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New QROPS tax charge for 2017 – Will this change after BREXIT?

By Spectrum IFA - Topics: Belgium, BREXIT, France, Italy, Luxembourg, Netherlands, pension transfer, Pensions, Portugal, QROPS, Retirement, spain, Switzerland, United Kingdom
This article is published on: 20th April 2018

20.04.18

In the Spring 2017 Budget, the UK government announced its intention to introduce a new 25% Overseas Transfer Charge (OTC) on QROPS transfers taking place on or after 9th March 2017. The HMRC Guidance indicates that the OTC will not be applied in the following situations:

  • the QROPS is in the European Union (EU) or EEA and the member is also resident in an EU or EEA country (not necessarily the same EU or EEA country);
  • the QROPS and the member is in the same country; or
  • the QROPS is an employer sponsored occupational pension scheme, overseas public service pension scheme or a pension scheme established by an International Organisation (for example, the United Nations, the EU, i.e. not just a multinational company), and the member is an employee of the entity to which the benefits are transferred to its pension scheme.

It is also intended that the above provisions will apply to transfers from one QROPS (or former QROPS) to another, if this is within five full tax years from the date of the original transfer of benefits from the UK pension scheme to the first QROPS arrangement.

Nevertheless, it is clear that taking professional regulated advice is essential. This includes if you have already transferred benefits to a QROPS and you are planning to move to another country of residence.

It is important to explore your options now while you still have the chance as who knows what changes will come with BREXIT. Contact you’re local adviser for a FREE consultation and to discuss your personal options

How Do I Find My Pension?

By Emeka Ajogbe - Topics: Belgium, Pensions, Retirement, UK Pensions
This article is published on: 19th April 2018

19.04.18

I have been asked this question, more than once. Some clients are embarrassed to ask. Others have simply lost sight of their pension for one reason or another and have no idea how to track it (or them) down.

Why am I telling you this? Well, recently the UK Government announced that there is over £400 million of lost pensions sitting with various pension and insurance companies in the UK – left behind by former employees who have either moved abroad, are unaware that they had a pension (it’s more common than you would think), or simply have not kept track of their pension. In fact, figures show that four out of five people will lose track of at least one pension over the course of a lifetime.

How can this happen?
It is surprisingly easy for people to lose track of their pension(s). Firstly, because people frequently move around for work. As the former Minister for Pensions, Baroness Ros Altmann said:

“People have had on average 11 jobs during their working life which can mean they have as many work place pensions to keep track of…”

That’s a lot of paperwork to keep on top of and to be fair, most people will only really think of their pensions when they are close to retirement. Which brings me to the second point.

We can and do lose contact with the companies which administer our pensions. The most common reason for this is that pension and insurance companies have merged, and hence brand names have disappeared. For example, a company called Phoenix Life owns more than 100 old pension funds. Its list includes schemes from Royal & Sun Alliance, Scottish Mutual, Alba Life, Pearl Assurance, Britannia Life and Scottish Provident. This invariably leads to a lot of frustrated people looking for their money. It will perhaps surprise you that neither the Association of British Insurers nor the Financial Conduct Authority have a comprehensive list of which company owns which funds.

OK, how can I track down my pension?
Glad you asked. We can help with that, of course. We would need as much information from you as possible which, depending on the type of pension, would include:

Personal Pension

  • The name and address of the pension scheme (you may find that this has changed)
  • The bank, building society or insurance company that recommended or sold the scheme
  • Policy/NI Number

Work Pension

  • The company you worked for and if they have changed names/address since you left
  • Dates you worked there
  • When you started contributing to the scheme and when you finished
  • Employee/NI number

Obviously, the more information that you can provide, the easier it will be to locate your money. However, we will work with what you’ve got to explore all possible options.

Some companies are more efficient and responsive than others when it comes to handling enquiries on historic pensions, even when the original policy documentation is available. It can take years to locate and recover lost funds. You can fight the battle yourself; or we can pursue on your behalf until we get a satisfactory outcome.

Another reason to review your work pension(s) is that transfer values for defined benefit, or final salary, schemes are at record highs. Depending on the company, valuations are higher than most people anticipate. For example, a pension projected to pay £8,000 per year could have a transfer value of over £285,000, well in excess the average house value in the UK!

