Archive for January, 2010

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A UK Pension Transfer to Australia – The latest HMRC QROPS list

Friday, January 29th, 2010

The UK Pension Scheme Services (PSS) have updated the QROPS (Qualifying Recognized Overseas Pension Scheme) list on the HMRC (Her Majesty’s Revenue and Customs) website on 15th December 2009. Individuals looking at a UK pension transfer to Australia, would observe that there are over 450 Australian QROPS schemes currently on the list.

For full details of the HMRC update see link: http://www.hmrc.gov.uk/NEWS/INDEX.HTM

If an individual does want to complete a UK pension transfer to Australia, they may be tempted to look at the list and work from there. However, HMRC stress that the QROPS list is not a recommendation or advertisement for any particular scheme, it is merely for information purposes for an individual to check that an Australian QROPS that they have received professional QROPS advice on is indeed approved.

Global QROPS Ltd advise many people migrating to Australia on their pension options. It is not, in all circumstances, best advice to transfer pensions to Australia and people need to be aware of all of the advantages and disadvantage before making a decision.

Many of the Australian QROPS on the HMRC list are either Australian employer’s pension schemes or Self Managed Super Funds (SMSF). These schemes may be available for an employee of a company or to an individual that has set up a SMSF but someone looking down the QROPS list could not simply pick out a scheme and apply to become a member.

For advice on a UK pension transfer to Australia, speak to an adviser at Global QROPS Ltd.

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Global QROPS Ltd quoted in Money Marketing regarding ASP and QROPS

Wednesday, January 27th, 2010

Qualifying Recognised Overseas Pensions Scheme (QROPS) specialists, Global QROPS Ltd, have been quoted in the UK financial publication, Money Marketing, regarding the use of QROPS for UK expat pension members.

A study by a leading UK Self Invested Personal Pension (SIPP) provider suggests that there is an increase in overseas pension transfers over UK pension transfers to a SIPP (for example) because of the steep UK tax charges on death whilst in Alternatively Secured Pension (ASP).

Once a UK pension member reaches the age of 75, they will be required to take pension benefits (if they haven’t already). Since 6th April 2006 (A-day), as an alternative to purchasing an annuity with accrued pension funds, a UK pension member can go into ASP – which is a form of pension income drawdown, paid from the fund. ASP was introduced as an ‘alternative’, to buying an annuity as certain religious groups objected, on moral grounds, to the concept of annuities.

One of the main problems with ASP is, once it has commenced for a member, the death benefits are severely restrictive for beneficiaries. In short, if a beneficiary was to receive death benefits as a lump sum from a deceased member of a UK pension, who was receiving benefits in the form of ASP, a tax charge as high as 82% could apply to the fund.

UK expat pension members, in retirement, have the option to transfer to a QROPS. The study suggests that many consider this as, once the 5 year reporting period falls away, the local rules of the QROPS scheme, for tax on death benefits, apply and not the UK’s rules. This could lead to the removal of the ‘82%’ tax charge on death, for beneficiaries.

Whether this is the main reason for a UK pension transfer to QROPS is by no means certain, however, it is definitely a consideration.

Please see link to the article: http://www.moneymarketing.co.uk/£500m-transferred-to-qrops/1005325.article

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Latest HMRC QROPS list

Tuesday, January 26th, 2010

On 15th December 2009, the UK’s Her Majesty’s Revenue and Customs (HMRC) updated on their website the latest updated list of QROPS (Qualifying Recognized Overseas Pension Schemes). The update is published by the PSS (Pension Scheme Services).
As with previous updates of the QROPS list, this is not a definitive list. In other words, there are QROPS schemes that have been approved by HMRC that have chosen not to appear on the list.
More importantly for those individuals looking for QROPS advice, they should not look at that list and assume that it is a recommendation by HMRC to use any of the QROPS stated. HMRC have emphasized that the publication of the list is for information purposes only and that they are not responsible for any overseas pension transfer from a UK scheme to an overseas scheme based on the clients choice of the scheme coming from the list.
As mentioned in previous news updates by Global QROPS Ltd, there are a number of schemes that feature on the list, as QROPS, but are actually unable to receive transfers in because their local rules do not allow this. An example for this is the USA – IRAs (individual retirement arrangements) and 401K’s are not permitted to take UK pension transfers in under USA legislation – despite appearing on the QROPS list.
It is also worth noting, that there are schemes that have been approved by HMRC but may have obtained their approval with incorrect information.
Please find link to HMRC latest news page. Latest QROPS list under 15th December: http://www.hmrc.gov.uk/NEWS/INDEX.HTM

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Global QROPS Ltd at the Down Under Live Exhibition

