By STEPHEN WARD [email protected]
Stephen Ward BA (Econ), ACII, APMI, AIFP, APFS, Managing Director of Premier Financial Solutions (UK) Limited, has more than 30 years experience in the UK pensions industry, is a Senior Lecturer with the UK’S Chartered Insurance Institute, and frequent speaker at Pensions Conferences throughout the world.
In last week’s article, I outlined the reasons why so many expatriates are transferring their UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS).
For many, it is the ability to avoid being forced to purchase the detested “annuity” and knowing that on their death their beneficiaries will be able to receive the full residual fund with no liability to Death Duties of any kind, either in the UK or Portugal (or anywhere else).
For others, it is the dramatically reduced tax on their pension income (reduced by 65% in most cases in Portugal) and more flexibility in the way lump sums and income benefits are payable. Some want access to as much capital as possible, to see them through the current financial nightmare.
Which territory and which QROPS provider?
Having decided that a transfer to a QROPS is the obvious choice, the question is which country offers the most appropriate QROPS regulations and which QROPS provider offers the best terms for your individual circumstances?
While there are QROPS available in other territories, the ones that provide maximum flexibility, security and peace of mind are those available in Guernsey, New Zealand, the Isle of Man and Gibraltar. The common denominators for these territories are that they are politically stable, with strict Financial Services regulators to ensure the safety of your funds. All have well established financial services industries as in the UK.
Transfers to any of the QROPS in these territories can only be completed after your existing pension fund managers have ensured that the receiving scheme is one that has been approved by Her Majesty’s Revenue and Customs (HMRC).
Isle of Man QROPS
Although some advisers still recommend the Isle of Man, their requirement to charge 18% tax on income withdrawals (in addition to the rate of tax applicable in the country where the individual is resident), with 7.5% tax on funds distributed on death, makes it an unattractive option.
New Zealand QROPS
New Zealand pensions’ legislation is extremely flexible and can provide lump sums before age 50; more than is available in other jurisdictions.
However, the funds suffer an annual tax deduction of around 1.5% and the QROPS provider’s annual management charge is 1.5%, so investment returns would need to be really positive to cope with a total annual charge of around 3%. Premier are the only advisers outside NZ who can deal directly with the main QROPS provider, others must deal via an NZ firm of advisers, adding additional costs.
Guernsey QROPS
Guernsey continues to attract more funds than any other territory, offering a choice from several QROPS providers, depending on the client’s profile i.e. size and number of funds, investment requirements, etc.
Gibraltar QROPS
In the last six months, HMRC have granted approval to two Gibraltar based QROPS.
One is very much targeted at the “category 2” wealthy Gibraltar resident, with funds of £1M or more, and with fee levels that make it unattractive to the average client.
The other, offered by Castle Trust, has been approved in the last few weeks, and has two different bases, one with a more limited fund choice for smaller transfers but with relatively modest fees, and the other offers one of the most flexible plans available, with fee levels more in line with market leaders in other territories.
A QROPS provider based locally for Costa del Sol and Algarve expatriates is attractive if they wish to visit the QROPS provider, and meet face to face the people who will be handling their funds. Not as easy for a Guernsey based provider, or harder still for one based in New Zealand!
But which one?
Obviously selecting which territory your QROPS should be based in, which QROPS provider and which plan, requires an in depth knowledge of all the plans available. Furthermore, your adviser needs experience in managing all types of UK pension schemes, including Defined Benefits Schemes, Self Invested Personal Pension Plans (SIPPs), Small Self Administered Pension Schemes (SASSs), etc.
But beware, some advisers are able to offer only one QROPS plan, which may not be the one that suits your circumstances best.
Not always necessary to encash your investment funds
Funds bought in the name of the fund trustees need not always be encashed for transfers, as they may be assigned “in specie” (i.e. as they are), from the existing fund to the QROPS without the necessity of selling such assets in a falling market.
As we were one of the first firms to arrange such transfers, we have built up a wealth of in depth knowledge and experience in advising expatriates on which QROPS plan is most appropriate for them.
If you think transferring your retained UK pension fund(s) would be worth considering, and remember we can advise on funds as low as £75,000, then why not attend one of our Seminar and Pension Clinics to hear the true facts on QROPS from Premier Financial Solutions (UK) Ltd.
Free Pensions Seminar and Clinic
We are holding a free Seminar and Pensions Clinic on March 25 at 11 am at the Quinta Do Lago Hotel in conjunction with Castle Trust and Management Services of Gibraltar.
As the number of places available are limited please contact Brian Brannan on 0034 952 789 297 or email [email protected]
Stephen Ward was a member of the UK Government’s Pensions Industry Working Group which assisted HMRC to plan and implement the changes in pensions legislation which introduced Qualifying Recognised Overseas Pensions Schemes, (QROPS), in 2006. Premier Financial Solutions (UK) Limited is authorised and regulated by the Financial Services Authority. Castle Trust and Management Services Limited are registered and licensed by the Gibraltar Financial Services Commission.
