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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 safe is your UK pension?

By Chris Webb - Topics: Madrid, spain, UK Pensions, United Kingdom
This article is published on: 9th February 2018

09.02.18

In days gone by the UK’s private pension schemes were the envy of the world, considered superior to other nations’ schemes. Alas, those days of world class company pension schemes are gone…………..

It is surprising just how many people are still members of their final salary or defined benefit schemes. Considered a “golden pension”, these schemes offer the best retirement promise, a promise to pay you the benefits that are defined in their pension schedule. Not a personal pension wholly dependant on the investments made, but a “fixed in stone” promise.

But how many of these people should be worried about how safe the promises are?

We recently witnessed the collapse of Carillion, a construction and outsourcing company with over 40,000 employees. They were just the latest in a high profile list of companies that have brought the subject of “pension safety” to the fore.

What happens to their workforce who are members of their pension scheme? The chairman of trustees of Carillion’s pension scheme, Robin Ellison, has suggested in a letter to a committee of MPs that there was a funding shortfall of around £990m with Carillion’s defined benefit pension scheme*. YES, £990 MILLION !!!

Many of the UK’s largest companies are running pension deficits that would bring a tear to the eye. The exact amount of pension deficit is hard to ascertain, but sources claim these numbers to be around £103 BILLION* with over 3,700 schemes in deficit compared to 1,800 in surplus.

Many household names find themselves in the same situation with their pension schemes. Names like BAE, Royal Dutch Shell, The Royal Mail and British Telecom to name a few. It is only a matter of time before one of these names, or another “big player” joins the list of collapsing pensions.

So, if you’re in a pension that is in deficit is that a problem? Well, there are close to 11 MILLION people holding defined benefit pensions. Out of that number they estimate that 3 MILLION (3) will encounter problems and potentially have only a 50% chance of receiving their promised pension.

The UK Government runs a special fund aptly called The Pension Protection Fund, the aim being to bail out companies with a pension crisis. The Pension Protection Fund (PPF) was set up on 6 April 2005 to protect members who had defined benefits (i.e. final salary type benefits) in a workplace pension scheme, where the employer became insolvent on or after this date and the pension scheme could not afford to pay those benefits promised to members on wind up.

Many smaller UK defined benefit pension schemes have already fallen into their basket, as well as some larger organisations. BHS and British Steel are two of the largest organisations to be in the pot. You can view all of the companies listed at the PPF website; it makes for horrid reading when you see the true amount of company pensions that have already owned up to and admitted they can’t afford to pay their promises………

The Pension protection fund isn’t exactly a guaranteed scheme anyway, whilst it runs within its parameters it can provide its own level of promises (below what the original pension company was offering), however if too many large company pension schemes start running to it for protection, it will put the protection fund under its own strain……

So what can you do about it?
Well, here at The Spectrum IFA Group we work closely with some of the worlds leading pension providers and can not only offer you completely independent advice but we can also provide you with a technical analysis on your pension. We can advise whether your pension is in deficit or surplus, we can advise on the pro’s and con’s of your existing pension provision and furnish you with sufficient information to actually understand what you may receive. We can also compare that information to the alternative options available to you, whether that be a transfer out of your scheme to a QROPS or an International SIPP option. This service is available for defined benefit and defined contribution (personal) pension plans.

It’s better to be aware of all the options available to you, it’s your retirement and it’s your choice to decide what the best option for your circumstances is.

*Sources: BBC News January 2018.

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/

Is your Pension close to the UK Lifetime Allowance?

By Spectrum IFA - Topics: Lifetime Allowance, pension transfer, Pensions, QROPS, Retirement, United Kingdom
This article is published on: 6th October 2017

06.10.17

With careful planning you can avoid the penal 55pc tax hit on pensions valued at more than £1 million

To find out how to avoid penal taxation on larger pension pots contact your local Spectrum adviser to arrange a free, no obligation consultation.