Monday, January 25th, 2010

Global QROPS Ltd, UK independent financial advisers that specialize in providing, financial advice for people migrating to Australia and New Zealand, will be exhibiting at the Down Under Live exhibition on Saturday 30th January and Sunday 31st January in London.
The exhibition is to be held at the Business Design Centre, London. For details of the times and location of the show, please check the attached link:
http://www.downunderlive.co.uk/london_directions.php
Global QROPS Ltd will be available to speak to potential migrants who are looking at all financial concerns relating to their move including major topics such as a pension transfer to Australia (or New Zealand), retaining UK property, UK inheritance tax and investments.
Potential migrants that have not considered the financial aspects of migration should take this opportunity to speak to Global QROPS Ltd to see if their service would be of some benefit to them.
People that may have already enquired or researched aspects such as a pension transfer to Australia or New Zealand and other financial implications in migrating Down Under should also speak to the experts to ensure they are not missing out on any details or tax breaks that their move to Australia or New Zealand could offer.
The Down Under Live exhibition is an excellent opportunity for a potential migrant to speak face to face with firms and companies that assist in a variety of aspects in the migration process.
Global QROPS Ltd looks forward to meeting you there.

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How does the QROPS Reporting Period Affect a UK Pension Transfer to Australia?

Saturday, January 23rd, 2010

Anyone approaching retirement and migrating to Australia, who is looking at a UK pension transfer to Australia, would need to consider how flexible the Australian QROPS (Qualifying Recognized Overseas Pension Scheme) is permitted to be during the QROPS reporting period.

Members of a UK pension scheme are allowed to transfer their benefits to an overseas pension scheme at anytime – providing the overseas scheme has been approved by the UK’s HMRC (Her Majesty’s Revenue and Customs) as a QROPS. However, a member of a scheme can not take advantage of the possible flexible pension benefits that the QROPS provides until after Reporting Period.

The Reporting Period is the time period in which the QROPS has to report to HMRC any payments (death benefits, lump sums or income) to the member (or member’s beneficiaries).

How Long is the QROPS Reporting Period?

The QROPS reporting period is 5 complete tax years of the pension member’s overseas residency.

For example, if an individual migrated to Australia on 1st July 2006, then the reporting period would last for the rest of that UK tax year (ending 5th April 2007) and for the 5 following completed UK tax years. Therefore, in this example, the reporting period would finish on 5th April 2012.

This may affect an individual’s retirement planning when considering a pension transfer to Australia (or any other overseas scheme). An individual pension member needs to be aware that their QROPS scheme will follow the same rules as a UK scheme for the reporting period and that they would not get the full flexible benefits from the Australian scheme before then.

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Changes to Tax on Short Service Refunds for UK Occupational Pension Members

Wednesday, January 20th, 2010

In the pre Budget Report, changes were announced (on 9th December 2009) to the tax that is charged when an individual leaves an occupational pension scheme within 2 years of joining and takes a refund of their contributions.

Global QROPS Ltd will explain the impact to UK occupational pension scheme members in this position and if there is any QROPS advice that may be affected by this.

What is a Short Service Refund?

Lump sums paid to members who leave an occupational pension schemes within 2 years of joining (known as short service refund lump sums), are permitted by the UK’s HMRC (Her Majesty’s Revenue and Customs) in order to ease the administrative burden for a scheme and reduce the cost of providing an extremely small pension for life for a member.

 The pre Budget Report declared that changes are being made to take into consideration the new 50% upper rate of income tax – coming into force from April 2011.

Short service refund lump sums, made on or after 6 April 2010, will now be taxed at a rate of 20% on the first £20,000 of the refund and 50% on the remainder. (Previously this was 20% on the first £10,800 and 40% on the amount above this).

For potential migrants, taking QROPS advice, there may be little option but to take the refund. Occupational scheme administrators will not always provide a transfer value for members with less than 2 years membership and therefore a transfer to QROPS may not be an option.

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UK Pre Budget Report 2009 – Tax Changes Affecting Annual Allowance

Sunday, January 17th, 2010

There are many circumstances, when a potential UK migrant is looking to transfer their UK pension funds to QROPS (Qualifying Recognized Overseas Pension Schemes) where it may be beneficial to boost their UK pension funds by making contributions first.

This would not only increase the transfer value, by the amount of contribution, but there is tax relief available on the contributions too.
Pre Budget Report Announcement Affecting Potential QROPS Clients

Already, for high earners looking to make fully tax relievable pension contributions, to a UK pension scheme, the new rules that were introduced in the Finance Act 2009 have a limiting affect on the amount that can be contributed above £20,000 per annum that would receive higher rate tax relief.

From April 2011, those with income of £180,000 and above would only receive basic rate tax relief on pension contributions. Those with income between £150,000 and £180,000 would get tax relief somewhere between basic rate and higher rate on a sliding scale.

