I pulled up a chair, and went looking for clues.

The Pension Sleuth

 

 

 

 

The budget was full of surprises in terms of changes to UK pension legislation. The changes affect the benefits that can be taken from a registered pension scheme as drawdown pension income and also as taxed lump sums. They amount to a radical reform of pensions in that they will offer much greater flexibility to individuals with different priorities, needs and circumstances. These changes include:

  • There will no longer be an obligation to purchase an annuity on retirement.
  • Those over 60 with small pension pots of up to £10,000 may release these savings as one or more trivial commutation lump sum
  • The number of such lump sums that can be taken under the revised regulation will be increased to three i.e. a combined trivial commutation lump sum total of 3 X £10,000 = £30,000
  • The minimum threshold for the flexible drawdown of pensions will be reduced to £12,000

Expatriates who opt to leave their pension in the UK are no longer required to have a minimum guaranteed pension of £20,000 per annum before being able to take advantage of flexible drawdown. With the new minimum threshold being reduced to £12,000 many more will be eligible for flexible access to their drawdown pension on or after 27 March 2014.

It is not all ‘roses’ however; there is still the thorny issue of taxes to be paid should individuals decide to take their total pension as a lump sum. This may include exposure to IHT taxes in the UK.

Temptation – I can’t resist.
Spend, spend, spend! The most obvious temptation is for individuals to dip into their pension and overspend as a result of this new liberalization. Can we trust ourselves to make the best choices? With life expectancy increasing by 2 ½ years every decade, individuals recognize the need to make their pensions last. They are not going to rush out and blow their pension pot on cruises or fast cars.
Insurance companies have been offering extremely unattractive annuity rates to date. Under the new legislation, individuals can now put off buying an annuity until the rates become more favourable, or seek alternative vehicles for their pension savings. These new rules will therefore allow people to be more in control of their retirement planning.

Impact of the budget on QROPS
There will be an Increase in the maximum income that can be accessed via the pension drawdown facility from 120% to 150% of basic rates, calculated by the Government Actuarial Department. This is indeed good news for those who seek to draw more income from their QROPS. Let’s not forget that UK pensions transferred to a QROPS can grow free of tax and also fall outside of your estate for IHT purposes.

Over the coming days the implications of the new rules on QROPS will become much clearer; stay tuned!

For further information please download our free QROPS Guide, or alternatively contact us at: QROPS@axis-finance.com

Join our Google+ community to keep up to date with the latest QROPS developments: QROPS? Which QROPS?




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QROPS – Reduction in Lifetime Allowance

Individuals considering the transfer of their UK pensions to a QROPS should be aware of changes in the Lifetime Allowance (LTA) as the end of the tax year approaches. The current LTA of £1.5m is the maximum amount of pension saving you can build up over your life that benefit’s from tax relief. If you build up pension savings worth more than the lifetime allowance you will be obliged to pay a tax charge on the excess.

As of 6th April 2014 the LTA will become £1.25m for the forthcoming tax year. We have witnessed a steady erosion of the allowance threshold from £1.8m in the 2010 / 11 tax year, which was subsequently reduced to £1.5m for 2013 / 14, and will be capped at £1.25m in the next tax year.

A transfer from a UK registered pension scheme to a QROPS is considered to be a Benefit Crystallisation Event (BCE). When an individual crystallises their benefits in order to take a pension commencement lump sum and / or facilitate the withdrawal of income from their pension capital, the value of the savings being crystallised is tested against their available Lifetime Allowance. As soon as the value of the total UK pensions exceeds that limit, an individual would be subject to a tax charge of up to 55% on any BCE upon retirement or death. The transfer of your UK pension to a QROPS would arrest the growth on your personal LTA at today’s value.

The new LTA threshold

As stated, the present situation is set to change on April 6, with a reduced LTA of £1.25m. Some people will already have pension funds of over £1.25m; many others can envisage their existing pension pot exceeding this limit with future contributions before they reach retirement. The new limit will have an impact on:

  • Individuals who intend to start taking income from their pension savings
  • Those who wish to increase the level of retirement income they need from those savings

What it means to you

Individuals living abroad who wish to access their pension savings in the current tax year may gain over the longer term from the transfer of their UK pension into a QROPS and therein the crystallization of benefits. The net result could be:

  • An increase in the available pension commencement lump sum that is tax-free from any future crystallisation
  • Reduced likelihood of suffering an LTA tax charge on part of the future value of their pension fund whenever they draw on those untouched pension savings

Pension funds are easy targets for governments wishing to raise revenue; we have already seen one such ‘raid’ under the last Labour government. Time is running short for those who wish to protect their pension fund against the forthcoming LTA change. However this may not be the last reduction in the LTA; the current trend suggests that the threshold will be lowered further to £1m at some stage in the future. There remains a window of opportunity for pension planning!

