Qualifying Non-UK Pension Schemes - QNUPS
QNUPS were introduced on the 15th February 2010 and came about through amendments detailed in Statutory Instrument 2010/51 relating to the UK Inheritance Tax Act regulations. Before changes were made to the pension tax rules in 2006, protection from UK Inheritance Tax (IHT) applied to certain non-UK pension schemes. When the changes were introduced this exemption was unintentionally omitted which resulted in certain overseas pension schemes losing their IHT exemption. With these amendments both QNUPS & Qualifying Recognised Overseas Pension Schemes (QROPS) now enjoy exemption from
IHT.
The Plan is a tax efficient wrapper for pension assets, all funds within the Plan are free from IHT, there are no tax charges on death and the fund will enjoy tax free roll up. Contributions will be made by the member from taxed income or from personal capital, there is no tax relief on payments into the Plan. Contributions can either be single or regular (subject to minimum limits). There are no limits on the amount that can be contributed to the Plan but any transfers into the Plan must be justifiable in line with the client's overall wealth position. QNUPS are not a deathbed planning tool.
Investment choice within the Plan has very few restrictions. Permissible investments include; equities, bonds, gilts, insurance products, bullion, private & public listed company shares, commercial property and previously excluded investments known as Taxable Property; Taxable Property covers investments such as residential property, antiques, fine wine and collectables. Whilst there are virtually no restrictions on allowable investments it is important to remember that the scheme is a pension plan and a low risk strategy must be pursued.
It is possible for the member to borrow up to 25% of the Plan funds, this must be arranged at a commercial rate of interest (which will be paid to the the Plan) and must be repaid before drawdown can commence. It is also a requirement that security must be held against the loan.
Income will be paid gross from Guernsey and subject to the client's marginal rate of tax in their country of residence. It is important that each client receives tax advice in their country of residence to ascertain the tax position there. A lump sum of up to 25% of the fund can be paid to the member (tax free for UK resident members, clients in other jurisdictions will need to seek advice).
Standard retirement benefits and termination events as follows:
■ Normal Retirement Age of 65;
■ Early Retirement Age of 55;
■ Death & Permanent Disability;
However there may be greater flexibility, determined by an individual's circumstances, which will need to be considered on a case by case basis. The member must start to draw an income by the age of 75.
■ A cash lump sum benefit up to 25% of the Plan value, tax free when paid into the UK;
■ A number of flexible benefit income options to be agreed with the client such as fixed term payments and variable income options.
Upon death of the member, all remaining funds within the scheme will be free of IHT. The funds can then be used to pay a dependants pension, be held in trust for future beneficiaries or be paid as a lump sum. Again, it is vital that the member seeks appropriate taxation advice relevant to both themselves and their potential beneficiaries before registering their wishes for disbursement with the trustee. The trustee retains ultimate discretion on any distribution but the member's wishes will be carefully considered before any decision is made.
The Plan is a pension plan that will appeal to high net worth UK residents seeking an alternative to a traditional pension.
Potential clients may have maximised their UK registered pensions and are looking for alternative options or they may be restricted with the new anti-forestalling rules in the UK and are looking for greater flexibility in their retirement plan. It also provides clients with the peace of mind that all funds can be passed upon death to the member's beneficiaries free from IHT and any withholding taxes in Guernsey.
The Plan will also appeal to UK expats with a QROPS that have been non-UK resident for a minimum of 5 complete tax years and are considering returning to the UK, as a QNUPS will prevent their pension funds once again falling under the UK pension regime.
A number of expats may also still be UK domiciled with a potential liability to UK Inheritance Tax. A transfer of assets to the Plan will provide total protection against this potential liability.
In summary the plan offers the following benefits:
■ No UK Inheritance Tax liability;
■ Up to 25% tax free lump sum at pension commencement;
■ No requirement to purchase an annuity;
■ Tax efficiency: no tax on the pension assets within the Plan; pension income paid gross.