Lifetime allowance (LTA): what does it mean for your pension?

  • You need to monitor how much you’re putting into your pension funds and how well your investments are performing. Money held in a personal pension, including workplace schemes and SIPPs, Final Salary pensions, all count towards the limit, but the state pension doesn’t
  • If you have a defined contribution scheme or a SIPP the total fund value is assessed against the limit. This will be tested when a Benefit Crystallisation Event (BCE) arises. There are 13 different BCE’s. However the most common would be taking your PCLS, buying an annuity, transferring to a QROPS, reaching age 75, death etc. Each time an event occurs your pension is tested against the LTA limit
  • Generally if your final salary pension is worth more than £50,000 a year you’ll be over the £1m lifetime allowance
  • If you have a mixture of pensions, with benefits taken at different times, then it can get quite complicated to work out, how much LTA was used when and how much you have going forward
  • The LTA excess charge is 55% if the excess is taken as a lump sum and 25% if it is taken as an income. (If taken as income then the net amount is then subject to income tax at the members highest marginal rate, which usually works out to be a total tax of around 55% in total)
  • There are certainly very good ways to reduce the potential LTA liability in the future. This could include applying for protection to increase the LTA limit, however there are restrictions to apply
  • Furthermore if you live abroad there could be other options with International Pensions, such as QROPS, to help reduce or remove future liabilities
  • With our pensions specialists we are able to review your pensions, work out your current situation and then work out clearly your current situation and what the best way forward to help minimise any future tax liability with your pension

New Pension Transfer Rules!

By Derek Winsland - Topics: Final Salary Pension, final salary schemes, France, Pensions, QROPS, United Kingdom
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 21st 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 19th 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.

UK expats cannot vote after 15 years abroad

By Victoria Lewis - Topics: Elections, France, Habitual Residence, Residency, United Kingdom
This article is published on: 12th June 2017

12.06.17

This article was written in May 2015 by a lawyer friend of mine and is as relevant today.

The result of the UK election was meant to be much closer. If it had been closer, the rule which prevents British expats who have been abroad for more than 15 years from voting in Parliamentary elections may have come under renewed scrutiny.

The size of the British community abroad is estimated at 5.6 million. Most expats leave the UK for work-related reasons, taking their families with them. Mixed-nationality marriages are also a factor in emigration decisions, as well as the wish of many British pensioners to retire abroad. Thanks to exchange programs, the number of students travelling around the world to experience life abroad has increased significantly in recent years. In our ever more globalized world, borders are disappearing.

These “British Expats” are unofficial but precious ambassadors, promoting British values to their host countries. They make an invaluable contribution to the diffusion of their culture, disseminating the “British Way of Life” by projecting an image of their “Britishness” around them. In the view of the Institute for Public Policy Research, “British abroad are not a burden or an embarrassment: they are in many ways the best of the UK and we should be proud and supportive of them”.

However, their political situation is overshadowed by the fact that they lose their right to vote in the United Kingdom after they have been living abroad for more than 15 years, no matter how frequently they return to visit their home country. Exceptions exist for the military, civil servants and British Council employees, but all other British expats cannot vote under the current UK law. While most developed countries such as France, Spain, Switzerland or the USA have recognized their own expat population by giving them an unrestricted right to vote in national elections, the United Kingdom seems to be one of the few countries with this type of restrictive rule.

How the law changed
Before 1985, British citizens living outside the United Kingdom were unable to vote in UK Parliamentary elections. Following intensive pressure, the Representation of the People Act 1985 finally gave them the right to vote. They could register as “overseas voters” in the constituency where they last lived in the UK. But, 1985 also marked the beginning of a ‘time limit’ during which British expats would be able to remain on the electoral register. This period was shortened and extended, but has never been unlimited.

The Representation of the People Act 1985 made provision for British citizens residing outside the United Kingdom to remain on the electoral register in the UK for a period of 5 years. In 1989, this period was extended to 20 years. In 2000, it was decided to reduce it to 15 years, with effect from 1 April 2002, leading to the rule that applies today.

