10 tips for international pension transfers

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Overseas Pension Transfers

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%

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

Gibraltar set to resolve QROPS deadlock

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

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

Gibraltar officials declined to comment on the reports.

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

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

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

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

As reported, Gibraltar QROPS moved to suspend pension transfers from the UK after reports that HM Revenue & Customs had concerns about Gibraltar’s tax regime for retirement income.

Gibraltar taxes the pension income of people over 60 at 0%, and it is this provision that is the focus of HMRC’s concern. HMRC is said to regard a 0% tax as inconsistent with QROPS regulations
For expert QROPS advice go to 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

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