I’ve got my pension(s). What next?
Depending on your age and circumstances, transferring an existing pension into a new scheme may be beneficial, including if you have more than one pension. Consolidating existing arrangements removes the need to monitor numerous pensions and, perhaps more importantly, allows you to optimise returns from a single, personalised investment strategy, often with greater flexibility over the timing and amount of payments and in your preferred currency.

Ahead of any potential transfer, the first step is to determine whether a transfer is in your best interests. A responsible adviser will always complete a detailed and objective review of your current position and plans. A transfer may not be appropriate, for a variety of reasons – for example if it means the loss of valuable guaranteed benefits – so it is essential to consult only a suitably authorised, qualified and experienced adviser. A proper assessment will enable you to make an informed decision on whether a transfer is best for you.

If you do proceed with a transfer, as part of the exercise you should also expect ongoing advice on matters such as investment performance and outlook, together with guidance on the suitability of the scheme following, or ahead of, a change in your circumstances.

For help with locating and reviewing your UK pension(s), please contact me either by email emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72.

The European Commission Pension Scheme

By Emeka Ajogbe - Topics: Belgium, EU Pension Transfer, european commission pension scheme, European Institutions Pension Scheme, European Union Pension Scheme
This article is published on: 8th February 2018

08.02.18

There are many benefits to working for European Institutions; the opportunity to be involved in policy making – changing the lives of millions, the opportunity to be integral in shaping the future of Europe and the opportunity to travel. This does not include the generous benefits; such as the good salaries (though those have been coming down in recent years), the opportunity to send your child or children to the European School of Brussels (either heavily subsidised, or free), and, of course, the opportunity to become a member of the gilt edged, well-funded, European Commission Pension Scheme.

The European Commission Pension Scheme is what is known as a defined benefit/final salary scheme. This means that when you retire, the organisation guarantees you a monthly payment (or defined benefit), every month of every year of your retirement, until you die. When you pass away, your partner will receive a reduced monthly payment, known as a Survivor’s Pension for every month, of every year that they are alive, until they die. As you can imagine, this is an extremely good scheme to be involved in, as when you retire, you will receive up to a maximum of 70% of your final basic salary, for the rest of your life, and your partner will receive up to a maximum of 60% of your final basic salary until they die.

The issue is, the European Commission Pension Scheme is not just given to anyone who works there; you have to qualify for it. This means that you must work there for at least ten years before you are eligible. The good thing is that this does not have to be consecutive. You can leave and return. Contributions are deducted from yourself and the EU, and a lump sum is collected that will form the basis for your eventual pension.

However, what happens if you leave before the ten years? Does the money just disappear? Well, no. You can take the lump sum with you and use it for whatever you like, as long as it is a pension. The pension must meet stringent EC guidelines before you can transfer it; see what I mean here: www.spectrum-ifa.com/eu-pension-transfer-eu-institutions-eur-money/

Having worked here for a number of years, I have accumulated knowledge and experience on this matter and can explain to you how your pension works, and help you transfer it should you need to. Contact me below for either query.

Brussels Presentation – Should I transfer my pension out of the UK, or not?

By Emeka Ajogbe - Topics: Belgium, BREXIT, EU Pension Transfer, United Kingdom
This article is published on: 16th January 2018

16.01.18

Brexit.
A word that exploded onto the British lexicon almost three years ago and has refused to dissipate. Indeed, instead of disappearing into the shadows and reappearing every time the ruling party wishes to dangle a carrot (or stick) in front of the populace, it has remained in full view without a day or week going by without it being mentioned on the news, by the watercooler, at home amongst family, or debated amongst friends and experts alike.

What does it mean? To some, it is wrenching back sovereignty from the EU Overlords, to others, it is an unmitigated mistake. To some, it is the taking back control of the British borders and stemming the tide of immigrants, to others, it is an unmitigated mistake. What is sure, is that it means that the UK voted to leave the EU next March and the EU28 will become EU27.

Whilst the politicians discuss the terms on which they will work together in the future and untangle the ties of the past, what does it mean for you?

If you have worked in the UK and have a pension (or more) there, then the lack of clarity and swirling uncertainty surrounding Brexit undoubtedly has you concerned about your money; fortunately, we at The Spectrum IFA Group have a solution for you.