A discriminatory and arbitrary rule, according to most British expats
Due to this, pressure groups have been created to plead for the abolition of the 15-year rule. They claim that the legislation is discriminatory, arbitrary and serves no useful purpose.

They consider it to be discriminatory because not all British expats are concerned by the legislation. As indicated previously, members of the armed forces, Crown servants and employees of the British Council are exempted from the rule. Besides, in accordance with European Union Treaties, all European citizens have the right to live and work in another state of the EU. These fundamental rights should not be subject to any restrictions or penalties. They accuse the UK of acting in a discriminatory fashion by penalising the right of free movement of its citizens, whilst most other developed countries do not.

They also consider it an arbitrary treatment because the cut-off point has been fixed without a concrete objective or justified basis on which to determine who should have the right to vote. The Government used to claim that people who have lived abroad for over 15 years are likely to lose links with the UK. However, in today’s world of increasing global communication, this argument does not seem appropriate any more.

Comparison with other countries
Unlike the UK, most advanced democracies have granted their expat population an unrestricted right to vote in national elections.
In June 2012, French people abroad were able to vote for their MPs for the first time. Around the world, 11 constituencies were created. (See the article on the FBCCI Blog: Voting rights for British Expats: What can the UK learn from France?)

Spanish expats’ rights are guaranteed by article 68 of the Constitution. In Portugal, according to the Constitution, the single-chamber Assembly of the Republic is “the representative assembly of all Portuguese citizens”. Thus, expats have the same right to vote in elections for the Assembly as citizens living in Portugal. Italian expats are represented in both chambers of the parliament and elect 65 representatives to the ‘Consiglio Generale degli Italiani all’Estero’. The United States also guarantee their expat population’s political rights.

Efforts to reform
Faced with this situation, some national and European politicians have asked for the law to be reviewed or, at least, debated.

“The exercise of the freedom of movement should not result in losing an important democratic right” says Viviane Reding, European Commissioner for electoral rights, in her factsheet “Promoting your electoral rights”. “Although EU law grants EU citizens the right to participate in municipal and European elections in the Member State where they reside, it provides no such right with regard to national elections. (…) Given that EU citizens of those Member States are not able to participate in any national elections (neither in the Member State of origin not in the Member State of residence), they are deprived of one of their most important political rights just because they exercise their right to free movement. (…) The Commission will launch a discussion to identify political options to prevent EU citizens from losing their political rights when they exercise their right to free movement.”

A short debate in the House of Lords on voting arrangements for British citizens living overseas and members of the armed forces serving abroad was held on 2nd March 2011. Viscount Astor, arduous defender of the overseas voters’ electoral rights (“This 15-year rule is unfair and excludes perhaps half the expatriates living overseas. There is no credible reason for that.”), asked whether the Government would consider changing the voting arrangements that were currently in place. He called on the Government to look again at the 15-year rule. Lord Lester of Herne Hill agreed with him and has previously asked the Government to legislate to change the rules.

More recently, calls have been made for the Government to reconsider this rule. The issue was raised during the passage of the Electoral Registration and Administration Bill 2012-2013 in the House of Commons. Conservative Geoffrey Clifton-Brown proposed that a new clause should be added to the Bill to remove the 15-year limit rule: “the new clause would remove this qualifying period altogether, so that all British citizens could qualify as overseas voters, regardless of when they were last resident in the UK”.

The Parliamentary Secretary, David Health, replied that the Government would give the issue “serious consideration” but that it would not rush into a decision, “not because of any wish to obstruct, but simply because the question of extending the franchise is a fundamental one and both the Government and the House would have to feel comfortable with doing that”. The amendment was subsequently withdrawn.

