisable in the first year you do it to write a letter to the person you are giving it to saying you may not always give it to them and it may not be the same amount each year."

You can also make a potentially exempt transfer. This allows you to make a gift of any amount without incurring IHT, as long as you live for seven years after you make the gift.

Another alternative, is to put the assets you wish to pass on into a trust. This incurs a chargeable transfer of 20 per cent IHT on gifts to most types of trust over £325,000, rather than 40 per cent. Trusts can be beneficial in that they protect the assets for the person to whom they are being gifted to.

For example, if the person to whom the money in trust is being given is undergoing divorce proceedings, their divorcing spouse could not claim the money in a trust in a settlement. Or if the person to whom the trust is being gifted has a business that goes bankrupt, this cannot be clawed back by debtors as it is not counted as part of their estate.

If your only asset is your house it is more difficult to mitigate IHT, but you could sell the house, move to a smaller property, and pass on the cash you make using one of the above methods.
Written by:Leonora Walters

QROPS Advice: Investment News: WORLD'S BEST MARKETS

2010-01-29T09:24:00.000-08:00

A good index-tracking fund can and should be one of the core components of any diversified portfolio. But there's a problem with ETFs. They provide a simple, efficient and cheap solution to lots of investment difficulties yet private investors have been slow to buy them. There are several reasons for this including our continued love affair with star fund managers.
But a bigger problem is probably what's been called the 'biscuit tin' problem – defined by one chief executive of an ETF firm as "investors not knowing what the heck our ETF actually tracks. We'd say it tracked the so and so MSCI index and they'd look at us blankly".
This brutal assessment gets to the heart of the problem. To get the best from low-cost trackers, you need to understand what the fund is actually tracking first.
It's all about the index
Indices are not all equal. Track an imperfect index that's poorly constructed, overweight in just a few shares (say banking stocks in 2008) and you'll end up destroying a large chunk of your money despite all the academics' talk about efficient markets and perfectly optimised portfolios. But there is a huge range of major markets that can be tracked using mainstream indices – nearly all the big asset classes and markets boast an index that's become a part of everyday language. In the US, for example, the level of the Dow Jones Industrial Average or the S&P is the subject of intense daily discussion on a number of major news programme s, while here in the UK all the major news organisations talk hourly about the current level of the FTSE 100 index of major London listed blue-chip companies.
The key for investors is to work out which indices – and markets – really matter and then work out how best to invest in these markets. FTSE Group alone calculates more than 120,000 indices.
In many liquid, mature markets index-tracking funds are probably the cheapest and arguably the best way of buying long-term exposure. Remember that an index-tracking fund will only ever buy the most popular stocks that are increasing in value – it's a giant weighing machine that is heavily influenced by momentum, so if a market and thus an index is overweight popular mining stocks, expect the ETF to be equally overweight.
by: David Stevenson

QROPS Advice: Investment News: The case for multi-asset funds

2010-01-29T09:21:00.000-08:00

The first month of 2010 has been marked by a deluge of multi-asset fund launches. A week ago, Heartwood Wealth Management announced the launch of its CF Heartwood Cautious Multi-Asset and Growth Multi-Asset Funds, which will be followed soon with the launch of the Balanced and Balanced Income Funds. The new multi-asset funds will invest primarily in third party funds, including alternatives, structured products and derivatives as appropriate.
Other recent launches include Prudential's range of five multi-asset funds with different risk levels: Defensive, Cautious, Cautious Growth, Balanced and Adventurous, and Scottish Widows Investment Partnership (SWIP)'s SWIP Multi-Manager Optimal Multi-Asset Fund, a higher risk/return follow-up to its cautious SWIP Multi-Manager Diversity Fund launched in 2007. Allianz Global Investors is another provider expected to launch a multi-asset fund.
The recent hike in multi-asset fund launches brings some truth to predictions by industry players and independent financial advisers (IFAs) that multi-asset funds will be the "hot financial product" of 2010. The term 'multi-asset funds' refers to funds which invest across several asset classes and fund managers, which means investors are not exposed to the market gains or losses of just one asset class. Ultimately, multi-asset managers create the potential for capital growth and the conditions where the better performers may offset the poor performers.
Investors' desire to spread investment risk, coupled with the low interest rate environment in which it is hard to get returns on cash, have been touted as some of the reasons behind the increased focus on diversified strategies.
Another, more pressing, reason behind the spate of launches is the need for IFAs to meet the demands of growing regulation, such as the Financial Services Authority's (FSA) Treating Customers Fairly (TCF) initiative and the Retail Distribution Review (RDR). These require IFAs to ensure a fair deal for consumers and consider as wide as possible a range of investment products to meet client risk and investment objectives.
So what benefits do multi-asset funds hold for the private investor?
By: Leonora Walters

