Qualifying Recognised Overseas Pension Schemes

Transcription

1 Qualifying Recognised Overseas Pension Schemes 1

2 AMA QROPS Contents Introduction...2 Are you a British Citizen already living abroad or planning on moving overseas? About QROPS?...3 The major advantages of transferring your pension into a QROPS QROPS Considerations Benefits with QROPS Benefits of QROPS vs. UK-based Pension Scheme...4 Why use Austen Morris Associates?...5 QROPS Transfer Procedure in 8 steps Our Global Reach...6 Introduction Are you a British Citizen already living abroad or planning on moving overseas? More than 140,000 UK citizens leave the country every year for a new life overseas, according to The Telegraph. Whether you are a young executive or a high net worth individual with a diversified portfolio of global investments, you probably have specific financial objectives. International investors living abroad are now enjoying the flexibility, amongst other benefits, of investing their money overseas. Due to increased demand, the overseas financial industry has become more robust. Investing money overseas is now easier, offering investors more flexibility and greater rewards than ever before. There is a broad range of products catering to the requirements of those who are accumulating wealth or consolidating savings, those accessing or spending their wealth and those who want to pass on their prosperity to their children. With over 20 years of experience, Austen Morris Associates has developed strong partnerships with many of world s leading investment houses, and is able to offer a variety of the most competitive products in the marketplace. In this informative guide, our aim is to provide essential information for effective retirement planning as an international investor. To help plan your retirement using a QROPS and to ensure that it is the right choice for you, one of our experienced financial consultants will personally discuss all the available options regarding your particular circumstance. We want to ensure that you fully comprehend all the details and are statisfied with your decision. 2

3 About QROPS For British citizens living internationally, QROPS are becoming increasingly popular, due to the many tax advantages they offer in comparison to UK pension funds. This trend is occurring because pension funds that remain in the UK are heavily taxed, in some cases up to 45%. Transfer your existing UK pension into a QROPS, and if planned correctly, the financial benefits can be immense. This option can help you avoid UK taxation, enhance your investment growth, flexibility and the future financial stability of your pension for you and your family. Most UK pensions are not managed on a case by case level. Therefore, being in control of your own pension is of immense benefit to those living abroad. You can benefit from being able to invest in a more diversified range of asset classes. Furthermore, similarly to the UK, you are no longer obliged to purchase an annuity. There are rewards to be earned in Inheritance Tax Planning (IHT). Despite the UK Government abolishing the 55% death tax on UK pensions, they have implemented a Inheritence Tax on UK pension schemes that may amount to you and your family losing 45% of your pension should you pass away after age 75. In addition, under certain conditions this taxation will also apply should you die prior to 75 years of age. The rules for QROPS are similar to those for a UK pension, but most importantly they have fewer restrictions. These rules allow that upon an individual s death, the value of your pension can be passed onto your beloved ones without major taxation penalties. Moreover, QROPS arrangements usually ensure that legacies will be passed to your intended beneficiaries effortlessly and swiftly rather than if your investment was still based in the UK. The major advantages of transferring your pension into a QROPS include: Greater investment freedom with the flexibility of investing in a much wider range of funds and investments. Use of onshore / offshore funds, highest fixed deposit rates and total diversification Tax efficiency Tax planning opportunities No requirement to purchase an annuity Receive income and benefits in currency of your choice Take income from your pension in a much more tax efficient way Withdraw up to 30% of the fund in a lump sum QROPS Considerations: The ability to pass on pension funds to your beneficiaries upon your death free of UK tax In 2006, Her Majesty s Revenue and Custom (HMRC) changed the regulations regarding pensions to retirees overseas. Pension holders are now qualified to transfer their UK pension to another country when they retire or relocate to a different international jurisdiction. For a QROPS scheme to qualify, it must be legally recognized by HMRC and must meet the following criteria: It must be recognized by HMRC for tax purposes, ie. it must be open to residents of the country where it is based and there should be stable taxation laws in place. The maximum lump sum should not exceed 30%, as 70% should be left to provide an income for life. To withdraw your income you must at least be 55 years of age. If you choose to relocate your pension into a QROPS fund in another nation, it will be important to work with a specialist who will face all the political, economic and currency risks that could degrade your return on investment (ROI) in the future. You will also have to balance the value of a QROPS against the declining solvency of most UK final salary schemes and review the potential UK taxation, versus the taxation benefits of your QROPS jurisdiction. Before making this important financial decision, please note that every individual has a unique financial situation; with any inquiry be sure to contact an Austen Morris Associates Consultant for specific personal advice. Benefits with QROPS Transferring your pension into a QROPS adds flexibility and opportunities during retirement. It also helps you avoid large tax penalties and hidden costs when accessing your money. With QROPS, you will be able to receive a lump sum of up to 30% together with the possibility, after 5 years of living overseas, to pass on your pension fund at death to your beneficiaries free of UK taxation. 3