The Bill received its second reading in the Lords on the 24th July 2012 and Lord Norton of Louth raised the issue of overseas voters during the debate. Lord Lexen also called for the 15-year rule to be abolished: (…) I urge strongly that the scope of the Bill be extended, as my noble friend Lord Norton of Louth argued, by adding to it provision to enable all our fellow subjects of Her Majesty who live abroad to vote in our parliamentary elections. This would end the 15-year limit rule, for which no clear rationale has ever been offered (…)”.

Lord Wallace of Saltaire responded for the Government and said there were no plans to extend the 15-year limit rule: “The Government does not have any plans at the present moment to lengthen the period from leaving the country beyond 15 years, nor do we have any really ambitious plans to do what is done in some other countries, which is to allow voting in embassies and consulates. However, the electoral period will help”.

The entrenched position of the Courts

The feeling of not being understood and being prejudiced in the execution of one of their fundamental rights has encouraged some expats to challenge the rules before the courts.

Two cases were brought recently.
The first case concerned James Preston, a British citizen living with his family in Spain and working for UK companies since 1995. In 2009 he was denied the right to vote in Parliamentary elections, having lived outside the UK for 15 years. He went to the High Court in 2011, asking for judicial review of the legislation but his case was dismissed. His application to take his case to the Court of Appeal was denied in 2012. Lord Justice Elias said he appreciated Mr. Preston and other expats were “genuinely upset about the rule”, but that there was no real evidence that “it does create a barrier of any kind to freedom of movement”. “It is inherently unlikely that the loss of the right to vote would be sufficient to cause expats to up sticks and return to the UK”, he added.

The second case was brought by Harry Shindler, a World War II veteran who retired to Italy in the early 1980’s. He took his case to the European Court of Human Rights in Strasbourg, alleging a violation of Article 3 of Protocol No. 1, which provides that: “The High Contracting Parties undertake to hold free elections at reasonable intervals by secret ballot, under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature”.

He claimed that no time-limit should be imposed on expats’ voting rights. He considered he should have the right to choose his place of residence without being disenfranchised. “Universal suffrage is set out in the Universal Declaration of Human Rights. Universal to my mind, and in every dictionary I’ve seen, means ‘everybody’”. “Expats abroad pay their taxes at home. There are those who have property and haven’t sold it because they believe they’ll be coming back. They pay taxes on that property. They pay council tax. The pensions we get, government and private, come from the UK and those pensions, when they reach a certain limit, are taxed in the UK. So here we have expats who pay their taxes and are not allowed to vote. It’s unacceptable.”

However, the court in Strasbourg rejected his case, ruling that the 15-year limit was “not an insubstantial period of time” and it was up to the British Government whether to choose a cut-off point. Therefore, in the court’s view, the 15-year rule does not violate the right to free elections.
In view of the positions of both the courts and the Government, it seems British expats are stuck in a situation where, after 15 years abroad, they may still pay taxes in the UK, still feel British and strongly linked to their home country, but cannot vote in British elections; nor in their host country’s national elections either.

In November 2011, the Government said Mr. Shindler is not a ‘victim’, since “it was open to him to take Italian citizenship and acquire a right to vote in elections to the Italian national parliament”.

David Burrage, an ex-soldier and policeman who co-founded the British Expats Association of Spain, commented: “When I consider that Harry had jumped ashore and onto the beaches at Anzio and offered up his life, like so many of our brave servicemen, during World War II, when viewed alongside the conduct of our Government, by way of that most recent response on their behalf, it not only makes me feel ashamed, I also feel utterly disgusted”.

Although this statement dates from 2011, it still expresses the feelings of many British expats.
Neil Robertson
Solicitor, England & Wales
Avocat au Barreau de Paris
May 2015

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

By Amanda Johnson - Topics: Article 50, Assurance Vie, BREXIT, Company Pension Schemes, Defined benefit pension scheme, Final Salary Pension, final salary schemes, France, QROPS, Retirement, United Kingdom
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:

  1. 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.

  1. 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.

  1. 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.