■ All remaining funds within the Plan, following death, can be distributed to chosen beneficiaries;
to make contributions with no lifetime limit;
■ Increased flexibility when taking pension income on retirement;
■ Ability to continue making contributions once drawdown has commenced;
■ Up to 25% of the Plan value can be loaned to the member;
■ Choice of investment management;
■ Wide choice of investments, including residential property;
■ Open to all nationalities;
■ No trustee reporting requirement to HMRC;
Contact Derry Thornalley on 0044 1664 444625
Wednesday, 9 June 2010
Tuesday, 18 May 2010
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
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
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
Friday, 23 April 2010
QROPS News:HMRC has finally approved the first Maltese Qualifying Recognised Pension Scheme (QROPS).
The Melita International Retirement Scheme is to be administered by Malta-based -Custom House Global Funds Services, the global funds specialist, and will be marketed by Panthera, according to a statement released by Panthera this afternoon.
As previously reported by International Adviser, a number of Maltese companies have been eagerly awaiting the chance to offer and administer QROPS, which enable UK expatriates to transfer their UK pensions abroad in a way that can be tax advantageous.
HMRC recognised Malta as a jurisdiction to which UK pensions could be transferred at the end of November, following months of negotiations. That development meant that Malta-domiciled pension schemes approved by the Malta Financial Services Authority (MFSA) were eligible for QROPS status. However, until now none had received the UK authority's approval.
http://www.international-adviser.com/article/hmrc-registers-first-maltese-qrops
As previously reported by International Adviser, a number of Maltese companies have been eagerly awaiting the chance to offer and administer QROPS, which enable UK expatriates to transfer their UK pensions abroad in a way that can be tax advantageous.
HMRC recognised Malta as a jurisdiction to which UK pensions could be transferred at the end of November, following months of negotiations. That development meant that Malta-domiciled pension schemes approved by the Malta Financial Services Authority (MFSA) were eligible for QROPS status. However, until now none had received the UK authority's approval.
http://www.international-adviser.com/article/hmrc-registers-first-maltese-qrops
Thursday, 22 April 2010
Expats enjoy a better life, says NatWest Int'l
Nine out of ten British expatriates say they enjoy a better quality of life abroad, according to the third annual NatWest International Personal Banking quality of life report.
According to the study, which was undertaken in conjunction with think tank, Centre for Future Studies, expats ascribe much of their happiness to maintaining a good work/life balance with 87% of respondents rating theirs as either excellent or good.
The survey asked expats to rate 16 key ‘life experience’ factors in their order of importance and how satisfied they are with them. Interestingly the natural environment, climate, culture and leisure, healthcare and education were all rated ahead of financial security and financial wellbeing which are rated sixth and eighth respectively.
Fewer return to UKNatWest International also found, despite the global economic downturn and the subsequent pressures put on people’s wealth, the number of expats who said they would return to the UK has fallen to 19% from 26% in 2008.
Dave Isley, head of Natwest international Personal Banking, said: “It seems the grass really is greener for Brits living abroad as our study shows.
“The fact fewer expats say they will return to the UK in the future, compared to three years ago, proves that the pace of life, work life balance and earning potential abroad means life as an expat is sunnier in more ways than one – and that they are weathering the financial storm.”
Higher WagesFurthermore, professional expats on average earn over £20,000 more than their counterparts back in the UK, according to the survey, with 92% reporting a salary increase over the past three years. The highest reported salary increase was in Hong Kong at 19% followed by the UAE at 17% and Spain at 14%.
In addition, while moving abroad often comes with fears of financial insecurity, the survey found the majority (63%) said they were comfortable with their financial position, while 27% said they were either very well off (10%) or quite well off (17%). Meanwhile, 59% said they were confident they will be better off financially in five years time.
“The dream shared by many Brits of living a happy life abroad is alive and kicking, despite the global economic factors which have to some extent affected British expats,” added Isley.
“Believe it or not, there seems to be more to having and leading a fulfilled life than just money. British expats have built their lives abroad on solid foundations - with the climate, culture and leisure, healthcare and education all deemed more important than financial security or financial well being for them.”
http://www.international-adviser.com/article/expats-enjoy-a-better-life-says-natwest-intl?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=152613-IA+20+April+10
According to the study, which was undertaken in conjunction with think tank, Centre for Future Studies, expats ascribe much of their happiness to maintaining a good work/life balance with 87% of respondents rating theirs as either excellent or good.
