Viewing posts categorised under: QROPS

New Pension Transfer Rules!

By Derek Winsland
This article is published on: 10th July 2017

10.07.17

Those of you who are familiar with my past articles will know I have a certain affinity with the pensions landscape; indeed, in the I’m considered a bit of an expert on the subject.

If you have read previous articles you will know that I have been quite critical of the Financial Conduct Authority’s seeming inability to keep up to date with developments in the UK pensions arena. Well up until the 21^st June 2017, that is.

In a complete reversal of previous ‘guidance’, the FCA has now eventually recognised that an individual’s circumstances differ from the next person’s. Up until now, the FCA’s default position regarding any request to transfer out of a defined benefit (final salary) pension scheme has been to view them as unsuitable. In other words, the emphasis (irrespective of a pension member’s situation), has been to decline such transfer requests, primarily because the FCA says it is not in the member’s interest to do so.

The introduction of Pensions Freedom by then Pensions Minister, Steve Webb, presented the FCA with a challenge. On the one hand, here was the government releasing the constraints that pensions had been progressively bound up by from successive previous governments; whilst on the other, the FCA was continuing to protect the interests of the pensions companies, at the same time becoming increasingly more detached from the consumer, for whom it was supposed to serve.

For the last two years, the FCA has struggled with the new pensions landscape, still believing that preserved former pension benefits, even those held within schemes that are only 50% funded, should remain where they are. The Pension Protection Fund, set up to protect members’ pensions where the employer has folded, is coming under increasing strain, because it is funded by all the other occupational pension schemes. As more schemes fold, the more the remaining schemes come under pressure. Clearly, therefore, something had to be done – those self-same members, now fearing their preserved pensions weren’t as guaranteed as they had been led to believe, wanted action.

On 19^th June, Steve Webb, now working for Royal London, reminded the FCA of its duties, warning it against ‘over-regulating’ DB Pension Transfers. The result? New ‘guidance’ (read ‘rules’ to us IFA’s) now focusing upon the individual member’s circumstances. Without blowing my own trumpet, I’ve been saying this ever since Pension Freedoms came in in 2015. You could have knocked me down with a feather when I read about this volte-face. At last, it is not now just about critical yields and hurdle rates, it’s about applying financial planning assumptions to individual needs. If a client has sufficient other assets to fund retirement, why leave deferred benefits in a scheme where on your death (and that of your spouse or partner), the pension is lost? Tell that to your kids……

“Johnny, you know you’re struggling to make ends meet, let alone build funds for your eventual retirement? We guess what, I’m going to leave my pension benefits in a scheme that will provide nothing for you on my death. How does that sound?” Under Pension Freedom, you can pass unused pension funds to your children, if it is outside of a defined benefit scheme. How many parents wouldn’t want that for their children, once their own needs had been catered for?

This is not to say that the floodgates have opened; we as advisers MUST assess the needs of not only the pension member, but also the family unit. We must assume something of a nanny role, helping our clients to plan for the future, to properly identify what capital and income will be available and when. There will be circumstances where the best advice is the comparative guarantee of an occupational pension income; for those people, the advice will be to remain a member of the scheme. But for a lot of people, this new FCA guidance will be seen as empowerment to take control of one’s own financial future. Our role as financial advisers is to provide help and support along the way. Proper financial planning.

Pension Presentation in Luxembourg

By Spectrum IFA
This article is published on: 24th May 2017

24.05.17

The Spectrum IFA group held a pension seminar at the NH Hotel in Luxembourg. The guest speaker was David Denton, Head of Technical Division from Old Mutual International who flew in especially for the afternoon to join two of the local Advisers in Luxembourg, Dave Evans and David O’Donoghue.

It was a sunny afternoon, which only happens a couple of times a year in Luxembourg, so it was great that the 39 guests still managed to turn up. It was hard to book David Denton in as he mentioned he had only just that month already been to Singapore and South Africa to give similar presentations.