“How dare they move abroad and take their wealth with them!”

By David Hattersley - Topics: BREXIT, Elections, Residency, spain, Theresa May, United Kingdom
This article is published on: 19th April 2017

19.04.17

Taken from a (fictional) script of a new episode of “Yes Minister”, re-introducing the following cast.

Chancellor of The Exchequer: The Right Honourable Jim Hacker
Permanent Secretary to the Treasury: Sir Humphrey Appleby
Principal Private Secretary to Jim Hacker: Bernard Woolley

Sir Humphrey, bursts into the office of the Chancellor, unannounced, hot, bothered, angry and ranting.

Sir Humphrey: The PM has just announced another election, What is that woman playing at !!. Heavens above it was only weeks ago that we spent ages working on the Budget, which may never come into effect, or at least until it becomes law, by which time we may, heavens forbid, have had a change of government, and have to start all over again. Teaching newcomers about the real facts !!!!!……. How can I run the nations Treasury on that basis????. It reminds of the last time a lady PM was in charge, daring to throw her hand bag around dictating what we could and couldn’t do. It created chaos. We have only just managed to get back to a kind of orderly sensible running of this department and the Civil Service. What is the point of having a Cabinet if you don’t share the information first.!!!!

Bernard: Sir Humphrey, please calm down a little. To be fair, it’s only a few months since the Minister was appointed. It’s not as if he fully knows the ropes yet. Besides, we tried to contact you this morning at your office, immediately after the Cabinet meeting, but were told that you were at your club having breakfast with old friends from Oxford and were not to be disturbed as you were talking about important issues in relation to the Budget.

Sir Humphrey: Minister you should have let me know earlier. Surely the PM must have known that she was going to make this U – turn, despite saying only a few months ago she wasn’t going to have a General Election until 2020. That’s the trouble with politicians, changing their minds, to the whim of the public at a moment’s notice. We seem to be moving to the policies of our neighbours in the EU, in particular Greece, France and Italy along with the US where a populist trend or tweet is considered grounds to react without the calm sensible order to the stability that we in the Civil Service desire.

Jim: The Cabinet meeting was held this morning. This U turn was only discussed this morning. It was felt that it was in the best interests to enable the PM to be elected as the leader of the party best in the position to negotiate a favourable exit. We needed to do this as soon as possible, so that stability is returned quickly. You seem to forget the previous lady P.M., whom you deride, and may I remind you, “Was not for turning”, who was then thrown out of power by a small number of people, and the electorate was not given the chance to vote . This is democracy at its finest, I think the PM should be applauded for taking this risk, as we all are.

Sir Humphrey: calming down…..mumble mumble, …… Minister I suggest we look at the best way to ensure that the best bits of the Budget that can be carried forward and that we can get some additional revenue coming into the State coffers without too much difficulty.

Jim: Mmm, I am a little concerned that perhaps some elements are a little too hasty and need further thought and consideration. We need to consider that the UK is still part of the EU, and is still subject to the freedom of movement of goods and services as enshrined by the EU/EEA constitution.

Sir Humphrey: In the mean time Minister, due to the election and additional delays we still need to make things harder to protect against a possible net capital outflow for those that are bringing forward plans to retire overseas. I was talking this morning to the FCA, along with the friends from Oxford who are either CEO’s of product providers concerned about retaining their funds under management, along those who are trustees of UK pension schemes. Maybe in two years time we will be well shot of the EU and bothersome elements of the EEA, and can then treat ex pats and the Europeans that move back to their original country as one. As for the Scots we are bribing them with more money than we can afford to stay within the UK. However they seem intent on holding another referendum to leave the Union and join the EU. In that event we can borrow President Trump’s brilliant idea by rebuilding Hadrian’s Wall to stop those heathen coming in. And that can be paid for by increasing the duty on their Scotch.