However, the Pre Budget report has determined that the definition of relevant income (used in determining whether an individual is affected by these changes) will include employer pension contributions therefore affecting those with incomes of £130,000 per annum upwards (rather than from £150,000 upwards).

(However, the Government has said that those with incomes of £130,000 or less before the  inclusion of employer pension contributions will not be affected).

High earners looking for QROPS advice should, therefore, speak to UK QROPS advice specialists (such as Global QROPS Ltd) before making decisions on increased contributions to UK pensions.

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UK Expat Pension Members in Retirement

Thursday, January 14th, 2010

There are many UK expats that are currently working overseas for foreign companies or for the overseas arm of a UK company. For the majority of these people the original intention would be to earn a living abroad but return to the UK to retire, however, recent surveys have shown that this is no longer necessarily the case.

Due to the increasing cost of retirement in the UK and the taxable nature of UK expat pension member’s retirement income in the UK, an increasing number of expats that are working abroad are choosing to remain abroad in retirement. For UK expat pension members (ie members of UK pension schemes that are living abroad), overseas pension transfer advice is required to assess whether their funds should remain in the UK or transfer to a QROPS (Qualifying Recognised Overseas Pension Scheme).

The surveys have shown that 60% of expats abroad retire in Europe (with France and Spain being the most popular destinations), with the purpose of being close to their family. For other expats, the USA, Canada, Australia and New Zealand are the popular destinations – largely because they are English speaking countries. Wherever an individual retires overseas, though, they have to weigh up the better climate and quality of living against issues such as the standard of health care, emergency services and the tax system of their new country.

When funding for retirement, recent statistics have shown that expats look at their savings as the highest source of retirement funding with 27% coming from this source. The other major sources of retirement funding include the UK State Pension (23%), private pensions (20%) and rental income from property (6%).

What is surprising is that private expat pension funds makes up only 20% of retirement benefits. There may be QROPS options available that could increase pension provision for a UK expat pension member.

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UK Expat Pension Members Decide to Retire Overseas

Monday, January 11th, 2010

According to a recent study, conducted by a prominent financial institution in the Isle of Man, UK expats that have taken up positions in employment overseas – throughout their working life – are deciding to stay abroad in their retirement rather than return to the UK.

The main reason cited for remaining abroad, throughout retirement, is the cost of retiring in the UK is perceived to be too high. Indeed, the figures in the study suggested that £400,000 was the minimum level of wealth needed in the UK for a successful retirement.

Given this situation, what are the options for UK expat pension members that have accrued benefits in UK pension schemes, as well as benefits in their foreign employment schemes?

One of the main disadvantages of UK pensions, for UK expat pension members, is that the income from a scheme (either in the form of an annuity or drawdown) is assessable for tax in the UK – should the member return to the UK in retirement.

Tax on retirement income is not applicable from every type of scheme for every jurisdiction or country in the world, however, which can give a UK expat pension member the choice of overseas pension scheme to transfer their UK funds to – providing it is a QROPS (Qualifying Recognised Overseas Pension Scheme).

If an individual has retired to country that is a tax haven, such as the United Arab Emirates, or to a country that does not tax pension income from their own pension schemes (such as Australia and New Zealand), a transfer to an appropriate QROPS could lead to a tax free retirement abroad – which can appeal more to an individual than retirement in the UK.

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QROPS and In-specie Transfers

Friday, January 8th, 2010

Like any UK registered pensions scheme, Qualifying Recognized Overseas Pension Schemes (QROPS) have rules and regulations regarding permitted investments.

For many UK expat pension members, pension funds are often left in the UK because of the nature of the investment within the pension scheme. For example, UK Small Self Administered Schemes (SSASs) and UK Self Invested Personal Pension Plans (SIPPS) can have more diverse investments than a UK personal pension or standard employer’s scheme could have.

It would not be uncommon for a SSAS or a SIPP to have commercial property or shareholdings as an investment within the scheme. UK expat pension members with these types of schemes and investments may be deterred from transferring out of their UK scheme to a QROPS because it may require the investment to be cashed in first and, with the property or equity market at a low, this could lead to an overall loss for the fund.

What is an in-specie transfer to a QROPS?

In-specie transfers could be an alternative solution to divesting a pension investment in order to affect a transfer. Under this method, assets are transferred directly from one pension scheme to another. This means that any legal ownership of the assets, such as property, can be transferred from the transferring pension scheme to the receiving pension scheme.

Theoretically, at least, the same principle can apply for transfers from UK pension schemes to QROPS – however, additional points need to be considered. 

As you would be dealing with a different jurisdiction for QROPS, would that particular regime allow investments such as property or shares? Furthermore, would those types of investments receive the same tax breaks in overseas schemes as they would in the UK?

Global QROPS Ltd can provide advice and guidance on QROPS matters.

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