David discussed the recent changes with the UK Budget and how this has affected non EEA residents when considering QROPS transfers, he mentioned the changes to the death benefits and the fact that unfunded Final Salary schemes can no longer be transferred. The changes to pensions over the last couple of years shows the UK Government are intent on narrowing down the option in the future, especially with regards to International Pension transfers to Qualifying Recognised Overseas Pensions (QROPS) and transfers from Final Salary schemes. Whilst these schemes do have good benefits, so should not be moved lightly, but with the very high transfer values at the moment and potential ban on transfers in the future, requests for transfer values are at record highs. With the general election coming up there could be another snap Budget and so why not review you pension plans now while you have time to think about the best way forward and before some retirement options are closed by the UK Government.

What can I do to minimise any potential impacts of a tough Brexit process?

By Amanda Johnson
This article is published on: 11th May 2017

11.05.17

This is a question many expatriates are mulling over, now positioning for the upcoming negotiations has started. First and foremost, I remind my customers that the process to leave the EU is widely anticipated to take the full two years set out in article 50, so the only immediate areas people should focus on are changes in the U.K. and French budgets.

As the negotiations progress however, there are steps you can take which will ensure that any effects to you are minimised:

Does your adviser work for a French registered company, regulated in France?

Working with adviser who operates and is regulated already under French finance laws means that any change in the UK’s ability for financial passporting will not affect you.

Is your Assurance Vie held in an EU country, not part of the U.K.?

Again, any issues the U.K. may have to solve regarding passporting are negated by ensuring your Assurance Vie is already domiciled in another EU country.

Have you reviewed any U.K. Company pension schemes you hold, which are due to mature in the future?

The recent U.K. Budget saw the government levy a new tax on people moving their pensions to countries outside the EU. There is no certainly that this tax will not be extended to EU countries once the U.K. has left the union.

The process of leaving the EU is very much unchartered waters and whilst I certainly do not recommend anyone acts hastily, a review of your financial position in the next few months may avoid future headaches.

Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.

Changes to QROPS from 9th March 2017

By Chris Burke
This article is published on: 23rd March 2017

The UK Government announced major changes to Qrops schemes as from the above date (note this does not affect those who already have a Qrops). In essence, anyone who is resident outside of the EU/EEA or not living in the country where their Qrops is based (limited options here) will be taxed at 25% of the value of their pension, if this occurs within 5 years of starting a Qrops (i.e. becoming non UK resident).

So for example, Chris Burke moves his pension from the UK into a Qrops on the 30th March 2017 to a scheme based in Malta (one of the most popular places to hold your Qrops due to its strict regulation). In 2021 (4 years time) Chris decides he is moving to Dubai. He would be taxed 25% on the value of his Qrops.

Why is the UK doing this?

Well, there are many reasons and you would think Brexit is one (many people leaving the UK and perhaps taking their pensions with them). Qrops is also very popular due to its potentially tax efficient and security aspect of securing your UK pension (this is not the case for everybody so good advice is needed). You would also have to look at the potential taxes the Government would raise from this, there are many Qrops based schemes around the world and by limiting where you can hold your pension greatly affects those that can move it.
So to clarify, UK pension transfers to QROPS requested on or after the 9th March 2017 will be subject to a 25% tax charge, unless;
1. The QROPS is in the EEA and the Member is also resident in an EEA country.
2. The QROPS and Member are in the same country or territory. This is a limited if negligible part of the market.
3. The QROPS is an employer sponsored occupational scheme, overseas public service pension scheme or a pension scheme established by an international organisation.
Draft Guidance confirms that for the purposes of these measures, the EEA includes Gibraltar, which is considered part of the EU as a part of the UK.

QROPS Pension Transfer

By Chris Webb
This article is published on: 20th March 2017

If you ever worked in the UK, no matter what your nationality, the chances are you were enrolled in a private pension scheme. The UK government continues to tweak legislative changes affecting the expat’s ability to move this pension offshore. On the surface, these changes appear to limit transfer options, but in reality they have strengthened the legal framework offering expats continuing advantages.

Background

When you leave the UK your private pension fund remains valid but is frozen, or deferred, until you reach retirement age. The pension income you then receive is taxable in the UK no matter where you are based in the world. Once you die the pension will continue in the form of a spouse’s pension if you are married; otherwise it will cease. When your spouse dies, all benefit payments come to an end.