The survey asked expats to rate 16 key ‘life experience’ factors in their order of importance and how satisfied they are with them. Interestingly the natural environment, climate, culture and leisure, healthcare and education were all rated ahead of financial security and financial wellbeing which are rated sixth and eighth respectively.
Fewer return to UKNatWest International also found, despite the global economic downturn and the subsequent pressures put on people’s wealth, the number of expats who said they would return to the UK has fallen to 19% from 26% in 2008.
Dave Isley, head of Natwest international Personal Banking, said: “It seems the grass really is greener for Brits living abroad as our study shows.
“The fact fewer expats say they will return to the UK in the future, compared to three years ago, proves that the pace of life, work life balance and earning potential abroad means life as an expat is sunnier in more ways than one – and that they are weathering the financial storm.”
Higher WagesFurthermore, professional expats on average earn over £20,000 more than their counterparts back in the UK, according to the survey, with 92% reporting a salary increase over the past three years. The highest reported salary increase was in Hong Kong at 19% followed by the UAE at 17% and Spain at 14%.
In addition, while moving abroad often comes with fears of financial insecurity, the survey found the majority (63%) said they were comfortable with their financial position, while 27% said they were either very well off (10%) or quite well off (17%). Meanwhile, 59% said they were confident they will be better off financially in five years time.
“The dream shared by many Brits of living a happy life abroad is alive and kicking, despite the global economic factors which have to some extent affected British expats,” added Isley.
“Believe it or not, there seems to be more to having and leading a fulfilled life than just money. British expats have built their lives abroad on solid foundations - with the climate, culture and leisure, healthcare and education all deemed more important than financial security or financial well being for them.”
http://www.international-adviser.com/article/expats-enjoy-a-better-life-says-natwest-intl?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=152613-IA+20+April+10
Tuesday, 20 April 2010
QROPS Advice: Guernsey moves closer to QROPS code of conduct
A code of conduct for QROPS providers in Guernsey is one step closer with the sub-committee’s first meeting set for tomorrow.
The sub-committee has been formed by the Guernsey Association of Pension Providers (GAPP) and contains a cross-section of QROPS providers from the jurisdiction. Its aim will be to establish a voluntary code of conduct, with additional input from tax and legal professionals, which will be displayed on the GAPP website along with a list of members aligned to those codes.
Members of GAPP will then be able to refer to their adherence to these codes in their own marketing material and provide additional comfort and assurance to clients and introducers.
Roger Berry, managing director of Concept Group and also chair of the sub-committee, said a code could be established as soon as one month from now.
“GAPP has been working on this for some time, and things are coming along quite nicely,” said Berry.
“I would hope within a month or so we should have something out there which is going to be helpful to not only the providers here, to ensure we are singing from the same hymn sheet, but also the users, intermediaries and members of these schemes.”
Furthermore, Berry said while the code would initially be voluntary there is a possibility in the future it could have some regulatory support.
“Most if not all the providers in Guernsey are now represented on the sub-committee so it has a huge amount of clout and the regulator and the tax office deal with this committee as well,” added
Berry.
“My hope is if we demonstrate to our local government that we are serious and we get this off the ground it is highly likely there may be some time found by the regulatory side and we might get some support from them. It may ultimately end up in something more formal.”
http://www.international-adviser.com/article/guernsey-moves-closer-to-qrops-code-of-conduct?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=152272-IA+19+April+10
The sub-committee has been formed by the Guernsey Association of Pension Providers (GAPP) and contains a cross-section of QROPS providers from the jurisdiction. Its aim will be to establish a voluntary code of conduct, with additional input from tax and legal professionals, which will be displayed on the GAPP website along with a list of members aligned to those codes.
Members of GAPP will then be able to refer to their adherence to these codes in their own marketing material and provide additional comfort and assurance to clients and introducers.
Roger Berry, managing director of Concept Group and also chair of the sub-committee, said a code could be established as soon as one month from now.
