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
Thursday, 3 February 2011
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
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
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
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
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
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
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
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
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
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
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