If you take any part of your fund and then die before you fully retire, a lump sum can be paid to your spouse.
In April 2006 Her Majesty’s Revenue and Customs (HMRC) introduced pension ‘A’ day. This liberalised UK private pensions and allowed people leaving the UK to transfer them overseas, often to a new employer. In doing this the UK complied with European legislation which allows all citizens the freedom of movement of their capital. Thus ‘Qualified Recognized Overseas Pension Schemes’ (QROPS) were born.

Recent Chamges 2017

During the March UK budget there was a very unexpected announcement regarding pension transfers out of the UK. The headline was :

“HM Revenue & Customs (HMRC) has announced that Qualifying Recognised Overseas Pension Schemes (QROPS) transfers for individuals not in the European Economic Area (EAA) will be hit with a 25% tax charge”.

At first glance it sent shockwaves through all concerned with pension transfers, after a moment to digest the news it became much clearer that there were exceptions to the rule, detailed below:
1. The QROPS Trustee is in the EEA and the client/member is also resident in an EEA country (not necessarily the same EEA country);

2. The QROPS and the member is in the same country; or

3. 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 important to understand that if a client was to move outside of the EEA within 5 years of the transfer then the tax rate would apply.

In most of the cases I deal with this new tax ruling will not affect the transfer. Since moving to Spain all but one of the transfers I have implemented are EU based.

Implementation

QROPS are not necessarily the right thing in every single case. In order to decide whether it would be advantageous to transfer your pension or leave it in the UK, with the intention of drawing the benefits in retirement, please contact me so that I can carry out a personalised evaluation. There may be compelling arguments, outside of the evaluation alone, which are often overlooked and may affect you in the future.

One of these is that a large number of UK schemes are currently in deficit to the point that they will be unable to pay future projected benefits. This would mean that even though it looks as though there are arguments to leave your UK pension in situ it may actually be wiser to transfer it.

In order for you to make the best decision you need to professional advice on what would be the best situation for you. This will entail seeking details of the current UK schemes, including transfer values, the types of benefits payable to you and options going forward when you get to a retirement date and when you die.

Advantages & Disadvantages of a Transfer Between a QROPS and a SIPP

Advantages

Lump Sum Benefits
QROPS – If you transfer your benefits under the QROPS provisions to a Malta provider, in accordance with the rules of this jurisdiction, you may be able to take a pension commencement lump sum of up to 30% (unless you have already taken this lump sum from the UK pension). Under the current HMR&C (Her Majesty’s Revenue and Customs) rules to qualify for the lump sum option you must be age 55 or over. Your remaining fund is then used to generate an income without having to purchase an annuity. The 30% pension commencement lump sum is only available once you have spent 5 full, consecutive tax years outside of the UK (in terms of tax residence), if you are within the first 5 years, we strongly advise you to limit the pension commencement lump sum to 25%. From 6 April 2017 this 5 year period has been extended to 10 years.

SIPP – The maximum Pension Commencement Lump sum from a SIPP would be 25%.

No Liability to UK Tax on Pension Income
QROPS – This will be paid gross and you declare the income in the country you are resident in as long as the QROPS jurisdiction has a Double Tax Treaty (DTT) with the country that you are resident in. Transferring under the QROPS provisions ensures that, if tax is due on pension income, it will only be taxable in the country of your residence.
SIPP – This should be able to be paid gross, although many clients find this to be a very awkward process to solve as the pension company does not always talk to the HMRC and therefore at least for the first year or two the pension is paid net of basic rate tax and sometimes even on an emergency tax basis. This can be reclaimed, but will involve more paperwork than that of a QROPS.

No Requirement to Purchase an Annuity
There is no longer a requirement to ever purchase an annuity with either your UK pension or in the event you make a transfer under the QROPS provisions. Therefore the rules below are the same for a QROPS and a SIPP.

With both a QROPS and a SIPP the maximum age you must start to draw an income is from age 75. The Pension commencement Lump Sum must be taken by this age or the option to take it after this age is lost.

The budget changes in the UK has meant that from April 2015 the restrictions imposed from drawing a pension income from a UK Pension Plan will be scrapped. This means that investors will be able to take the whole of their pension as a lump sum if they wish from age 55. The first 25% would be the standard Pension Commencement Lump Sum but the remaining amount would be subject to your marginal rate of income tax. The Malta QROPS have now followed these changes to allow full flexibility also.
This would not be possible with a Final Salary pension. It would need to be transferred to a SIPP or QROPS to utilise these options.