QROPS Advice: Investment News: Spotlight on Technology Funds

2010-01-29T09:15:00.000-08:00

Following the much-publicised bursting of the 'dot.com' bubble in 2000, many investors have understandably ignored technology funds as being part of their investment portfolio. Catastrophic losses followed unprecedented excitement around a new sector that promised so much yet ultimately delivered, for some, almost nothing.
Technology funds became a victim of their own success in a very short space of time, in January 1999 investors put just GBP5m into technology funds, in January 2000 they attracted GBP238m (source: Investment Management Association (UK)). The future value of technology equities was vastly over estimated, and when these expectations were not met, the industry duly collapsed.
However, anybody that has kept a close eye on the development of technology funds since 2000 will know that it now represents a very real, if not relatively unknown, investment opportunity (the Lipper Science and Technology Funds sector average returned 69.31percent in 2009). Learning from the mistakes of a decade ago, technology companies started focusing on profits and cash flows rather than just revenue growth, so much so that the technology sector is now in very healthy financial shape, with either little or no balance sheet debt. More importantly, valuations based on technology companies represent an honest reflection of future worth, unlike they did 10 years ago.
Whilst the sector didn't escape the effects of the recent global recession, it has emerged relatively unscathed owing to an almost unique appeal to both retail and business markets. Consumers' seemingly insatiable appetite the latest technology gadgets; mobile phones, multi media and gaming consoles, plasma and LCD TVs etc., coupled with need for IT infrastructure solutions to accommodate the rapid growth of many financial centres based in emerging market economies, has served as a regular and diverse income stream for many new and established technology firms.
From innovative smartphones to 'tablet' computers and 3-D TV, technology consumers and investors have a lot to look forward to in 2010 and beyond. Warren Tennant, manager of the Hansard Invesco Global Technology fund (MC23, available in both HIL and HEL) has greater confidence in the medium-term outlook and continues to be encouraged that the coordinated global stimulus will positively affect the global economy. Going forward, he sees the possibility for improvements in credit markets, stabilisation of demand patterns and conditions for secular growth. And have consistently highlighted the long-term positive trends for technology in the team outlook.
Hansard has a variety of fund links across a diverse range of asset classes, whether your clients have a conservative, balanced or adventurous outlook. To find out more about any of our fund links please contact your Hansard Account executive who will be able to assist you further.

QROPS Advice: Investment News: Home prices in 20 U.S. cities rose in November

2010-01-29T09:11:00.000-08:00

Home prices in 20 U.S. cities rose in November for the sixth consecutive month, signalling the industry that precipitated the worst recession since the 1930s is stabilizing. The S&P/Case-Shiller home-price index increased 0.2 percent from the prior month on a seasonally adjusted basis, after a 0.3 percent rise in October, the group said on Tuesday. The gauge was down 5.3 percent from November 2008, exceeding expectations and the smallest year-over-year decline in two years.

QROPS Advice: Investment News: France's growth may exceed forcasts

2010-01-29T09:07:00.000-08:00

France's 2010 economic growth may exceed the government's 1.4 percent forecast, President Nicolas Sarkozy said. France's economy emerged from recession last year, growing 0.3 percent in the second and third quarters, and prompting the government to double its economic forecast. Sarkozy was more confident than his finance minister on employment, pledging an end to job losses in the "coming weeks, months."

