Posts Tagged ‘QROPS SCHEME’

Jersey QROPS to Enter the Market Place

Sunday, September 26th, 2010

As anyone looking into QROPS (Qualifying Recognized Overseas Pension Schemes) would be aware, there are in excess of 100 QROPS in Jersey. These QROPS are not open to non-residents of Jersey. However, this situation could be about to change at some point in the next 2 years.

Current legislation in Jersey allows only residents to be members of their pension schemes. Jersey officials are now looking at this law with the view of making their pension schemes (that have been approved as QROPS by HMRC) available in the international market. (more…)

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QROPS, the Proposed Annuity Changes and UK Drawdown

Wednesday, September 15th, 2010

Following Global QROPS Ltd’s news item, posted on our website on 28th August 2010, regarding the proposed annuity changes featured in the UK Treasury’s consultation document – published as a result of the UK Emergency Budget on 22nd June 2010 – this Global QROPS Ltd news item has been composed to further clarify the terms ‘capped’ and ‘flexible’ drawdown.

With effect from 6th April 2010, according to the recently drafted consultation paper, the UK government are looking to abolish compulsory annuity and alternatively secured pension. Abbreviated to ASP, alternatively secured pension is effectively ‘drawdown’ directly from a member’s pension fund – for pension members aged 75 or over.

Currently, prior to age 75, a member of a UK pension or a QROPS, has the option of USP (unsecured pension) which is drawdown pre age 75. USP allows income on the basis of zero to 120% of the GAD (Government Actuary Department) limit until age 75, when the less flexible ASP rules apply.
As Global QROPS Ltd understands, the proposals state that there are two types of drawdown to become available: ‘capped’ and ‘flexible’ drawdown.

Capped drawdown will be on the same basis as USP, but with the ability to continue past age 75 – although the upper limit of 120% GAD will be reviewed to see if it is still a realistic rate to use.

Flexible drawdown will allow an individual to draw an unlimited amount from their fund, with the proviso that the member can demonstrate that they have secured a sufficient minimum income to prevent them from falling back onto the State. The method of assessing this income (known as the Minimum Income Requirement) has not yet been decided.

It is important that people looking to transfer to QROPS (especially those within the QROPS reporting period) are aware of the rules as the levels of income that they take from the QROPS could be affected by this.
For further information, please speak to an adviser at Global QROPS Ltd.

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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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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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Can my Child’s Pension Transfer to a QROPS?

Monday, December 28th, 2009

From 6th April 2006, just about anyone with a UK pension can transfer to an overseas pension scheme – providing, of course, the overseas scheme is an approved QROPS (Qualifying Recognized Overseas Pension Scheme).

Since the Defined Contribution regime was introduced in the Finance Act 2000, an individual could make a UK pension contribution, on behalf of another individual, from 6th April 2001. These were known as Third Party contributions.

Also introduced in 2001 was the removal of the minimum age that an individual needed to be to become a member of a UK personal pension (or stakeholder).

Often taking advantage of these rules were grandparents or parents looking to make a contribution on behalf of a child. As a result, since 2001, there are many minors who have accrued pension funds.

It is often the case, that when a family migrates, all family members (including the children) would have accrued pension funds in the UK. Therefore, when Global QROPS Ltd are asked to advise about UK pension transfers to QROPS, the question arises about whether a child’s pension plan can transfer to a QROPS?

Theoretically, the answer to this question is ‘yes’. Her Majesty’s Revenue and Customs (HMRC) have not applied any restrictions on such a transfer (providing the receiving scheme is QROPS). However, there are plenty of considerations first.

For example, do overseas pension schemes have their own minimum age restrictions for pension membership? Is there value for the UK fund in being transferred to a QROPS (now or in the future)? – The answer to this could depend on factors such as the overseas pension scheme charges or the fund size.

Global QROPS Ltd are able to provide advice on all aspects of overseas pension transfers.

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QROPS and Guaranteed Annuity Rates

Saturday, November 28th, 2009

There are many UK expat pension members, that have migrated abroad, who are existing members of UK pension schemes that date back years. Many UK pension schemes, from the 1980’s and before – such as Retirement Annuity Contracts (also known as section 226 contracts) – offered guaranteed annuity rates (GARs). For those UK expat pension members with GARs, that are contemplating a transfer to a QROPS (Qualifying Recognized Overseas Pension Scheme), should take advice as to whether they will lose the guarantees and the overall impact on their retirement income.

What are Guaranteed Annuity Rates?

A GAR is the minimum annuity that a pension member is offered as pension income when they retire. The annuity rate that is offered by the scheme provider is usually more generous than the standard annuity rates available today. Typically, the older plans would offer annuity rates of 10% or more – which is unheard of today.

Expat pension members that are fortunate enough to have GAR benefits in their pension, would have to think very carefully as to whether the QROPS income that they could potentially receive would be greater than the benefits that they are giving up from their existing scheme.