Secure Your UK Pension Pot
Some defined benefit schemes in the UK are in deficit. Since the deficit forms part of the balance sheet of the company, this can present a huge risk to your pension fund.
Transferring your UK benefits to a SIPP or QROPS provisions could enable you to have full control of these funds without worrying about the financial situation of your previous employer.

Ability to Leave Remaining Fund to Heirs
QROPS – All death benefits will be paid out from the Malta QROPS with 0% death tax no matter what age an individual is.
SIPP – The recent UK Budget has changed how death benefits will be paid to their heirs in the future. If death occurs before age 75 then any remaining balance in a pension fund can be paid tax free to any beneficiary. Otherwise if a member passes away after the age of 75 then there would be a tax charge, any lump sum benefit would be subject to the beneficiaries marginal rate of income tax.

A transfer under the QROPS provisions will allow the member to leave lump sums without deduction of tax to heirs no matter what age they pass away, so it is clear and simple. (this is not applicable to Defined Benefit schemes). The below table shows the situation more clearly.

Defined Benefit Plans

UK Pension – (generic pension benefits)
	Scenario	Death Benefits
SRA	Married couple 1^st to pass away	50% income to Spouse
	Married couple 2^nd to pass away	0% of total plan
	Single but with grown up children	0% of total plan
	Lump sum to future heirs	0% of total plan

QROPS- Malta
	Scenario	Death benefits
SRA	Married couple 1^st to pass away	100% of fund value to any beneficiary
	Married couple 2^nd to pass away	100% of fund value to any beneficiary
	Single but with grown up children	100% of fund value to any beneficiary
	Lump sum to future heirs	100% of fund value to any beneficiary

SRA – Selected Retirement Age

The tables are based on the usual death benefits being taken in retirement. Some plans may have slightly different death benefits which may be higher or lower than 50% income provided on death and guaranteed periods for the first 5 years. Please check the exact benefits within your scheme for a full exact comparison.

Currency
A standard UK pension will usually only be invested and pay benefits in Sterling, which means the member runs an exchange rate risk in respect of pension income, in addition to incurring charges in converting the pension payments to the currency of their country of residence.
A transfer under the QROPS provisions means that the pension payments can be made in the local currency, thus potentially eliminating exchange rate risk.

Lifetime Allowance Charge (LTA)

QROPS – There is no LTA charge within a QROPS so transferring larger plans to a QROPS may not be caught in this reduction in the future. Careful planning will be needed with your adviser if you are close to the limit in the UK. (a transfer to a QROPS is a crystallisation event, so will be tested against the LTA at that stage, any benefits above the LTA at time of transfer will be subject to a 25% tax liability.

SIPP – This is a restriction on the total permitted value of an individual’s total accrued fund value in UK registered pensions, currently £1m. Those who exceed this value face a potential tax liability of 55% on the excess funds on retirement at any time when there is a “benefit crystallisation event” that exceeds the LTA. A benefit crystallisation event is any event which results in benefits being paid to, or on behalf of, the member and so includes transfer values paid to another pension scheme, as well as retirement benefits.

Disadvantages

Charges
QROP & SIPP If you have a pension(s) with a combined transfer value of less than £50,000 then the charges may be prohibitive.

Loss of Protected Rights
QROPS & SIPP – A transfer may result in the loss of certain protected rights, including Guaranteed Annuity Rates, Guaranteed Minimum Pension, a protected enhanced lump sum, or rights accrued under a defined benefit scheme. (These are shown in the section “Analysis of Your Existing Pensions”).

Returning to the UK
If you return to the UK, then the QROPS administrator will have to report this ‘event to HMRC and the pension scheme will become subject to UK pension regulations again.
If it is your intention to return to the UK in the near future then a transfer under the QROPS provisions is usually inappropriate. If this was the case then we can help with our UK SIPP offering which may be more appropriate.

When is a guarantee not a guarantee?