QROPS Advice: Investment News: German business confidence rises

2010-01-29T09:02:00.000-08:00

German business confidence rose more than economists forecast to an 18-month high in January as the global economic recovery boosted exports. Rising foreign sales, fuelled by Asian demand, may help offset a slide in domestic spending and ensure Germany's economy continues to expand. The government said last week it will raise its 2010 growth forecast to 1.5 percent from 1.2 percent even as some of its stimulus measures expire. Europe's largest economy shrank 5 percent last year, the most since World War II. Tuesday's report "laid to rest some of the concerns that the economy is running out of steam," Carsten Brzeski, an economist at ING Group said.

QROPS Advice: Investment News: Chinese banks have begun restricting new loans

2010-01-29T09:00:00.000-08:00

Chinese banks have begun restricting new loans, responding to a push by regulators to contain credit after a surge in lending in the first half of this month. The China Banking Regulatory Commission last week said lenders that failed to meet any of more than a dozen regulatory requirements have been told to limit lending. The watchdog said not all banks have been asked to rein in credit. "Five major banks we have contacted today all suggested they received instruction from banking regulators last week to slow down new lending, but not stop new lending," HSBC Holdings Plc economist Hongbin Qu said.

QROPS Advice: INVESTMENT RULES OF THE ROAD

2010-01-29T07:58:00.000-08:00

Diversification. It's a core principle of investing. Don't put all your eggs in one basket, and all that. Multi-asset funds promise diversification at a stroke, because they invest in various asset classes rather than just shares, just bonds, just property and so on. But you still need a manager who knows what he's doing. Call 0044 (0)1664 444625 for professional impartial advice.

Will annuity rates rise in 2010? | This is Money

2010-01-28T10:37:00.000-08:00

Will annuity rates rise in 2010? | This is Money

EU ruling could axe pension income by 20% | This is Money

2010-01-28T10:08:00.000-08:00

EU ruling could axe pension income by 20% | This is Money

EU proposals force Axa to pull pensions | This is Money

2010-01-28T10:06:00.000-08:00

EU proposals force Axa to pull pensions | This is Money

QROPS Advice: Investment News: UK economy out of recession

2010-01-28T02:58:00.001-08:00

The UK economy has come out of recession, after figures showed it had grown by 0.1% in the last three months of 2009. The economy had previously contracted for six consecutive quarters - the longest period since quarterly figures were first recorded in 1955. There have been recent recovery signs - last week UK unemployment fell for the first time in 18 months. Bank of England policy makers will study the data as they assess the strength of the recovery and decide next week whether to halt bond purchases and prepare to withdraw emergency stimulus measures.

QROPS Advice: Finance News: Obama Bashes The Banks

2010-01-27T07:21:00.000-08:00

President Obama appears to have developed a grim determination to bash the banks. During this month he has announced two major schemes that will hit them hard - a $90bn (£56bn) levy over the next decade to grab back the government cash used to prop-up US lenders, and a plan to cut risk by stopping US banks from undertaking both consumer banking and riskier investment banking business. And the fall-out has already affected UK banks.
Share prices in all UK banks have fallen since the levy was announced in mid-January, with Barclays amongst the hardest hit - its shares are down 14 per cent since 18 January. That's because it's Barclays that could have the most to lose after buying Lehman's north American investment banking operations. Indeed, some analysts think Barclays could yet be forced to hive off its Barclays Capital investment banking arm altogether, meaning the loss of a major growth centre. Meanwhile, Royal Bank of Scotland’s (RBS) plan to sell its US commodities trading arm, Sempra, to JP Morgan for about £2.5bn could now run into difficulties.
And while none of the UK's lenders received any direct state support from the US banking bail-out, they must also contribute to Obama’s levy - as much as $10bn in total over the next decade according to broker Execution Ltd. The broker reckons that Barclays could face a $5.6bn bill, HSBC co uld be hit for $3.8bn and RBS could have to pay-up to $1bn.
But while Obama's plan to split retail and investment banking has received support from Bank of England Governor, Mervyn King, the government here remains lukewarm. The UK government prefers tougher capital requirements and 'living wills', setting out how banks can be broken up in a crisis without state help. City minister Lord Myners reportedly said: "I don't see anything in the Obama proposals which makes us want to change our line of travel." And rather than a US style levy, the government continues to favour an internationally-coordinated tax on financial transactions.
by John Adams