“GAPP has been working on this for some time, and things are coming along quite nicely,” said Berry.
“I would hope within a month or so we should have something out there which is going to be helpful to not only the providers here, to ensure we are singing from the same hymn sheet, but also the users, intermediaries and members of these schemes.”
Furthermore, Berry said while the code would initially be voluntary there is a possibility in the future it could have some regulatory support.
“Most if not all the providers in Guernsey are now represented on the sub-committee so it has a huge amount of clout and the regulator and the tax office deal with this committee as well,” added
Berry.
“My hope is if we demonstrate to our local government that we are serious and we get this off the ground it is highly likely there may be some time found by the regulatory side and we might get some support from them. It may ultimately end up in something more formal.”
http://www.international-adviser.com/article/guernsey-moves-closer-to-qrops-code-of-conduct?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=152272-IA+19+April+10
Saturday, 10 April 2010
QROPS Advice: Full QROPS encashment still taking place
Intermediary firm Windsor Pensions has said it will accommodate British expats wishing to fully encash their pensions immediately upon leaving the country, despite this conflicting with UK regulations.
In particular, the firm said certain New Zealand-based QROPS schemes are willing to allow the practice. According to HMRC, QROPS must be treated exactly like domestic pensions for five years after the holder has left the UK, otherwise they will be liable to tax charges of up to 55%.
Steve Pimlott, an intermediary at Windsor Pensions, said: “Strictly speaking it is against the rules [to take full immediate encashment] but there are some schemes that will allow it. Most schemes which will allow this are based in New Zealand. We have used them, but I cannot go into details of the specific schemes.”
Windsor’s business largely comes from clients and IFAs based outside the UK and the company will not share its commission with UK intermediaries.
The claims by Windsor follow a report by IA in January that concerns had been raised by HMRC about the conduct of schemes in New Zealand.
Axa Life head of pensions and savings policy Steve Folkard offered a word of warning for those considering undertaking full immediate encashment.
“Potentially HMRC could try to recover the tax charge from the client, although this will depend on what jurisdiction they are in and whether there are any double tax treaties in place and so on – this aspect is complex and clients should seek professional advice,” he said.
In addition, Pimlott mentioned two Latvian-based schemes that have attracted some client money. One is the Wenns International Pension Scheme, which has proven particularly popular with ex-military personnel.
“The Latvian schemes are much more rigid in their rules – Wenns International is typically used by ex-servicemen – they have a lot of good packages, as well as the pension transfers for ex-servicemen,” he added.
http://www.international-adviser.com/article/full-qrops-encashment-still-taking-place?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=151491-IA+09+April+10
In particular, the firm said certain New Zealand-based QROPS schemes are willing to allow the practice. According to HMRC, QROPS must be treated exactly like domestic pensions for five years after the holder has left the UK, otherwise they will be liable to tax charges of up to 55%.
Steve Pimlott, an intermediary at Windsor Pensions, said: “Strictly speaking it is against the rules [to take full immediate encashment] but there are some schemes that will allow it. Most schemes which will allow this are based in New Zealand. We have used them, but I cannot go into details of the specific schemes.”
Windsor’s business largely comes from clients and IFAs based outside the UK and the company will not share its commission with UK intermediaries.
The claims by Windsor follow a report by IA in January that concerns had been raised by HMRC about the conduct of schemes in New Zealand.
Axa Life head of pensions and savings policy Steve Folkard offered a word of warning for those considering undertaking full immediate encashment.
“Potentially HMRC could try to recover the tax charge from the client, although this will depend on what jurisdiction they are in and whether there are any double tax treaties in place and so on – this aspect is complex and clients should seek professional advice,” he said.
In addition, Pimlott mentioned two Latvian-based schemes that have attracted some client money. One is the Wenns International Pension Scheme, which has proven particularly popular with ex-military personnel.
“The Latvian schemes are much more rigid in their rules – Wenns International is typically used by ex-servicemen – they have a lot of good packages, as well as the pension transfers for ex-servicemen,” he added.
http://www.international-adviser.com/article/full-qrops-encashment-still-taking-place?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=151491-IA+09+April+10
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