Archive for September, 2009

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UK Pension Transfer to Australia – retirement considerations.

Saturday, September 12th, 2009

As the advisers at Global QROPS Ltd have had many years of experience in advising people considering a UK pension transfer to Australia, they are frequently referred to for their opinion on the subject.

Most people assume that, when they migrate ‘Down Under’ that they should transfer their pension to Australia. However, Global QROPS Ltd is of the opinion that whether a UK pension transfer to Australia is a good idea should be taken on a case by case basis.

Before the UK introduced Qualifying Recognised Overseas Pension Schemes (QROPS), an individual migrating to Australia, who was approaching retirement, could have the option of affecting a UK pension transfer to Australia and taking the benefits immediately, in the form of 100% lump sum – as Australian rules allowed for this from their schemes. From 6th April 2006, an individual has to have been abroad for 5 complete UK tax years before their UK funds, transferred to a QROPS, fall outside the UK reporting requirements and revert to local rules.

This QROPS rule change made a UK pension transfer to Australia less attractive in the immediate term than before. However, this does not necessarily mean an individual should hold onto their pension assets in the UK either. Due to the Australian FIF (Foreign Investment Fund), some assets held in UK pensions could be taxed on the growth – on an annual on going basis – whether they are moved to Australia or not. Depending on their visa type (amongst other issues) Global QROPS Ltd can advise the best pension strategy.

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Global QROPS Ltd warning on Gibraltar QROPS

Friday, September 11th, 2009

UK based QROPS (Qualifying Recognized Overseas Pension Scheme) advice specialists, Global QROPS Ltd, are aware of the uncertainty regarding the status of QROPS in the Gibraltar jurisdiction.

Due to a technicality over the tax ‘paid’ on income from Gibraltar QROPS, the UK’s HMRC (Her Majesty’s Revenue and Customs) and the Association of Pension Fund Administrators (APFA) in Gibraltar are in discussions as to whether Gibraltar schemes can continue to accept UK pension transfer funds.

As a result of the current uncertainty hanging over their schemes, Gibraltar schemes have taken the stance to suspend receipt of UK pension transfer money. This situation will obviously be reviewed as and when HMRC confirm what they intend to do.

The situation, at the moment, means that there are some UK pension members, who are in the process of a UK pension transfer to a Gibraltar QROPS, that do not know whether or when it will be completed. Whereas the Gibraltar QROPS providers are prepared to continue to process the paperwork, to make a transfer in happen, they will not physically accept any funds until HMRC confirm that Gibraltar schemes are permitted to do so.

The results of the discussions between APFA and HMRC, which have been ongoing for some time, will determine as to whether Gibraltar QROPS can continue and as to whether any pending UK pension transfers can be finalized. In the meantime, Global QROPS Ltd are in a position to provide some guidance to clients on the situation.

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Alternatively Secured Pensions and QROPS

Wednesday, September 9th, 2009

Alternatively Secured Pensions (ASP) was introduced in the UK Pension Simplification Legislation at A-day on 6th April 2006. Qualifying Recognised Overseas Pension Schemes (QROPS) also came into effect at the same time.

ASP is a form of drawdown direct from a UK pension member’s scheme that is permitted after the member attains the age of 75. Prior to April 2006 an individual would have to purchase an annuity once they reached that age.

The maximum that an individual can take from their fund, in the form of income, at the age of 75 is 90% of the Government Actuary Department (GAD) limits. The minimum amount is 55% of the GAD limits. If an individual has transferred their UK pension benefits to a QROPS and are continuing to take their benefits directly from the QROPS scheme after the age of 75, they would be expected to receive these benefits at the same UK ASP GAD rates – if they are still within the 5 year QROPS reporting period.

Any payments made to a QROPS member that is in excess of the permitted limit, would be treated as an unauthorised payment under the QROPS legislation and be subject to tax.

Migrating UK pension scheme members approaching the age of 75, that are thinking about transferring to an overseas pension scheme approved as a QROPS, should consider whether the receiving scheme can still make payments directly from the funds or whether the QROPS only allows for annuity purchase options.

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Pension Transfer to Australia and other Advice Issues

Sunday, September 6th, 2009

UK based advisers, Global QROPS Ltd, specialise in advising people migrating to Australia the best course of action for their finances – including advising on a UK pension transfer to Australia.

Many people decide, when migrating, that they want to make a clean break from the UK. This would include, not just transferring their UK pension to Australia, but cashing in, selling or dissolving many of their other assets.

In many cases Global QROPS Ltd agree that this could be the right thing to do, however, advice would need to be taken before any decisions are made in order to avoid any potential financial loss.

For example, someone may come to Global QROPS Ltd who is considering cashing in their endowment. There may be tax issues in holding the endowment in the UK once they arrive in Australia – because of the Foreign Investment Fund (FIF) tax rules – and therefore may think that they should cash it in. What an individual may want to look at, before doing this, are factors such as early surrender penalties in the endowment, the life cover that is provided and any terminal bonus that might be lost on cashing in early. Would the potential tax payable be higher than providing replacement life cover in Australia, for instance?

On top of this, a client may not be aware that their visa could exempt them from FIF tax or that their combined assets fall below the exemption. Global QROPS Ltd emphasises that advice is not just about a pension transfer to Australia but other considerations as well.

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The Rising UK State Pension Age effecting Global QROPS Ltd Clients

Thursday, September 3rd, 2009

Many clients of Global QROPS Ltd, ask whether they should make additional contributions to their UK State Pensions (sometimes referred to as the Old Age pension) before they migrate. With the recent news of a potentially increasing UK State Pension Age, it is important that Global QROPS Ltd clients make the correct decision.
 
People migrating, who have built up enough credit in the UK State Pension, to qualify for part of the UK State Pension, question whether they should make additional contributions to their UK State Pension to receive the full entitlement. This is particularly important for people migrating to a country that does not have a social security agreement with the UK, such as Australia, where overseas social security contributions do not count towards the UK State Pension.

One of the main considerations, as to whether to top-up your UK State Pension, is when are you entitled to the benefit? Currently the UK State Pension age is 65 for men and 60 for women (although the State pension age for women born after 6th October 1950 is increasing on a sliding scale to age 65 for women born from October 1954 onwards).

According to the UK Pensions Regulator, the current plans to increase the State Pension age to 68 from 2044 onwards could be further increased to age 70 for everyone. This has lead to many Global QROPS Ltd clients, who are still several years from retirement, being sceptical about how old they would finally need to be before they can claim the UK State Pension and whether there would be any benefit in making the additional contributions before migration.

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