For further information please download our free QROPS Guide, or alternatively contact us at: QROPS@axis-finance.com

Join our Google+ community to keep up to date with the latest QROPS developments: QROPS? Which QROPS?




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QROPS – a Maltese dilemma

QROPS are designed to pay out benefits to members at the age of 55. They were structured in such a way so as to reflect the UK system, wherein 55 is also the earliest date that individuals are permitted to begin receiving their pensions.

However, pension fund trustees in certain jurisdictions at present allow QROP scheme members to begin taking pension benefits before the age of 55‚ on the provision that the scheme member has lived outside of the UK for more than five complete tax years.

Pension liberation - How could this affect you?

The major protagonist in this case is Malta, the only mainstream jurisdiction for qualifying recognised overseas pension schemes that is both a member of the European Union and has a legal minimum age for taking one’s pension of 50. This stance is placing Malta at loggerheads with the QROPS regime. UK legislation stipulates that HMRC has the power to raise an unauthorised payment charge for those who have opted to take their pension before the age of 55. As such, a Maltese QROP scheme may be interpreted by HMRC as a potential vehicle for pension liberation (pension busting), and therein run the risk of being referred to the UK Pension Regulator.

Squaring the circle

It is in the interest of both the industry and the QROPS scheme member that consistent pension legislation exists between Malta and the UK. A solution to the problem would be for jurisdictions to align the rules relating to access to pension benefits with those of UK pension plan holders. The objective of QROPS legislation in this area is to guard against individuals accessing their pensions early.  Ultimately, the UK State does not wish to have to support individuals in retirement as a consequence of them being given access to their pension fund too soon. It is therefore better for all concerned parties that age 55 be universally accepted as the date for drawing pension benefits.

Back at basecamp, UK pension funds may decide to challenge whether a QROPS provider in a given jurisdiction is offering access to pension benefits before the minimum requirement age of 55. As existing trustees, these institutions have a ‘duty of care’ to pension scheme members, and are responsible for ensuring that any transfer out of UK pension funds are not categorized as a form of pension liberation.

One suggestion is that Scheme providers should play their part and forbid benefits being taken from pensions at the age of 50 as it is in conflict with existing HMRC rules on pension transfers.

In Malta’s case, it is the responsibility of the Maltese authorities to report back to HMRC on all activity involving pension funds of UK origin. As such, HMRC will be informed should an individual with a Maltese QROPS take benefits before the age of 55.

If all else fails, HMRC itself may decide to take action by ruling that the Maltese jurisdiction is in some way encouraging pension liberation. This could open up the possibility of the QROPS provider being removed from the published HMRC recommended list.

Summary

Although current Maltese law permits people to take pension benefits at age 50, this should not encourage individuals to flout the QROPS rules laid down by HMRC. There will always be glitches and anomalies in a given process. The task of the industry is to monitor any changes in the rules, and their interpretation as they evolve.

For further information please download our free QROPS Guide, or alternatively contact us at: QROPS@axis-finance.com




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QROPS in France – Happy New QROPS Regime!


 

 

QROPS in France – Hurray for January, the month when everything becomes new again!

However, let’s take the opportunity to have a recap of what happened last year in the world of QROPS and how it will affect those living in France.

On 17 June 2013 the French law, Loi de Finances Rectificative, took effect wherein trustees of foreign trusts were obliged to report UK personal pension vehicles that have French tax-resident beneficiaries to the French fiscal authorities. As such, beneficiaries and/or settlors must declare the market value of the assets, rights or capitalized income on all trusts which have been in existence since January 1 of 2013. The new legislation appears to be part of a wider campaign to clamp down on undeclared wealth in France.  Investors in possession of a QROPS in France need to give this due consideration.

Uncertainty over QROPS and the laws governing their structure appeared to have been cleared up, when the UK House of Parliament finalised amendments to the QROPS regime in October 2013. HMRC have introduced additional reporting requirements for Qualifying Registered Overseas Pension Schemes (QROPS). These include the following:

  • QROPS managers are required to renew the status of their schemes every 5 years with HMRC. Failure to do so will result in the scheme losing its QROPS status
  • QROPS providers must report payments that have been made from funds transferred out of a UK pension scheme. Former QROPS must also abide by these requirements
  • Former QROPS providers that have been found to have breached the rules will be subject to penalties
  • HMRC will have the power to remove the QROPS status from providers should the scheme manager provide false or misleading information in terms of the scheme’s compliance with applicable legislation

From the provider’s side of the equation, Malta led the way through the imposition of legislation governing the way QROPS are to be handled within its jurisdiction. The Maltese regulatory authority require the administrator/trustee of each QROP scheme to submit an independent audit each year, which covers the scheme’s finances and includes a statement that addresses the scheme’s compliance.

