Justin Scott Director November 2010 Pension Seminar. trusted to deliver

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1 Justin Scott Director November 2010 Pension Seminar trusted to deliver

2 UK tax law Tax relief is available for pension contributions into approved schemes Relief limited to 3,600 or 100% of net relevant earnings up to annual allowance Annual allowance in is 255,000, but restrictions have been in place since 2009 to prevent higher rate tax relief for those earning in excess of 130,000 A lifetime allowance sets the maximum amount of pension savings that can benefit from tax relief. In the lifetime allowance is 1.8 million. UK government announcement on 14 October 2010 reducing the annual allowance to 50,000 from 2011/12 and the lifetime allowance to 1.5 million from 2012/12. The announcements last month replace the restrictions on tax relief for higher earners.

3 UK tax law 2 From April 2010 a member must be 55 before retirement benefits can be paid. Benefits must be taken before age 75 Generally 25% of the fund may be taken as a tax-free lump sum Pensions taxed as income on individual recipient Pension benefits can be paid to a spouse or dependant on the death of the member in some cases free of tax

4 State pensions State pensions comprise two parts a basic pension and an earnings related addition. Retirement age is still currently 60 for women (increasing to 65 by 2018) and 65 for men. The pension age is set to increase to 66 for all by Contribution requirements are based on two elements:- Minimum amount of contributions Minimum number of qualifying years

5 Position on leaving the UK Can continue to contribute into a UK scheme. Tax relief limited to 3,600 unless continue to have UK taxable relevant income. May not need to pay NI contributions, but can choose to do so to maintain entitlement to state pension. Option to top-up in later years. Limits still apply Pension payments on retirement are subject to UK tax

6 Effect of Swiss Treaty Treaty provides for the State in which the individual is resident to have the sole taxing right. Care should be exercised in relation to lump sum payments as these are not pension income and may trigger a tax charge. The individual might want to consider transferring rights out of the UK to another jurisdiction.

7 Advantages of QROPS Qualifying recognised overseas pension schemes are those approved by HMRC to receive funds from registered UK schemes No tax is payable on transfer unless the lifetime allowance is exceeded. After 5 years of non-uk residence, scheme administrator not obliged to report payments to the member to HMRC. Certain jurisdictions will not levy a withholding tax on the payment of a pension (new Isle of Man rules).

8 EFRBS Unapproved schemes No limit on contributions No Isle of Man taxation No tax on employee for employer contributions Employer contributions not deductible until relevant benefits paid Pension payments are taxed on receipt. If member not resident in the UK, no UK taxation.

9 Alternatives to pensions If tax relief on making pension contributions not available consider family trust or employer financed trust as an alternative More flexible on taking benefits Rules on unapproved pensions schemes and employer financed trusts are expected to change in March Discounted bonds return at maturity date greater than investment amount.

10 UK resident receiving Swiss pension UK tax due on amount received if member UK domiciled UK tax due on amount remitted to the UK if member non-uk domiciled and remittance basis claimed No Swiss tax by virtue of treaty

11 Conclusion Consider all issues Tax deduction for employer Tax deduction for individual Tax on extraction of funds Restrictions on use of funds

12 Contact Details Justin Scott Director SMP Partners Limited Clinch s House, Lord Street, Douglas, Isle of Man IM99 1RZ Tel: + 44 (0) justin.scott@smppartners.com The information in this presentation is intended for general guidance only and should not be applied to individual circumstances without professional advice. No liability or responsibility for loss to any person acting, or refraining from action, on the basis of any material in this presentation can be accepted by any member of the SMP Partners Group of Companies. SMP Partners Limited and SMP Trustees Limited are licensed by the Isle of Man Financial Supervision Commission to provide corporate, and corporate and trust services, respectively. SMP Fund Services Limited is licensed to provide collective investment scheme and corporate services. SMP Accounting & Tax Limited is a member of the ICAEW Practice Assurance Scheme.

13 Thank you trusted to deliver