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

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

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

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

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

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

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

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

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

For expert QROPS advice go to 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

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

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

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

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

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

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

First QROPS is launched based on new IoM rules

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

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

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

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

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

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

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

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

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

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

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

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

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

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