The evolution in QROPS legislation is gathering pace; day by day the framework for UK pension transfers continues to strengthen!

For further information please download our free QROPS Guide, or alternatively contact us at: QROPS@axis-finance.com




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QROPS in IrelandQROPS in Ireland are proving to be the ideal solution for British expats seeking to access their UK pension plans early. An estimated 300,000 UK nationals currently live and work in Ireland; many of these have retained UK pension benefits which they accumulated whilst working in Britain.

UK rules governing pension transfers have been simplified since the introduction of legislation in 2006, enabling the transfer of the value of accrued pension entitlements from Britain to another jurisdiction. The legislation was passed by the UK tax authority, HM Revenue and Customs (HMRC), in order to comply with an EU directive that pensions be free to move across European borders. It is the requirement of HMRC that any UK pension transfer should be made to a Qualifying Recognised Overseas Pension Scheme or QROPS.

What makes a scheme a QROPS?
The criteria outlined by HMRC for an overseas scheme to qualify as a QROPS include:

  • The pension scheme must be established outside of the UK
  • It must be recognised for tax purposes in the country where it is located
  • It must be regulated in the country in which it is established

Eligibility for a QROPS pension transfer
A QROPS is specifically designed to allow anyone, not intending to retire in the UK, to transfer existing and frozen UK pension plans into a more appropriate retirement vehicle. As such, British expats living in Ireland, or wishing to retire there, can take advantage of their offshore status and transfer their UK pension to a pension structure that is better suited to their needs.
Those eligible for a QROPS pension transfer therefore include:

  • A UK national moving to Ireland
  • Any national who has built up UK pension benefits and is now resident or intending to become resident in Ireland

The establishment of a QROPS offers a certain degree of flexibility in terms of how and when you can take benefits.For further information please download our free QROPS Guide, or alternatively contact us at: QROPS@axis-finance.com

 




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QROPS Ireland

QROPS Ireland

The use of QROPS in Ireland as a vehicle for the transfer of UK pensions for returning Irish expats is becoming increasingly popular. In recent times many Irish found their way to English shores in the quest for work, adventure and a chance to make their fortune. The era of ‘the celtic tiger’ saw the emigration situation reversed, with Ireland becoming a place of destination.  Irish people came back in their droves given the lure of opportunity and new found prosperity; some with the intention of retiring to pastures green.

 

I’m coming home, I’ve done my time!

A recent survey conducted by Standard Life of more than 1,000 Irish adults, revealed that 15% of respondents were in possession of a UK pension. If you are Irish resident, have worked in the UK and built up UK pension benefits over the years, you are now able to bring your pension home and in so doing have more control over your retirement options.

Make the most of your UK pension by using a QROPS when retiring to Ireland

Recent changes to UK pension legislation mean that returning Irish expatriates can avoid the various restrictions imposed by the UK Government on how their UK pension benefits can be taken on retirement, by transferring their pensions to a QROPS. A QROPS or Qualifying Recognised Overseas Pension Scheme is an offshore pension vehicle that is designed to accept a transfer from a UK registered pension scheme. QROPS offer Irish residents the same benefits as their English counterparts when it comes to the transfer of UK pensions.  Pensions that can be transferred into a QROPS include personal and occupational pension schemes.

Who is eligible for a QROPS pension transfer?

In order to transfer your pension out of the UK, you must have already left the country for tax purposes, or be intending to leave in the near future. Once tax resident in Ireland, you can transfer your pension fund out of the UK into a QROPS in the same way that you would transfer between pension providers within the UK. Those eligible for a QROPS pension transfer therefore include:

  • A UK national moving to Ireland
  • Any national who has built up UK pension benefits and is now resident or intending to become resident in Ireland

As such, an Irish person leaving the UK who wishes to transfer their pension provision to another jurisdiction will generally opt for a QROPS as the most viable solution.

QROPS Benefits

QROPS offer a certain degree of flexibility in terms of how and when you can take benefits. These include:

  • Benefits can be drawn from the age of 55
  • You can take up to 30% of your pension fund tax free on retirement. This is higher than the current UK limit.
  • A lifetime income can be provided by way of income drawdown, a fixed annuity, or a combination of both
  • In most cases you are also able to draw-down a higher annual pension income than you would if you were to retire in the UK.
  • QROPS helps solve the problem of currency risk by allowing you to invest your pension, and take income and benefits in a currency of your choice.
  • QROPS offer a greater choice of investment options, allowing you to access funds managed by any of the world’s leading investment groups.
  • Assets held in a QROPS fall outside of your estate for Inheritance Tax purposes if you die while living overseas. This means your wealth is protected for future generations, which is in stark contrast to the potential 55% tax charge on death were you to leave your pensions in the UK.
  • Investments grow free of tax (except for withholding tax on dividends)
  • There is no limit on the amount of contributions/growth
  • You are able to consolidate a multiple of pensions in a QROPS

For further information please download our free QROPS Guide, or alternatively contact us at: QROPS@axis-finance.com

 




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The 30% ruling is a tax incentive granted to foreign workers, possessing specialist skills, that come to work in the Netherlands. The maximum duration of the 30% ruling for expatriate employees is 8 years.