By Derek Winsland
This article is published on: 15th March 2017

15.03.17

On 20^th February, the government issued its eagerly awaited Green Paper on reforming defined benefit occupational pensions, more commonly known as final salary pension schemes. This consultation document invites opinion from the pensions industry for giving the government powers to re-structure the benefits payable from such schemes in instances where the employer (and its pension scheme) are in financial difficulty.

For re-structure, read ‘water down’, as what the government proposes is that the scheme, with tacit government approval, can change the terms by which pensions are paid out to its pensioners.

The catalyst for this green paper is the situation surrounding Tata/British Steel, where the sticking point for any sale hinged on the deficit in the British Steel Pension Scheme. This deficit has been variously reported as between £300m and £700m and under current rules, any buyer would have to take on responsibility for addressing this shortfall. Negotiations between the trustees of The British Steel Pension Scheme, Tata and the government has resulted in the trustees amending the way pensions in payment are increased annually from Retail Price Index (RPI) to the lesser Consumer Prices Index. Experts believe this will save the pension scheme, on average £20,000 per member.

Fast forward to 20^th February and the government now believes this would be beneficial for ALL schemes suffering from deficiencies in its funding to be able to water-down its benefits. But is this all bad news?

In the case of Tata/British Steel, the alternative was for The British Steel Pension Scheme, with £14 billion of assets, to enter the pension industry’s ‘safety net’ the Pension Protection Fund. If a scheme enters the PPF, its pensioners are guaranteed 100% of their pension entitlement up to a ceiling of £37,420 (at age 65), but with annual increases limited to 2.5% pa. For those members, yet to reach pension age, they are entitled to 90% of their pension.

The Tata deal gives its pension members better benefits than they would receive in PPF, and so received the approval of government and the unions.

The deal that Sir Philip Green struck with the Pensions Regulator for the BHS Scheme is structured along the same lines – the £363m that he ‘deposited’ alongside the BHS Scheme, which has entered PPF, will allow for the BHS pensioners to receive better benefits than would otherwise have been paid from the PPF. I say ‘deposited’, because it is a one-off, no-strings attached, contribution by this Knight of the Realm, to keep the Pensions Regulator happy, whilst preserving the number of yachts in his possession.

And the BHS deal adds to the uncertainty defined benefit pension scheme members must be feeling right now. Sir Philip’s ‘deposit’ has been labeled, within the industry, as a Zombie Pension Fund. In essence, it allows employers to deposit a chunk of money in a pot, separate to its pension fund, that will be called on to sweeten the pill if the scheme then enters PPF.

But why would an employer do this? Because a move such as Sir Philip Green’s puts a cap on the employer’s liabilities. If an employer can strike a deal where it can walk away from its continuing responsibilities to its pension scheme members, then it’s going to be attractive. We’re all going to hear a lot more about ‘sustainability’ of pension funds, with its open-ended responsibility and liabilities falling on the employer. This green paper is, I fear, going to open the flood-gates to more deals being struck by employers with their pension scheme trustees.

I may be wrong but I suspect Mergers and Acquisitions activity could reach unprecedented levels if the government gives the nod to these pension changes.

If you have preserved pension benefits held in a defined benefits pension scheme and would like to find out more about your pension entitlement and its funding position, then please contact me direct on the number below. You can also contact me by email at derek.winsland@spectrum-ifa.com or call our office in Limoux to make an appointment. Alternatively, I conduct a drop-in clinic most Fridays (holidays excepting), when you can pop in to speak to me.
Our office telephone number is 04 68 31 14 10.

Retirement Benefits

By Pauline Bowden
This article is published on: 14th March 2017

For people in all walks of life, retirement can be an uncertain prospect. At the very least it raises all kinds of questions concerning personal financial stability and the maintenance of living standards.

For those whose work takes them to a number of different countries during their career, the uncertainty is increased.

Until recently, retirement plans have traditionally offered a restrictive and inadequate package which was expensive to implement and complicated to arrange.

Most people require a simple yet flexible retirement benefits package, offering the possibility of a secure and prosperous retirement. An investment programme that allows you to decide exactly what you want and when you want it, how much and which type of protection you feel is appropriate for your own personal circumstances.