On Wednesday 7th February, we have invited leading industry experts to discuss the potential implications of Brexit on your money and more specifically any pensions that you have in the UK. This is a must attend event for anyone who has worked and has a pension in the UK. Our experts will discuss likely scenarios and provide solutions for your pension concerns and we will also have a local Belgian Tax Expert who will talk about the tax treatment of UK Pensions here. The evening will end with finger food and drinks and an opportunity to meet and greet our experts, advisers, and attendees.

Click below to confirm your attendance, and we look forward to meeting you at the Renaissance Hotel.

Yes, I would like to attend the presentation on Wednesday 7th February/

EU Pension Transfer from the EU Institutions – It is EUr money

By Emeka Ajogbe - Topics: Belgium, EU Pension Transfer, France, Luxembourg, pension transfer, Retirement, Switzerland
This article is published on: 15th August 2017

15.08.17

Have you ever worked for any of the below institutions for less than 10 years? Go ahead, and have a look:

• European Commission
• European Council
• European Parliament
• EEAS
• European Court of Justice
• Eurocontrol

If yes, then carrying on reading this article, as an EU Pension Transfer will definitely be of interest to you. If not, then you’ll probably want to stop reading, unless you know someone in the aforementioned position.

To Whom It May Concern, if you have worked for less than 10 years at the EU Institutions (and have left), you will not have qualified for the gold plated, much coveted, EU Pension. I say much coveted, as no one is really making pensions like them anymore; as they are very, very expensive for the employer to maintain. Yet, they can be very, very good for you, the employee. Anyway, I digress. That is for another article.

As you will know by now, you have to work at the EU Institutions for at least 10 years (this can be interrupted, as long as the total is 10 years) before you qualify for the pension. If you leave before that time, then you are eligible for a severance grant which you can transfer into a scheme that has been approved by the EU. As it states in the EU Staff Regulations handbook:

“An official aged less than the pensionable age whose service terminates otherwise than by reason of death or invalidity and who is not entitled to an immediate or deferred retirement pension shall be entitled on leaving the service:

a. where he has completed less than one year’s service and has not made use of the arrangement laid down in Article 11(2), to payment of a severance grant equal to three times the amounts withheld from his basic salary in respect of his pension contributions, after deduction of any amounts paid under Articles 42 and 112 of the Conditions of Employment of Other Servants;

b. in other cases, to the benefits provided under Article 11(1) or to the payment of the actuarial equivalent of such benefits to a private insurance company or pension fund of his choice, on condition that such company or fund guarantees that:

I. the capital will not be repaid;
II. a monthly income will be paid from age 60 at the earliest and age 66 at the latest;
III. provisions are included for reversion or survivors’ pensions;
IV. transfer to another insurance company or other fund will be authorised only if such fund fulfils the conditions laid down in points I, II and III.”

The last 4 points are the most important to note as your money will not be transferred unless the approved receiving organisation adheres to those criteria.

WHY WOULD I TRANSFER?
Essentially, you have to, unless you like losing large sums of money. If you have not transferred by the time you have reached pensionable age, then your money disappears and is absorbed by the EU. If you die before you claim your money, then it is also lost. It will not be transferred to any beneficiaries as it is not a pension. When you leave, the amount that you leave behind is frozen and only increases at a very low interest rate; no further contributions are made on your behalf. So moving it when you leave allows you the opportunity to invest it into funds that could grow your money substantially over the years (depending on how close you are to retirement). For example, if you left the institutions at 40 years old, you would have at least 25 more years to grow your money. If you leave earlier, then you would have longer.

Moving it would also allow you better protect your financial future, make provisions for your partner or dependents/beneficiaries. It can be of benefit even if you decide to return to the EU Institutions.

There may be circumstances where it is not appropriate for you to transfer the money at that time, your particular situation will be evaluated by our pension specialist who will compile a report detailing the appropriateness of the potential transfer.

SOUNDS GREAT! WHAT NEXT?
We will conduct an evaluation of your situation and also the accumulation of your money at the EU. Once we have confirmed and agreed with you that transferring out is the right option for you, we will work with an approved provider to who complies with the requirements as stated above who will help set up your new pension. Then, as part of our ongoing service, we will review your pension and personal circumstances every quarter to ensure that you are always updated with the latest information. Even if you move countries, our service will continue.