Factored into the equation would be the tax position that the individual would be in when receiving income. Would a QROPS, without guaranteed annuity rates, provide greater income solely because a QROPS could be more tax efficient? Would the investments, within a QROPS, have the potential to grow to a greater fund-size pre-retirement?

Global QROPS Ltd would be able to research the best options for those expats with GARs in their pensions.

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Global QROPS Ltd – Clients with Contracting Out pensions (2)

Thursday, October 29th, 2009

As well as employer and employee contributions, an individual could have built up an entitlement to an employers or personal pension through ‘contracting out’. Global QROPS Ltd have established, in previous news items, that these benefits are both transferrable to a QROPS (Qualifying Recognized Overseas Pension Scheme) and not detrimental to the Basic state pension. Having said that, what affect does contracting out have on the State pension overall?

What impact does contracting out have on my state pension entitlement?
When an individual is contracted out, some (or even all) of their entitlement to additional state pension (S2P) or State Earnings Related Pension (SERPS) would be reduced or even lost.
 
The affected on an individual’s overall benefit depends on whether they are contracted out under a stakeholder/personal pension plan or their employer’s Occupational pension scheme (such as a contracted out salary related pension scheme (COSR) or a contracted out money purchase occupational pension scheme (COMP).

Some of the national insurance contributions (NICs) paid by an employer or an individual, contribute towards their state pension.  If an individual is contracted out, they lose some or all of their entitlement to the additional part of the state pension over and above the Basic State Pension. (Global QROPS Ltd can help their clients obtain a State Pension forecast in order to determine their State pension entitlements).

As a result of this, the State reduces the NIC liability on earnings between the lower earnings limit and the ‘upper accrual point’ for these individuals and their employers.

The method used to reduce the NIC liability depends on whether the individual is contracted out under a COSR, COMP or personal pension. For Global QROPS Ltd’s clients, that are looking to transfer to QROPS from a contracted out scheme, they can conceivably transfer from all of these schemes regardless of the method of contracting out.

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Transferring UK Pensions to Isle of Man QROPS

Wednesday, October 21st, 2009

When migrating overseas many UK pension members investigate the possibility of transferring their UK schemes to overseas pensions. Since 6th April 2006 the overseas scheme would have to register and be approved by the UK’s Her Majesty’s Revenue and Customs (HMRC) as a QROPS (Qualifying Recognized Overseas Pension Scheme) in order to be able to accept UK pension transfer money.

Many jurisdictions, throughout the world, have QROPS. One such jurisdiction, that is close to home, is the Isle of Man. What are some if the considerations that someone would need to take into account with Isle of Man QROPS?

Amongst the main points to consider will always be how pension funds, transferred to a QROPS (anywhere in the world) would be treated for tax and what level of retirement benefits can they provide?

An Isle of Man QROPS will pay to it’s members income at UK Government Actuary Department (GAD) rates within the QROPS ‘reporting period’ – which is 5 complete tax years of the member’s overseas residency. This income will be taxed at source at a rate of 18% – although there is an allowance for the first £2,120 per annum (for tax year 2009/10) on this income for Isle of Man non-residents. (Although a non-resident may have to pay further income tax on receipt of QROPS income in their country of residence).

As far as the payment of tax free cash is concerned, a member can receive 25% of the fund as a tax free lump sum if this is paid out within the (QROPS) reporting period. If the member waits until after the 5 year reporting period – and they haven’t drawn any tax free cash previously – 30% of the fund is available as a lump sum.

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Why would you need QROPS Advice?

Friday, July 31st, 2009

Factors when Considering QROPS Advice
Planning for the ideal lifestyle in retirement is not easy. For the 130,000 people that migrate from the UK each year, to live abroad, there are additional opportunities and problems to consider.
The main question is whether a migrating UK pension member should move their UK pension benefits with them.
Careful advice should be taken as whether the benefits available from the existing UK scheme are better for the individual as to those available from an overseas scheme.  
By obtaining the correct QROPS advice, an individual could obtain that ideal retirement lifestyle.
A QROPS adviser would take into account all the necessary factors and advise accordingly.
The questions that a QROPS adviser would ask could include:
Do you intend to retire abroad?
Will you return to the UK to live at any point?
What type of UK scheme are you currently a member of?
What benefits does your UK scheme currently provide for you?
Does your current scheme levy any additional charges for transferring?
Do you have dependants?
Are there investments in your existing scheme that you would like to retain?
Is there an appropriate QROPS scheme, provided by your new employer, in your new country of residence?
What are the rules for retaining pension investment overseas in your new country of residence?
What level of tax is applied, in your new country of residence, to any pension benefits received?
Only when considering the answer to the above questions can a QROPS adviser deliver the most appropriate QROPS advice.

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