A plan where you can have the flexibility to take it with you from employer to employer and country to country, where you can increase or decrease, or even temporarily suspend, payments. You want to choose at what age you wish to retire and chose how you wish to receive your money on retirement.

Flexibility and choice are the key words to most people when they start a retirement plan. Gone are the days when you worked for one company for 40 years, religiously paying into the company pension scheme. It is each individual’s responsibility to make sufficient provision for their retirement and which route to take to achieve future financial security can be a complicated search of bewildering facts and figures when comparing products available.

To get personal and confidential advice regarding your retirement provision, it is necessary to discuss your own individual future financial needs, together with your full financial planning objectives.

UK PUBLIC SECTOR PENSIONS, BREXIT AND ITALIAN CITIZENSHIP

By Gareth Horsfall
This article is published on: 1st March 2017

01.03.17

I was watching a nature documentary with my son the other day and we were watching the foraging activities of grizzly bears in North America.

It was interesting from the perspective that they will forage across huge distances in search of different food types to ensure they get the proteins, minerals and vitamins they need to stock up for the long winter ahead of them.

In some ways this behaviour reminded me of the foraging that I sometimes embark upon, across the internet, to ensure that you have all the information you need to weather the seasons ahead. We have lived through some spring and summer seasons, metaphorically speaking, but politically we seem to be entering autumn and possibly winter, depending on your point of view of course. I imagine for those people I know who voted BREXIT, that this is a new dawn. However, I will stick with my view for the purposes of this blog.

FORAGING
I was foraging through the internet last week in search of some information on UK pensions and happened to stumble across an Italian fiscal website which had a summary of the Italian tax treatment of pensions from around the world.

To my surprise, my eyes fell across the following statement in relation to pensions paid from Argentina, UK, Spain, the USA and Venezuela:

‘Le pensioni private sono assoggettate a tassazione solo in Italia, mentre le pensioni pubbliche sono assoggettate a tassazione solo in Italia, se il contribuente ha la nazionalità italiana.’

WHAT DOES THIS MEAN?
In short, and what caught my eyes was specifically in relation to the tax treatment of public section pensions in Italy.

…….le pensioni pubbliche sono assoggettate a tassazione solo in Italia, se il contribuente ha la nazionalità italiana.’

(Public sector pensions would be those defined as local Government, doctors, nurses, police, firemen, armed forces, teacher etc).

If you are a holder of one of these types of pensions and are resident in Italy, you will likely know that under the double taxation treaty with the UK, in this case, that public sector pensions are only taxed in the UK, for those who are no longer UK resident and are therefore not subjected to taxation in Italy.

However, the above statement implies that if you are an Italian national then this pension would be taxed in Italy. (Taking into account any double taxation credit that would need to be applied). Therefore, Italian tax rates would apply and the pension would not benefit from the application of the UK personal allowance, in Italy, either.

This is clearly important, given BREXIT, and the number of people who were considering or making application for Italian citizenship as a means of resolving the issue of residency. Italian citizenship would define you as an Italian national and tax would apply to a UK public service pension.

DOUBLE TAXATION TREATY
Without wanting to take the words of a website as hard evidence, I did some more foraging and can confirm the words of the double taxation treaty (UK/Italy) as follows:

(2) (a) Any pension paid by, or out of funds created by, a Contracting State or a political or an administrative subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.

(b) Notwithstanding the provisions of sub-paragraph (2)(a) of this Article, such pension shall be taxable only in the other Contracting State if the individual is a national of and a resident of that State.

THE BREXIT PROBLEM JUST KEEPS GETTING BIGGER
So, here we have another BREXIT problem which has now arisen as part of further investigation. I would suggest that Italian citizenship, for those with UK civil service pensions, needs to be thought out carefully and planned financially, before any action is taken.

What will happen in 2017?

By John Hayward
This article is published on: 23rd January 2017

23.01.17

There cannot be many people who were able to answer this question accurately in 2016. There were many “shocks” most notably the Brexit vote and the election of Donald Trump as President of the USA. There were several celebrities who died in 2016 but, more importantly, we may have lost loved ones which had financial implications, aside from the grief.

There are many events already planned for 2017 but I suggest that in December our conversations will focus on aspects that are not already known by the vast majority of people.