QROPS Advice: Investment News: IMF Warning

2010-01-27T07:06:00.000-08:00

Countries have emerged faster than expected from the global recession, but the International Monetary Fund warned on Tuesday that managing post-crisis growth is becoming complicated by the divergence in advanced and developing economies. The IMF presented a brighter outlook for this year, with the world economy forecast to expand at a 3.9 percent pace instead of the 3.1 percent estimate given in October. Global growth is expected to continue to pick up in 2011, with the forecast edging up to 4.3 percent from 4.2 percent.

QROPS Advice: Investment News: Easing off the property rally

2010-01-26T13:37:00.000-08:00

Thursday 4 February sounds like an unremarkable date. However, economists fear it will be the day the mini-boom in the UK commercial property market comes to an end. Why? It is when the Bank of England's Monetary Policy Committee is expected to call a halt to its £200bn programme of quantitative easing (QE).
Crudely described as 'printing electronic money', QE has pumped cash into the economy through the purchase of government bonds and corporate bonds in the hope this will inject liquidity into the financial system.
Since March 2009 when the programme started, £200bn has been spent on this artificial prop to the economy. The knock-on effect for both commercial property values and the FTSE 350 Real Estate sector has been extremely positive.
QE made property look cheap. The principal side-effect of QE has been a weaker pound, meaning foreign investors have enjoyed a 'double discount' on UK property through the currency advantage. Currently, foreign buyers account for around 80 per cent of all commercial investment transactions.
Another partial consequence of QE, low bond yields, means property returns are also attractive to funds and institutions, who have all come back into the market. Increased demand for property assets from cash-rich buyers has caused values to rapidly inflate, with the industry benchmark IPD Index registering a record monthly rise in December.
However, there are gro wing fears that the suspension of QE will stop the nascent recovery in its tracks.
Written by: Claer Barrett

QROPS Advice: Investment News: Playing with BRIC's

2010-01-25T10:38:00.000-08:00

Sanjeev Shah, fund manager of the Fidelity Special Situations Fund, buys into the longer-term emerging markets story, but does not believe that commodities are the best way to play it.
Playing the BRICs
"I am not a believer in the commodity story and have a more negative view than some on the demand/supply balance for commodities," says Mr Shah. "Leaders in the first part of a bull phase are rarely in that position in the next phase."
Mr Shah regards mining stocks in particular as "value traps" on the grounds that there is potentially a lot of momentum in the name, but their valuations are not supportive. "The price to book ratio on these stocks is at a 50-year high driven by sentiment because of their emerging market exposure," says Mr Shah. "I only think that a stock is a good investment if it has long upside potential, and in the case of miners it is not there."
As oil stocks, in particular exploration and production companies, did well in the early part of 2009, Mr Shah reduced holdings.While he still has some exposure in this area, given that valuations here are better than for miners, he adds: "I do not have a high level of conviction on this for 2010/11, as the stock market has re-rated a lot of commodity producers to historically high extremes. For emerging markets exposure I prefer to buy franchises outside the commodity s pace."
Examples include FTSE 100 advertising and communications agency, WPP, which Mr Shah says generates around 28 per cent of its revenue from the BRIC economies (Brazil, Russia, India and China). WPP has also not participated in recent equity rallies, and fits in well with Mr Shah's investment approach, which he describes as a "strong contrarian philosophy".
Identifying special sits

Mr Shah identifies a special situation by keeping his focus on valuation anomalies - stocks which he considers to be materially mis-valued - 25 per cent or more. "I look for stocks unloved by the sell side and other investors, and opportunities which represent recovery situations," he explains.