Bernard: errmmm can I remind you Sir Humphrey, that if what is left of the Union leaves the EU, and just stays in the EEA , then what is left might not get the benefits of the subsidies of the Common Agricultural Policy. That could mean that things like Scottish Salmon, Lamb, Beef and Irish butter from remaining members will get these subsidies whilst what remains of the UK won’t as we will have lost the benefits of the CAP.

Sir Humphrey: Look , after all it was the English electorate that voted to leave and they will have no sympathy with any of them whatsoever. This is especially after that brilliant campaign by the Daily Blurb to stop winter fuel payments to pensioners living in the sunny Costa’s.

Jim: Didn’t they have snow on the Costa’s recently, that seems pretty wintery to me !

Sir Humphrey: Yes, but Minister , that is once every 30 odd years, a one off .

Jim: About the same number of years since there has been snow in London on Christmas Day then!!!!! Their homes are not built for winter, and those that live 10 kms inland have had to suffer cold winters regularly.

A by now exasperated Sir Humphrey: You haven’t given me the chance to explain the wider picture….. We have to take a long term view. The best bit Minister is when 70% of the ex pats return to be with children & grandchildren, or illness, and they eventually need residential care. They will have to pay for this, but not via HMRC taxation, more a sort of stealth tax. Most won’t realize this as it is not direct taxation, but capital assets have to be liquidated to pay to local Social Services under the Care Act. This leaves a maximum of £23,350 per individual that cannot be used for this purpose. It avoids the pesky IHT rules and allowances, with very little being passed to the next generation. That means that they too will have to work longer and harder, still paying tax of course, without the help of a legacy. That solves the problem of demographics, we have to take the longer view. So we hit them on the way out and on the way back in a triple whammy for daring to retire abroad, and not staying to pay taxes in this glorious country of ours as it moves back to its former glories. After all the opportunities we have given to the great British public over the years, for some of them, how dare they move abroad and take their wealth with them. Ungrateful peasants.!!!

Jim: Doesn’t that discriminate against the very idea of freedom and choice, they took a risk. I remember the 60’s and early 70’s when one was limited to the amount of money one could take out of the UK under exchange controls, for those lucky enough to go on holiday abroad in those dark days. My parent’s passports were stamped accordingly to prevent capital flight and a further fall in Sterling. It is wrong, to return to those dark old days and take that freedom away, that’s not playing cricket.

Sir Humphrey: Yes Minister ,but we will also potentially lose further tax payers when some of the companies in the City relocate part of their operations to Europe, along with research companies that may relocate to Scotland so that they still benefit from EU grants. Someone has to pay for that loss and we have to be realistic and find a way that is politically acceptable to the remaining electorate and protect our interests’ as a result of an additional loss to the countries coffers. I know it may not be cricket, but that is a just a game, to which incidentally I will thoroughly enjoy watching from the members pavilion at Lords , after meeting up with the ex leader of UKIP who has just been nominated as a member. Perhaps you’d like to become a member too Minister, I am sure that could be arranged.

Jim: Sir Humphrey, I am pleased for you as a civil servant that you are to be able to spend 5 days off watching a Test Match live. As a working politician I still have the dispatch boxes to go through, and attend to the needs of my constituents. So I am lucky to watch the one hour highlights on TV, so I will have to decline your offer. And there is a minor chance that unlike you I might be out of work in a few weeks time, can’t afford to be a member of Lords, and revert back to a real job.

Moving away from fiction lets deal with the facts

Factual time line.
UK Statutory Residents Test . Finance Act 2013. Note how helpful it is for those coming in, and how difficult it is for those leaving in relation to tax.

UK sited residential property held by ex pats once tax resident abroad. Finance Act 2014. From April 6th 2015, any gain from that date in the value of the property thereafter, upon sale will be liable to UK Capital Gains tax, and as such the gain will be paid directly to UK HMRC.

Care Act 2014.Statutory testing of benefits for care .Introduced two stages April 2015, & then April 2016. The April 2016 element included a revised increased of the thresholds re residual capital and was deferred in April 2015 until at least April 2010 when it will be reviewed again.