How do we cope with the unknown?
Our role, at The Spectrum IFA Group, is to help people cope with all things financial. With interest rates at such a low level, banks have little to offer, especially to the cautious investor. In fact, Spanish banks have an additional problem since the European Court of Justice ruling in December. They could face billions of euros in refunds due to inequitable “floor clauses” they had in their mortgage agreements.

Here are some of the ways we help:-

Improved exchange rates – banks may not charge for currency exchange but often offer poor rates. We can help you protect your income today as well your capital in the future.

Higher income/returns on investments – Whether a cautious or speculative investor, we have access to some of the top investment companies. With their expertise, they are able to make financial decisions prior to an event. Most people will react to an event when it is too late.

Tax friendly and compliant investments – We specialise in providing access to products that are tax efficient in the country of tax residence and which are portable within the European Union. This means an investment, whether this is a personal arrangement or a QROPS/ROPS (Overseas pension scheme), is tax efficient wherever the policyholder lives.

Registered and regulated in Spain – With the upcoming Brexit, it is possible that companies, who are not registered in Spain, or in other EU countries, will not be able to function. The Spectrum IFA Group has a Spanish company that holds a licence in Spain. Once the UK leaves the EU, companies based in the UK and Gibraltar may no longer be able to operate and service their clients in Spain.

Back to the question. We deal with the unknown by being prepared. This generally means applying caution and care. It means having access to experts who can react much quicker to events, if not predict them. We live where you live and so, if something needs dealing with urgently, we are available

Should you cash in your final salary pension?

By Chris Burke
This article is published on: 14th December 2016

14.12.16

Potentially millions of people with defined benefit or Final Salary pensions have seen their transfer values shoot up in the last year.

A transfer value, also known as a CETV (cash equivalent transfer value) can be exchanged for giving up the future projected benefits for your pension. In effect, the company buys back the pension.

Over the last 18 months in particular these values have soared.

In many instances people are being offered tens of thousands of pounds more than a year ago with some even being incentivised by their Pension scheme to leave, with a bonus given for doing so. The main reason for this is that the pension company no longer wants the responsibility of having to pay the pension when you retire. Life expectancy in Europe now is 84/85 and in effect people are living longer, meaning the pension scheme has to pay you longer.

For someone with an annual pension income worth £20,000, it is not uncommon to be offered 30 times that amount – in other words, £600,000 in cash.

However this is not the right thing to do for everybody, and there can be significant disadvantages.

‘Unique Circumstances’

Many people have seen their pension transfer values doubled since two years ago, now making it very worthwhile to re-visit these and see what the best advice would be, given this growth in values.

What is a defined benefit pension and the difference between these and a Defined Contribution pension scheme?

Workers with defined benefit pensions know exactly how much they will receive in retirement. Such schemes are either based on a worker’s final salary, or on their career average earnings. Workers with defined contribution (DC) schemes save into a pension pot, which they then use to buy a retirement income. The size of the pot depends on stock market performance. The reason for the increase in transfer values is continuing low interest rates, and particularly low Gilt Rates. Gilts are bonds issued by the Government to raise money, and the rate/interest of these is a major factor used to help calculate a transfer value for a DB pension scheme.

Pension schemes depend heavily on bond yields for their income, and with yields at record lows, many are struggling to meet their commitments to pay future pensions. So they have been offering larger and larger sums to people who are prepared to give up their pension rights.

Transferring your DB/Final Salary pensions can offer a more flexible retirement income, the possibility of extra tax-free cash and upon death the remainder of the pension can be paid out to any beneficiary’s rather than paying a reduced income only to a spouse/dependent partner and then ending.

However, keeping a DB/Final Salary pension can also offer you certainties such as an income for life with Inflation protection, Risk-free income, which does not depend on the ups and downs of the stock market.

There are currently major uncertainties surrounding Brexit and the UK leaving the EU, particularly for those people living outside of the UK. With the almost constant review and changes of UK pensions laws/taxes and the fact that 90% of UK DB/Final Salary schemes are underfunded, it’s important you review your options and the right decision with your pension.

In all circumstances, you should talk to a professional and have your own pension/situation evaluated and see what the best advice there is for you.