This will often include mis-priced growth, takeover potential or a hidden aspect, which could include an unnoticed division within a company, or an aspect of its business model and how it is developing. "Yell is perceived as a print directory, but 25 per cent of its revenues comes from online activity, while it also provides leads for small businesses," says Mr Shah.

In terms of merger and acquisition activity (M&A), there could be some opportunities ahead. "M&A is at historically low levels, but there are improvements such as the availability of financing via debt markets. I expect there will be more appetite," says Mr Shah. "Examples of stocks which could be taken over include online gaming stocks."

Special situation investing can often mean a sacrifice of shorter-term returns, as companies take a while to turn around. In 2008, the Fidelity Special Situations outperformed its peers in the UK All Companies fund sector as well as the FTSE All-Share. However, in 2009, the fund got left behind with just under 29 per cent - as opposed to 30 per cent for the sector and All-Share.

Over the last year to 20 January, the fund is ahead with nearly 45 per cent, compared to 38.8 for the sector.

Favourable conditions

Mr Shah adds that while the fund's mandate and flexibility allows him to adjust to different market conditions, at present the environment is very good. "This is because valuations are still cheap relative to history, although they were much cheaper in 2009, and investor sentiment is still negative. There are some good bottom-up opportunities and we are finding things we like," he says.

The fund has a large position in media stocks which accounted for nearly 18 per cent of assets at the end of November. "These had been weak for around 10 years because of the online threat and fragmentation," says Mr Shah, "but BSkyB and Pearson offer growth at a reasonable price, while Yell is a recovery situation".

Mr Shah also sees some good organic growth potential among certain technology stocks in which the portfolio is overweight. "Technology had its own crisis during the tech bubble at the turn of the Millennium, but has done better in this crisis because these companies' balance sheets are now robust. Among small caps, I own around 8 per cent of Kofax, while I also hold mid-cap Logica (one of the fund's largest holdings), which has turned around under new management and could be involved in takeover activity."

In late 2006, Fidelity Special Situations gained Ucits III powers to use derivatives. Mr Shah comments: "Special Situations is a long only fund in the main, however, through using derivatives selectively I have added value. I short individual stocks and am short on 10 in the portfolio currently, which account for around 5 per cent of the overall value of the fund."

At times, such as early 2008, Mr Shah will also buy put options and has shorted the mid-cap index. He says: "If I become more negative I will do this again, but do not plan to do it at this moment in time."

by: Leonora Walters

QROPS Advice: Taxation of ‘Non-Residents’ Living in Greece

2010-01-23T10:57:00.000-08:00

Non-tax residents are taxable only on their income from Greek sources or income related to Greek duties, at the same tax ratesmapplicable to tax residents (as discussed under ‘Income Tax’ on the first page), with the exception of an additional 5% on the taxmfree bracket. Non-residents are not entitled to any of the deductions and allowances that may be claimed by residents, unless theymare EU residents who earn at least 90% of their worldwide income in Greece.
Non-resident aliens are taxed on salary earned for work performed in Greece or work considered to be ‘Greek related’, regardless of where payment is made and regardless of where it is remitted. Non-residents are not taxed on compensation relating to services performed outside Greece and related to non-Greek duties.
Double taxation treaties cover the taxation of the local income of expatriates working in Greece. In order to qualify for treaty treatment, the expatriate must be a resident of a treaty country and must fulfil all conditions provided by each treaty regarding the country of taxation. Alternatively, the expatriate must be employed by, or render their services to, an individual or legal entity of the treaty country where they maintain permanent residency. Particular treaties may contain other conditions.