FCA ruling. April 2016. Advice and the report required on the potential transfer to a QROP of a Defined Benefit Pensions can only be carried by a UK regulated IFA who charges fees upfront.

Finance Bill March 8th 2017. A potential tax surcharge of 25% of the pot after transferring a UK pension to a QROP.
( Qualifying Recognized Overseas Pension ) Exemptions apply to this particularly if you reside in EEA/EU for five complete tax years after the transfer is completed. A review of all QROP’s providers to see that they match the new rules, in particular those that are outside the EU/EEA area. The rules are more onerous for non EEA / EU residency of both individual and provider. In addition as a “foreign pension” paid to a returning ex pat a QROP will no longer benefit from 90% of this being liable to UK income tax. It will revert to a 100% with immediate effect.

An unusual element of the bill was the fact that it came into effect on the 9th March, allowing no time for those plans already in progress. It is unusual to take such a draconian step and not allow sufficient time for those cases in the process of being progressed to be halted in such a manner.

March 29th 2017. The date the UK formally triggered Article 50 to leave the EU. This has already negated the EU element of the EU/ EEA referred to above re QROP’s.

April 18th 2017 Announcement of UK General Election for June 8th 2017.

A further note is that UK HMRC will still allow personal allowances on taxation of assets held in the UK for non-resident UK citizens living abroad within the EEA. This was dated the 7th April 2017, direct from UK Gov HMRC website. Whether that will continue in the future, will be dependant on the outcome of Brexit negotiations, and that is the great unknown. If you follow the logic applied to the above and the UK does leave the EEA, you have been given at least advance warning.

Most of us as regulated advisers in the EU have come across some UK providers of all manner of, Unit Trusts, ISA’s and Pensions in particular making life extremely difficult too.

So action is required , one has to say immediately, before it is too late. Finally my thanks to the BBC and Antony Jay/Jonathan Lynne for the original Yes Minister,and in particular that episode where Sir Humphrey extols the virtue of the UK remaining in the EU. Thank you for the inspiration to write an updated version that is current, possible and satirical.

Banks start plans for Brexit

By Chris Burke - Topics: Article 50, Banking, BREXIT, europe-news, spain, United Kingdom
This article is published on: 22nd March 2017

22.03.17

After U.K. Prime Minister Theresa May set a date to trigger the formal mechanism for quitting the EU, within weeks some of the worlds Big investment banks will begin the process of moving London-based operations into new hubs inside the European Union.

The biggest winners look likely to be Frankfurt and Dublin. Those people familiar with the plans, asking not to be named because the plans aren’t public, include the Bank of America, Standard Chartered Plc and Barclays Plc. To ensure continued access to the single market they are considering Ireland’s capital for their EU base. Meanwhile, Frankfurt is being eyed by Goldman Sachs Group Inc. and Citigroup Inc respectably others said.

Dublin shares similar laws and regulations as its U.K.neighbour and is the only other English-speaking hub in the EU. Whilst Frankfurt is a natural pick, given a financial ecosystem featuring Deutsche Bank AG, the European Central Bank and BaFin.

Executives want to have new or expanded offices up and running inside the EU before the U.K. departs in 2019. With banks increasingly expecting a so-called hard Brexit – the loss of their right to sell services freely around the EU from London.

It is thought London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($1.9 trillion) of assets out of the U.K. after Brexit, according to think tank Bruegel. Other estimates range from as much as 232,000 jobs to as few as 4,000.

QROPS Pension Transfer

By Chris Webb - Topics: Company Pension Schemes, Final Salary Pension, final salary schemes, Pensions, QROPS, Retirement, spain, United Kingdom
This article is published on: 20th March 2017

20.03.17

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 1st to pass away 50% income to Spouse
Married couple 2nd 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 1st to pass away 100% of fund value to any beneficiary
Married couple 2nd 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.