4 Benefits of a QROPS vs. UK-based Pension Scheme QROPS UK-based Pension Scheme QROPS are designed for a more transient population and international advisers are more familiar with them. UK-based pension schemes are designed for residents of the UK, so if you are based overseas it can be very challenging to consult UK pension expertise. You may invest in assets in most currencies, and choose to receive payments in your local currency, allowing the privilege you to eliminate multi-currency risk. Most investments are held in sterling, so payments are affected by exchange rate fluctuations and subject to currency conversion charges. Most schemes allow the same flexibility as in the UK, but local rates may differ. With QROPS you get the benefit of being able to crystalise on your pension. You may access your retirement at any age starting from 55 years old and above. Generally in the UK drawdown occurs between years of age, though this is now increasing, particularly with some of the major company defined benefit schemes. There is a prediction that scheme access will rise to 72 years of age by You can withdraw up to 30% tax free, depending on local legislation. Most UK schemes allow you to withdraw a lump sum of up to 25%. Like UK based schemes, there are no requirements to provide income via an annuity, so funds may remain invested and income levels are also flexible. This is subject to certain maximum levels, which may be more generous than UK based schemes. It is no longer compulsory to purchase an annuity at any age in the UK. Therefore, your pension funds may remain invested indefinitely and realigned to suit your investment requirements. Income can be taken directly from the invested funds, (income drawdown) but subject to limits. The existence of a double taxation agreement between the jurisdiction of the QROPS provider and your country of residence is a vital factor when considering the income tax implications. This will ensure you are not taxed twice. Your pension income will be taxed in the UK, and claiming this back may be challenging, if not impossible. However, it is possible to arrange payments to be made gross and pay tax in your country of residence. A QROPS can offer a wider choice of investments, including shares, mutual funds and packaged investment products. The investments are available in multi-currencies. Can offer a wide choice of investments, including shares, mutual funds and packaged investment products. However, the investments will predominantly be denominated in GBP Sterling which means more currency risk. A QROPS can provide a simple and effective way to consolidate your pension arrangements. Holding a variety of UK pension schemes means your funds can be subject to numerous complex charging structures, so it is harder to tell whether you are getting value for your money. Any lump sum death benefits payable after 5 consecutive years of non-uk residency will not get surcharged by any taxes, regardless of whether benefits have been crystallised or your age. There is the possibility that any lump sum benefit paid in the event of your death will be subject to a tax charge of 45%. This will depend upon whether you have crystallised your benefits, the method you have used to provide your income and your age at date of death. This charge has nothing to do with inheritance tax charges, which are an entirely separate calculation. Not usually liable to UK taxes. Contrary to a lot of QROPS related information publically available, for inheritance tax purposes the value of most UK pension arrangements will not be included in your estate. Some very antiquated arrangements may be included however, (Section 32 Buy Out Plans, Retirement Annuity Contracts), so it is important to understand whether this applies to you. 4

5 Why use Austen Morris Associates? Each QROPS jurisdiction offers a wide range of solutions and alternatives, depending on your current situation, including your residency. It is crucial to comprehend which jurisdiction is best suited to your requirements. If you hold an existing QROPS policy or planning on transferring your existing UK pensions to a QROPS, we strongly recommend you to speak to an Austen Morris Associates consultant who can compare QROPS with your pension to determine the best possible advice, given the nature of the ever changing market. QROPS Transfer Procedure in 8 steps 1. Client QROPS inquiry is sent to Austen Morris Associates. 2. Austen Morris Associates consultant contacts the scheme owner, and depending on the geographical terrain, he meets with the client either directly or remotely. 3. Then the consultant sends a Letter of Authority (LOA) to the client for them to sign. 4. Client sends signed LOA back to Austen Morris Associates by or fax with original to follow via the mail. 5. Austen Morris Associates contacts existing UK pension(s) provider(s), and verifies that position(s) can be transferred to QROPS and ascertain transfer value or any other additional benefits. 6. A report is produced by Austen Morris Consultant. Following up, another meeting is then scheduled with the client, in order for the client to understand the implications and to make a decision on whether he would like to transfer the pension to an overseas jurisdiction. 7. If the client is happy with the opportunity to move to QROPS: 1. The signed and completed paperwork is sent to the existing provider. 2. The application transfer form is sent to QROPS Plan Trustees to action transfer of UK pension plan(s) assets to a QROPS Offshore Structure. 8. Pension not based overseas: 1. An appropriate investment structure is implemented by the Austen Morris Associates Consultant. 2. Regular quarterly reviews of the pension performance is provided by the Austen Morris Consultant. * Please Note: a. It can take 4-8 weeks for the existing scheme providers to supply the information required at step 4. b. If client consents to proceed at step 5, resume at step 6. c. Step 6 can take 4-5 weeks for the transaction to be completed. d. This whole process can take up to 3 months to be terminated. 5

6 Our Global Reach AMA website: In the countries we call home, our purpose will always remain the same: Austen Morris Associates is committed to rewarding partnerships. WeChat official account: After you have read the Education Fee Planning guide, please contact us through our Live Chat, at one of our Office Addresses below or us one of the addresses below. Enquiries: Client Services: Careers: China Office 19th Floor, Guangfa Bank Tower 555 Xujiahui Lu, (near Luban Rd) Shanghai, , China Tel + 86 (21) South Africa Office 1st Floor Stemcor House, The Braes, 193 Bryanston Drive, Bryanston, Sandton, Johannesburg SA, 2191 Tel +27 (0) Philippines Office 20th Floor, Picadilly Star Building 4th Avenue corner 27th Street Bonifacio Global City, Taguig Manila, Philippines 1634 Tel Cape Town Office Suite 323, 3rd Floor, The Business Centre No 1 Bridgeway Road, Bridgeways Precinct Century City, 7441 Tel +27 (0) Marketing: marketing@austenmorris.com Fax +86 (21) GPS , GPS ,