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Greece_2009.pdf

QROPS Advice: Taxation of Expatriates Living in Greece

2010-01-23T10:54:00.000-08:00

Subject to relevant tax treaty provisions, income tax is payable by all individuals earning income in Greece, regardless of citizenship or place of permanent residence. Permanent residents are taxed on their worldwide income. There is no clear definition
of “residency” in Greek tax law and individuals residing in Greece and indicating intent to remain permanently are considered to be tax resident.
Greece has concluded treaties for the avoidance of double taxation with over 40 countries.
There is no special tax regime for expatriates, although relief may be obtained from payment of social security contributions if suitable certification is received from the individual’s home state and submitted to the Greek social security authorities.

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Greece_2009.pdf

QROPS Advice: Taxation of ‘Non-Residents’ Living in Germany

2010-01-23T10:51:00.000-08:00

Individuals who are not resident in Germany will be subject to ‘limited tax liability’ only on such income from German sources that are listed in the German Income Tax Act. A non-resident taxpayer will have to file a return and receive an assessment only if their German income is not subject to withholding tax. Where income is subject to withholding tax, the income tax liability is normally
settled through the withholding system and no returns or assessments are required.
The solidarity surcharge also applies to non-residents, but non-residents are not subject to church tax.
In the case of dividends sourced in Germany and payable to non-residents, withholding tax applies at the new rate of 25% with the 5.5% solidarity surcharge added thereon. However, in practice the tax due may be less owing to double taxation treaties.
Nevertheless, the German payer generally has to withhold tax at the higher rate of the two countries. Where the withholding tax has been deducted, the taxpayer may apply for a refund of the tax withheld in excess of the withholding tax applicable under the relevant double taxation treaty. Savings interest sourced in Germany and paid out to non-residents are not subject to withholding tax at source.
In the case of inheritance tax when neither the deceased person nor the donor are resident in Germany, only certain assets situated in Germany are taxable, e.g. real estate and business assets.
Applications for more favourable treatment
Non-resident individuals who derive at least 90% of their taxable income from German sources, or where the non-German income does not exceed a certain level, may apply for more favourable taxation in Germany in a manner similar to the taxation of German
residents.
A non-resident spouse of a resident tax payer can upon application be treated as resident in Germany if this is more beneficial, provided that the resident tax payer is a citizen of an EU/EEA member state and the spouse lives in a member state of the EU or EEA.

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Germany_2009.pdf

QROPS Advice: Taxation of Expatriates Living in Germany

2010-01-23T10:47:00.000-08:00

The basis for taxation in Germany is determined by an individual’s residential status. Individuals who are residents of Germany are subject to ‘unlimited tax liability’, from the very first day of arrival in Germany, except insofar as a tax treaty assigns the right to impose tax on any income in favour of another country. An individual will be considered a resident of Germany with ‘unlimited tax liability’ under two circumstances:
• They take up residence in Germany by, for example, purchasing or renting a property for future indefinite use, or
• They have a habitual abode in Germany, i.e. a continuous presence in Germany for more than 6 months.
The German Income Tax Law offers very important deductions, which often apply to expatriates and which are unknown in other countries. These include income related expenses which are deductible from taxable income received by an employee, e.g. moving expenses, rent for a German apartment, expenses for returning to the home country, flights home under the ’double household regime‘ and telephone costs.
Inheritances and gifts are often taxable in both Germany and the expatriate’s home country. However, in some cases, national legislation allows taxes paid in one country to be deducted from the tax in the other country. Germany has an extensive network of tax treaties preventing double taxation on income signed with about 80 countries. Inheritance tax agreements are signed with a relatively small number of countries, such as Austria, Denmark, Greece, Sweden, Switzerland, and the USA. An inheritance agreement with France is currently in a discussion.
German social security contributions do not, in principle, apply to individuals who:
• are seconded to Germany for a limited period (3 to 5 years or, under some social security treaties, from 6 to 8 years), and
• work on behalf of a foreign (non-German) employer on their payroll or account, and
• have costs of the assignment charged to the host company (this is only possible with a cost-plus agreement to avoid German
social security)
The decision as to whether the provisions for a secondment are met is made, on application, by the social security authorities in the home and/or in the host country.