We have established contacts with case handlers in the Office for the Administration and Payment of Individual Entitlements (the department responsible for calculating and transferring your money), and have developed the knowledge and expertise to ensure a smooth transfer, putting you in control of your money and helping you make the right decisions, as and when they are needed.

So, if you have no longer work for the EU Institutions and have less than 10 years’ service, you don’t like losing large sums of money, wish to protect your financial future, and potentially provide for your dependents/beneficiaries, then contact me either by email: emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72 to see whether an EU Pension Transfer is suitable for you.

Compound interest – The Eighth Wonder of the World

By Emeka Ajogbe - Topics: Belgium, Interest rates, Investments
This article is published on: 2nd May 2017

02.05.17

Albert Einstein reportedly said it. “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.

Regardless of whether Einstein uttered these exact words, the essence of his statement is still immensely powerful and cannot be disputed. For anyone who wants to build lasting wealth, understanding and harnessing the power of compound interest is essential. So, what is compound interest? Well, it is the exponential increase in the value of an investment. Or, more simply put, it is the interest that you earn on your interest.

For the more visual of you, imagine, if you will, building the bottom part of a snowman. It starts with a snowball (or initial investment). You roll it around in the snow and it slowly gets bigger (interest on the investment). A slow and monotonous process until something wonderful becomes apparent – the snowball not only gets bigger and bigger, but at a faster and faster rate (interest on the interest).

Compound interest - The Eighth Wonder of the World

Put another way, let’s say that you invest €100,000 at (just to keep the maths simple) 10% interest per year. After the first year, you would have earned €10,000 of interest, with your total investment now worth €110,000. After the second year, your 10% annual return would have earned you another €11,000, giving you a total of €121,000. Year three would see your investment rise to €133,100. Over time this growth accelerates, meaning that you would double your initial investment in approximately seven years, simply by harnessing the power of compound interest. Sounds pretty easy, yes? So, why don’t more people do it? Well, for two main reasons, in my experience:

The key requirement for generating compound interest is time – the longer you leave your money to grow, the more pronounced and positive the outcome. Modern times have encouraged us to expect immediate rewards. For many, being told that it will take a good few years to see significant returns on their investments can be demotivating.

Another common reason is “it’s a bad time right now.” In the 1970s we experienced record breaking levels of inflation, in the 1980s Black Monday brought the biggest stock market crash since the 1920s. The 1990s saw a period of sustained recession. Currently, there are many economies around the world that are still recovering from the financial crisis of 2008, almost ten years on. Yet the stock market performs over time and continues to do so. The timing of an investment is far less important than the time that is allowed for it to deliver.

Essentially, having a long term investment strategy – allowing growth to be achieved over time – provides the best possible opportunity to achieve financial security for you and your loved ones in later years. With compound interest, the old Chinese proverb holds true. “The best time to plant a tree was twenty years ago, the second best time is now.”

Time to Review Your Final Salary Pension

By Craig Welsh - Topics: Belgium, BREXIT, Netherlands, Pensions, Uncategorised
This article is published on: 27th October 2016

27.10.16

Final Salary pension schemes, also known as Defined Benefit schemes, have long been viewed as a gold-plated route to a comfortable retirement. In the past, many advisers, including ourselves, would have been sceptical about people transferring out of such a scheme. However, there have been huge changes in UK pensions legislation and there are likely to be further changes ahead. The key question here is; will these schemes be able to provide the benefits they have promised over the next 20+ years?

Why Review Now?

In many cases, it may still be best advice to leave the pension where it is. And a transfer out requires highly specialised and regulated advice. However, there are many compelling reasons why a review makes sense.

Record high transfer values
UK gilt yields are at an all-time low and this has pushed up transfer values to be an all-time high; some transfer values have increased by over 30% in the last 12 months. Many clients are quite surprised to learn their scheme which projects an income of GBP 10,000 per annum in retirement offers a transfer value of over GBP 330,000!

Scheme Deficits
Actuaries Hyman Robertson now calculate the total deficits on remaining final salary pension schemes as £1 trillion.

TATA Steel/BHS
Recent examples show that very large deficits cause several problems. No one wants to purchase these struggling companies as the pension deficits are too big a burden to take on. Could the Government be forced to change the laws to allow schemes to reduce benefits? A reduction in the benefits will reduce the deficits and make the companies more attractive to purchasers. There is a strong argument that saving thousands of jobs is in the national interest, if that just means trimming down some of these “gold plated benefits”.

