It all began with the advent of the 2003 European Union’s freedom of transfer of monies directive, which gave private investors the opportunity and flexibility to invest across the EU and choose those jurisdictions that appeared more attractive by virtue of lucrative tax benefits and incentives.
This directive represented the first step on the way to an internal market for occupational retirement provision organised on a European scale. Indeed with the UK pension regime overhaul in 2006, great industry attention has been given to those investors who hold dormant UK private and company pension schemes and the opportunity to transfer the value overseas through the HMRC authorised QROPS system.
With now over 170 authorised schemes investors are offered a multitude of options if they wish to transfer their pensions to an authorised jurisdiction. Traditionally, the most popular options for clients advised by their financial advisers have been the crown dependent channel-islands: Guernsey and the Isle of Man. Schemes are also now available in mainland Europe through Gibraltar, Malta, Latvia and Lichtenstein, and further afield in Australasia, namely Hong Kong and New Zealand.
With such rich and attractive transfer opportunities brings the quandary – which jurisdiction is the most suitable and why? Which jurisdictions offer the best value and benefits and how is any potential risk minimised for investors’ hard-earned pension transfer values?
The first port of call must surely be the client’s financial objectives and personal situation. If clients have been non-UK resident for more than five consecutive tax years then a QROPS could certainly be beneficial. Trustees of the overseas pension scheme are no longer required to report back to the UK Inland Revenue and so the client’s offshore tax position remains only in the jurisdiction where they reside. Qualifying Non-UK Pension Scheme (QNUPS), which in effect is an unregulated version of a QROPS and provides looser boundaries are also an option.
Clients who have not been non-UK resident for the five year period or who may return to the UK should think carefully about whether a QROPS is an option for them or whether a Self Invested Personal Pension transfer is more beneficial.
The 2006 changes in UK pension legislation prompted an explosion of pension related transfer opportunities. The accompanying divergent views and investor speculation on QROPS transfer options only served to polarise opinion and confuse even the most competent financial advisor.
1. Crown dependant territoriesChannel Islands:
In essence, Foot focuses on bringing these jurisdictions in line with the mainstream international community. Interestingly, this means tax information exchange agreements (TIEA’s) are already being adhered to and the possible introduction of withholding, value added, capital gains and corporation taxes. This is echoed with the forthcoming EU Code of Conduct group’s recommendations for zero-10 tax systems and compliance with any new tax directives given. Indeed, the IoM has already introduced withholding tax and TIEA’s are in force with a commitment to automatic exchange of information by July 2011. Guernsey and Jersey have TIEA’s and are also considering their positions on taxation related issues. When considering QROPS, it is worth noting non-residents will currently pay full income tax on pensions received in the IoM, with Guernsey rates at nil at present and Jersey to open pension planning to non-residents in the near future. The relevance of changes in tax legislation and scrutiny of offshore financial shelters is also an important issue to bear in mind when transferring pensions away from the UK. Highlighted in the Foot report as a crown dependency, the above recommendations will also apply to this jurisdiction. Gibraltar has fairly or unfairly been targeted by HMRC due to its nil taxation rate for retirees at 60. This position has recently been resolved and Gibraltar is returning as an authorised QROPS jurisdiction. 2. Member states of EU, Lichtenstein, Latvia: New to the QROPS scene, Malta offers an alternative to the crown dependencies due to its independence as a EU domiciled jurisdiction. The Malta Financial Services Authority have also worked with HMRC over the last two years to ensure a robust QROPS system is in place (unlike other jurisdictions where the authority is initially granted and then scrutinised at a later date). Indeed, each individual scheme is approved and regulated to ensure a comprehensive structure is in place. Liechtenstein and Latvia are interesting, with the latter proving popular with ex-service personnel. However, the service personnel and veteran’s agency (SPVA) is now in liaison with HMRC on the suitability of this jurisdiction. The Liechtenstein disclosure facility (LDF) is one example of how the UK Inland Revenue is giving jurisdictions considered as ‘opaque’, a tax haven amnesty for investors to declare savings. On this basis, both jurisdictions maybe considered less attractive to the pension investor. 3. Wider Jurisdictions: QROPS maybe domiciled where the UK has completed double taxation agreements (helpfully listed here). Such agreements contain provisions as to exchange of information and non-discrimination. In the past few years, we have seen HMRC flexing its muscles and withdrawing status from those trustees deemed unfit to hold the authorised QROPS status. Singapore based QROPS provider Panthera and most recently Hong Kong based Beazley trustees, suffered such a fate. Those investors who transferred their pensions could then be charged a crystallisation benefit charge and an unauthorised transfer charge totalling 55%. A former Crown colony, Hong Kong itself remains authorised and is generally recognised as a non-EU authorised jurisdiction. This may appeal to those investors looking for non-EU based tax havens, as this jurisdiction gives resident and non-resident investors favourable tax treatment. Schemes are fully authorised under the mandatory provident schemes ordinance and thus are domiciled in a well-regulated jurisdiction. Hong Kong has also made great changes to its social benefit structures and thus begins to boast a new and innovative regulatory structure compared to other jurisdictions. New Zealand (NZ) has also fallen under HMRC’s spotlight amid claims of trustees allowing pension-busting schemes. Nonetheless, this remains an authorised jurisdiction and indeed is defended by some IFA’s as a suitable jurisdiction for pension transfer with the territory allowing more than 25% commutation of pension rights if the member is to remain a non-NZ resident. Along with Australia, NZ offers some of the most comprehensive regulatory arrangements for retirees. The future Along with the EU directives, the OECD has produced white papers on the concern for retirement provision for member countries. With public sector income levels in decline, many governments are encouraging individuals to supplement income with private pension savings. source : international investor & others. Information was as accurate as possible at time of publication. No decsion should be based on the information on this website. Always seek professional advice. |
Qualifying Non-UK Pension Schemes (QNUPS) The technicalities are complicated, but in simple terms a QNUPS is a new offshore pension for expats or international workers with UK pension rights who now live abroad. The new rules mean all QROPS are by definition QNUPS, but confusingly, not all QNUPS are QROPS. The similarity ends with where the pensions are based. A QROPS must be hosted in a country that has a double taxation agreement with the UK. This means the fund manager has an obligation to report any unauthorised fund payments to the UK taxman during the first five years of the QROPS. Key Features of QNUPS :
When an individual moves overseas, one of the first monthly payments to cease is their pension contribution. This is partly due to the taxation rebates no longer being available, and partly due to reducing outgoings at what can be an expensive time.
There are a number of interesting options for expats both for existing UK pension schemes, and for creating new offshore pension saving plans.
Offshore Pension Plans
An offshore pension plan is usually a long term savings plan that is held in an offshore life assurance wrapper. The location offshore is commonly in highly regulated jurisdictions such as the Isle of Man or Geurnsey. This enables an individual to invest/save in a tax efficient environment, and still benefit from regulatory laws.
 There are products specifically designed for Spanish expats. These 'spanish compliant' life assurance products, ensure any taxation requirements on withdrawal are dealt with on the clients behalf. this means the client does not have the concern of completing a tax return to the Hacienda. There are also standard offshore life assurance wrappers that provide a gross payment to the owner of the plan, and it is their choice on how taxation is dealt with.Below are some example products. These are by no means a recommendation, and sutiable financial advice should be sought for the most appropiate product
The most appropiate product will vary from person to person. This is beacuse most investment products have different fee structures, penalty fees, bonuses, minimum contributions etc.
|