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Germany_2009.pdf

QROPS Advice: Taxation of ‘Non-Residents’ Living in France

2010-01-23T10:45:00.000-08:00

If an individual is deemed to be a non-resident for tax purposes, they are subject to income tax on their French-sourced income
only. However, a basic distinction is made depending on whether or not the non-resident taxpayer has a dwelling at his
permanent disposal in France. If not, the general rule is that he/she is taxed exclusively on French-sourced income using the
same income tax rates as residents. However, the rate must not be less than 20% of income, unless it can be proven that the
overall rate of French tax on his worldwide income would be lower than 20%, in which case the tax liability is reduced
accordingly. If the non-resident taxpayer has one or more dwellings in France, and subject to large exceptions, he/she is taxed on
a deemed income equal to three times the annual rental value of his/her residence(s). If their French-sourced income exceeds
this deemed income, they are subject to tax on the basis of their French-sourced income. In general, this flat tax does not apply
to residents of countries which have concluded a tax treaty with France.
Non-residents who are liable to French personal income tax on employment income are subject to withholding tax. Following
deduction of the mandatory French employee social security contributions and the standard 10% salary deduction, employment
income is then subject to withholding tax at source by the employer, at the rates of 0%, 12% and 20%. The withholding tax at
0% and 12% frees the corresponding portion of net annual salary from further income tax. The French complementary personal
income tax is computed on the part of the remuneration liable in the 20% band. It is computed based on the French normal
income tax rates, with a minimum of 20%. If the resulting tax is lower than the withholding tax already paid at a rate of 20%,
the total withholding tax is the final tax liability of the employee. If the resulting tax is higher than the 20% withholding tax, the
20% withholding tax levied by the employer is offset but an additional income tax is due by the employee.
In respect of social security contributions, France has entered into agreements with more than 40 countries. Under these
agreements, where expatriates are temporarily transferred to France, they may remain under their home country’s social security schemes.

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/France 2009.pdf

QROPS Advice: Taxation of Expatriates Living in France

2010-01-23T10:40:00.000-08:00

An individual is deemed a French resident for tax purposes if:
􀂃 They have a home in France or, if they have no home in France or abroad, France is their principal place of abode; or
􀂃 France is the place where they perform principal professional activities; or
􀂃 France is the centre of their economic interests.
Only one of these criteria needs to be met in order to qualify as a French resident for tax purposes. If an expatriate working in France is considered to be a resident in both France and in their home country, reference will be made to the relevant tax treaty, if any, to determine the country in which the individual will be regarded as resident. France has an extensive network of double taxation treaties, with over 110 negotiated and in place.
Allowances and annual progressive tax rates apply in the same way to part-year and full-year tax residents. However, because of French income-splitting rules, a married taxpayer with children may not reach the maximum marginal tax rate during their first year in France. This means that there may be a significant benefit to an expatriate in shifting income into the first year or last
year of the assignment, depending on the date of arrival/departure. When a French tax resident leaves France during the course of a tax year, they remain liable to French personal income tax on the aggregate of world-wide income earned as a French tax resident and also their sole French-source income earned as a non-French tax resident, subject to the provisions of an applicable tax treaty.
A new ‘inbound assignee’ regime came into force on 6th August 2008 (Article 155B of the French Tax Code) and is applicable to employees assigned to France by their foreign employer as from 1st January 2008 or to employees directly recruited abroad by a French company as from 1st January 2008. In both cases, the individuals must not have been French tax resident during the five calendar years preceding the year of starting their assignment/employment in France. Under this new regime, individuals
assigned to France by their foreign employer can benefit from a French income tax exemption in relation to salary supplements connected with their assignment. For employees directly recruited abroad, the new regime would offer an option with regard to their tax treatment as follows:
• The exemption of the actual amount of salary supplements received; or
• In the event that there are no such salary supplements, upon election, a flat rate exemption of 30% of the total remuneration.
However, the new regime provides for a “floor” of reportable compensation (i.e. the taxable compensation cannot be lower than the taxable remuneration paid for a similar job in the same or a similar company established in France). It also provides for an exemption of part of the remuneration based on foreign workdays. However, the total exemption (i.e. on salary supplements – actual or not – and foreign workdays) is limited to 50% of the total remuneration, or the individual can elect for an exemption of French tax connected with foreign workdays limited to 20% of the taxable remuneration.
The availability of this new inbound regime is limited to five years as from the year of arrival.
Inbound assignees who benefit from the new inbound regime can also exempt 50% of the amount of their foreign interest, dividends, royalties, capital gains and industrial and intellectual property gains, under certain conditions.