Pension Protection Fund (PPF)
This fund has been set up to help pension schemes that do get into financial trouble. Two points are key. Firstly, it is not guaranteed by the Government and secondly, the remaining final salary schemes must pay large premiums (a levy) to the PPF to fund the liabilities of insolvent schemes. As more schemes fall into the PPF there would be fewer remaining schemes that must share the burden of this cost. Their premium costs will increase as there will be fewer remaining schemes to fund the PPF levy.

It is possible that the PPF will end up with the same problems as the final salary schemes; i.e. they won’t have the money to pay the “promises” for pensioners. Additionally, the PPF will most likely have to reduce the benefits they pay out.

Pension Changes Already in Place
Inflationary increases have already been permitted to change from Retail Prices Index (RPI) to Consumer Prices Index (CPI). This change looks reasonably small, but over a lifetime this could
reduce the benefits by between 25% and 30%.

In April 2015, unfunded Public Sector pension schemes have removed the ability to transfer out, so schemes for nurses, firemen, military personnel, civil service workers etc. are no longer transferable. Now these are blocked, it will be easier to make changes to reduce the benefits and no one can respond by transferring out.

When this rule change was being discussed the authorities also wanted to block the transfer of funded non-public sector schemes, i.e. most corporate final salary schemes. There is therefore a risk that transfers from all final salary schemes could be blocked or gated.

Autumn Statement (Budget)
This is expected on 23 November 2016. Could the Government make any further changes to Pension rules? When Public sector pensions were blocked, there was a small time window to transfer. People who review their pensions now may at least have time to consider options.

Could Brexit end the ability to transfer pensions away from the UK? This is still unknown, but pensions are often a soft target of government taxation ‘raids’.

Reasons Why Schemes Are In Difficulty

Ageing population. People now expect to live around 27 years in retirement. When these schemes commenced the average number of years in retirement was 13 years.

Lower Investment Returns. As schemes have become underfunded, they have invested more conservatively. Average exposure to equities (shares) is now around 33%, whereas in 2006 the average equity content was 61%.

Benefits were too generous. In simple terms, many of the final salary schemes were too good. In 2016, if you became a member of a 1/60th scheme then your company would need to add 50% of your salary to make sure the benefits can be paid. Clearly this is unrealistic.

What Could Change?

·       An end to the ability to transfer out of such schemes

·       An increase to the Pension Age, perhaps in line with the increase of the State Pension

·       Reduction of Inflation increases, (already started as many now increase by CPI instead of RPI)

·       Reduction of Spouse’s benefit

·       Increase of contributions from current members

·       Lower starting income

What Are The Alternatives?

QROPS schemes have proven very popular in recent years as they offer expats excellent flexibility. While a QROPS is not the only alternative, and each individual case needs properly reviewed by a suitably qualified adviser, the benefits are clear;

·       The ability to pass the pension fund on to heirs

·       The option to change currency

·       You can access the benefits flexibly via income drawdown (can vary the income you take)

·       Wide investment choice to suit your risk profile.

At The Spectrum IFA Group, your locally-based adviser will work together with our internal Pensions Review team and conduct a full analysis of your current arrangements.

The Spectrum IFA Group Expands in Holland and Belgium

By Spectrum-IFA - Topics: Belgium, Netherlands, Uncategorised
This article is published on: 26th March 2014

26.03.14

The Spectrum IFA Group are delighted to announce that David Elkan has joined the office in Holland.

David has worked in Financial Services for the past 26 years covering all aspects of financial planning and investment advice. Initially working within a large offshore brokerage in South East Asia, David then setup his own business in 2002 advising expat clients worldwide.

Commenting on this recent appointment, The Spectrum IFA Group’s CEO, Michael Lodhi commented “We are delighted to welcome David into the team to advice clients in Holland and Belgium. His appointment underpins The Spectrum IFA Group’s commitment to extend our range of services and advisers in Europe and to provide expatriates with a wide range of specialist financial advice”.

The group has been rapidly expanding within Europe over the past few years and this is the third new appointment for The Spectrum IFA Group within the month of March. Michael continues to say, “It is clear that our services are badly needed by the expatriate community in Europe and we are committed to providing this much needed professional advice”.