It is not unusual however for expats to be unaware of their eligibility for this ‘tax break’. The reason may be as simple as not having the time to look into the matter, or perhaps as a result of being unsure of the government regulation. All is not lost however; it is possible to apply for the 30% ruling even if you have already spent several years working in the Netherlands.  Although you may have missed out on some of the benefits, there are still advantages to be had as the tax authorities will reduce the total duration of the ruling by the period you have already resided in the Netherlands.

There is always the case of one’s employment situation changing. There have been incidents where the employer is reluctant to apply for the ruling on behalf of his employee, even though the employee would have been eligible; this can be readdressed. It is also possible for the expatriate employee to reapply for the 30% ruling if he changes employer during the term. Alternatively, the expat may decide to set up his / her own Dutch B.V. becoming an employee of that company and therein be eligible for the 30% ruling. Whatever the circumstances, the 30% ruling exists to incentivize skilled foreign workers to come to the Netherlands; let’s not waste this opportunity!

If you have any questions on the 30% ruling or seek a more detailed explanation on how it effects your tax position in the Netherlands, please contact us at: enquiries@axis-finance.com


 






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Oil & Gas and IT contractors are in prime position to take advantage of the 30% ruling in the Netherlands. Application for the tax break, offered by the Dutch government to expat contractors possessing specialist skills, should be considered as an essential part of financial planning.

Partial Non-Resident Status
When an expat relocates for work purposes to the Netherlands, they are considered as Dutch tax resident. However, under the 30% ruling they may opt to be treated as a partial non-resident for Dutch income tax purposes for the duration of their contract or posting. The choice of partial non-resident status can be revised each year by the expat.

With this status contractors are exempt from Dutch taxation on investments, other than those in Dutch real estate. This means that expats with offshore pensions or investments are not taxable on any gains declared to the Dutch revenue.

For information on how to apply for the 30% ruling or for a more detailed explanation on how it effects your tax position in the Netherlands, please contact us at: enquiries@axis-finance.com




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QROPS in France – amendments to the QROPS regime

With the use of QROPS in France becoming ever more popular, it is important for expats to stay abreast of developments in the marketplace. With over 3000 providers on the official QROPS list, there are quite a number of jurisdictions to choose from.  It is important to be sure however that your UK pension transfer is being handled by a provider / jurisdiction that is in compliance with HMRC rules.

Any uncertainty over QROPS and the laws governing their structure now appear to have been cleared up. The UK House of Parliament has finalised the much awaited amendments which seek to clear up anomalies within the QROPS regime. The Registered Pension Schemes and Overseas Pension Schemes (Miscellaneous Amendments) Regulations 2013 were put before Parliament during September and came into force on the 14 October 2013.

HMRC have introduced additional reporting requirements for Qualifying Registered Overseas Pension Schemes (QROPS). These include the following:

  • QROPS managers are required to renew the status of their schemes every 5 years with HMRC. Failure to do so will result in the scheme losing its QROPS status
  • QROPS providers must report payments that have been made from funds transferred out of a UK pension scheme. Former QROPS must also abide by these requirements
  • Former QROPS providers that have been found to have breached the rules will be subject to penalties
  • HMRC will have the power to remove the QROPS status from providers should the scheme manager provide false or misleading information in terms of the scheme’s compliance with applicable legislation
  • Information notices may be issued to third parties by HMRC in certain circumstances without requiring the consent of either the QROPS member or QROPS provider. An example of such a situation would be HMRC seeking to clarify the tax position of a QROPS member

For further information please download our free QROPS Guide, or alternatively contact us at: QROPS@axis-finance.com

 




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Retirement in France

As a French resident, all of your worldwide income and gains should be declared on your French tax return. To avoid confusion it is best to refer to the UK / France Double taxation Treaty on this matter. The Double Tax Treaty is set up to ensure that you do not pay tax twice on any income / gains. However, the global amount is needed in order to calculate the rate at which income should be taxed in France. As such, income which is normally taxed outside of France e.g. a government or civil service pension, will still be used in order to calculate your overall tax liability.

Government pensions and state / private pensions are treated differently under the UK / French tax treaty. If you receive a government pension, this is taxed in the UK and not in France. On the other hand, if you are in receipt of either a state or private pension, it is eligible to be taxed in France and not in the UK. It should be noted that ‘state pensions’ are regarded as ‘private pensions’ by the French authorities and are therefore taxable in France.

For further information please contact us at:  enquiries@axis-finance.com

 




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