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/France 2009.pdf

QROPS Advice: Taxation of ‘Non-Residents’ Living in Belgium

2010-01-23T10:37:00.000-08:00

The taxation of non residents living in Belgium is different from that of residents. Non-residents are taxed on Belgian-source income only, namely income from employment in Belgium, Belgian-source property income, interest and dividend income paid by Belgian companies, as well as Belgian-source capital gains. They are not taxed on foreign capital gains or foreign investment income received outside the country. If, on death, a non resident leaves property in Belgium, an inheritance tax liability arises, with the tax chargeable being based on the gross value of the property.
Special Tax Regime for non-resident expatriates Expatriates in Belgium are generally regarded as Belgian tax residents and are therefore subject to Belgian income tax on their worldwide income. However, the Belgian authorities have encouraged multinational companies to transfer foreign executives to Belgium by introducing special tax concessions to non-Belgians who are ‘temporarily’ working in the country. The tax concessions allow such expatriates to be treated as non-residents for tax purposes. The concessions do not apply to inheritance tax.
To qualify for these special concessions, a number of factors are considered e.g. ‘does the employment contract specify a limited time?’, ‘has the expatriate’s family moved to Belgium?’, ‘is the expatriate’s centre of economic and/or personal interest in Belgium?’, and ‘is the employment with a qualifying entity?’
Under the special concessions:
• Only Belgian source income is taxable, including property income and dividend income.
• Additional taxes are payable at 7% of total federal income tax payable.
• Capital gains tax applies only to Belgian-source gains.
• Under certain circumstances, temporary expatriate workers who qualify for the special regime may be exempt from paying social security contributions (typically up to 5 years).
Expatriates who benefit from the non-residents’ special tax regime may not invoke double taxation agreements because they only apply for the benefit of Belgian residents. For certain expatriates qualifying under the special regime who originate from other EU Member States, the EU Savings Directive may have an impact on their Belgian-source interest payments, with a withholding tax of 20% being levied on such payments (increasing to 35% as from July 2011).

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Belgium_2009.pdf

QROPS Advice: Taxation of Expatriates Living in Belgium

2010-01-23T10:32:00.000-08:00

An expatriate living in Belgium will become liable to Belgian income tax, as residence rather than domicile is the relevant determining factor.
A resident of Belgium is defined as someone who has a family home or a place from where they manage their personal wealth/business/occupation in Belgium. People are automatically presumed to be resident of Belgium if their family lives in Belgium
and/or if they are registered in the Belgian population register.
Where an expatriate is resident in Belgium for only part of a tax year, income for that period is treated as if it were for a full year and full annual allowances can be claimed, as can the full bands for progressive rates of tax.
Expatriates that become permanently resident in Belgium are liable to inheritance tax on their worldwide assets. Any gifts, not already subject to gift tax, made three years prior to death will be added to the value of the estate. Inheritance tax rules differ according to the region where the deceased had their fiscal residence and the heir’s relationship with the deceased.
Foreign inheritance taxes paid on property situated abroad owned by a deceased Belgian resident can be deducted from Belgian tax payable on that property under certain conditions.
Expatriates may be considered to be tax resident in more than one country, but double taxation treaties between Belgium and many expatriates’ home countries should ensure that double taxation is avoided. Belgium has negotiated over 90 double taxation agreements.

http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Belgium_2009.pdf