UK Pensions Lamborghinis for all? New UK pension rules explained

Transcription

1 UK Pensions 2015 Lamborghinis for all? New UK pension rules explained Ben Lester Business Development Manager

2 Brooklands Pensions UK and international pension provider established 2006 Multijurisdictional Offices across the globe Over 6,000 members

3 Core products SIPP (Self Invested Personal Pension) QROPS (Qualifying Recognised Overseas Pension Scheme) Gibraltar, Malta and New Zealand

4 Lamborghinis for all?

5 Recap of 2014 What happened last year?

6

7 What happened last year? Freedom and choice in pensions Unrestricted access (removal of the GAD limits on income) No transfers out of unfunded public sector schemes from April Removal of the 55% tax charge on death Restrictions on private sector DB transfers

8 Freedom and choice in pensions Unrestricted access (removal of the GAD limits on income) - Only applies to defined contribution (money purchase schemes) - What are the tax consequences? - Not all schemes will be able to offer full flexibility - How does it affect non UK residents?

9 Freedom and choice in pensions No transfers out of unfunded public sector schemes from April - What schemes does this apply to? - Why are they being stopped? - Is there any flexibility?

10 Removal of the 55% tax charge Current rules (up until April 5 th ) BEFORE RETIREMENT DRAWDOWN BEFORE AGE 75 DRAWDOWN AFTER AGE 75 UK SIPP NO TAX 55% TAX 55% TAX GIB QROPS NO TAX NO TAX* NO TAX* *Member must have completed five consecutive tax years outside of the UK and will retire and remain offshore

11 Removal of the 55% tax charge New rules (from April 6 th ) BEFORE RETIREMENT DRAWDOWN BEFORE AGE 75 DRAWDOWN AFTER AGE 75 UK SIPP NO TAX NO TAX 0 45% TAX GIB QROPS NO TAX NO TAX* NO TAX* *Member must have completed five consecutive tax years outside of the UK and will retire and remain offshore

12 Freedom and choice in pensions Restrictions on private sector Defined Benefit (final salary) transfers - What is being proposed? - Does it actually work?

13 What should you be aware of from April 6 th?

14 What should you be aware of from 6 th April? Income guidance should be sought! Further changes inevitable What about overseas schemes (QROPS)?

15 Unrestricted access for QROPS? 70/30 rule will continue until further notice for non EU QROPS After a period of consultation, HMRC announced that the 70% rule would, as planned, remain in place temporarily while they consult further on how to clarify the rules in order to ensure that any future legislation marries with the original policy intention is to allow people permanently leaving the UK to simplify their affairs by taking their pension savings with them to their new country of residence.

16 Double taxation agreements (DTA s)

17 DTA s things to look out for? Is there a DTA in place? Does it cover pensions (government and private)? Are their restrictions such as nationals and residents only? Which country does it assign the taxing rights to? Is there a remittance limitation? Just because there is a treaty in place that does not guarantee that income will be paid gross. An application must be made and it is at the discretion of the local tax office in the UK.

18 Case study 1

19 Case study 1 Meet Tom: 57 year old pilot with major airline British National who has spent 8 years living and working in Brussels. Divorced, living with partner, 4 adult children No intention of returning to UK He plans to retire in Belgium He has a deferred pension with British Airways His is in a comfortable position financially, does not anticipate needing to draw any income from this pension and his main aim is for his family to inherit the fund when he dies

20 A Gibraltar QROPS has been recommended for Tom as:

21 Case study 1 He will retire and remain offshore A QROPS will ensure that whilst he remains non UK resident his family will inherit his fund on death with no tax deducted The Gibraltar scheme has the lowest fees and will therefore give him the best opportunity for growing the fund

22 Case study 1 A QROPS will allow Tom to name his legal partner, children and/or grandchildren as beneficiaries If Tom dies whilst still resident offshore then a QROPS will allow his entire fund to pass free from tax at source to his beneficiaries at any age If he does decide to take income he can and he can also switch to a different product without penalty if needed

23 Case study 2

24 Case study 2 Meet Emma: 42 year old marketing executive Married with one child and recently moved to Belgium for work She would like to stay in Belgium for at least 5 years Small defined benefit pension and 2 defined contribution pension from previous employment in the UK

25 Case study 2 She wants to consolidate her pension benefits and ensure that her husband and children are provided for in the event of her death She would like her adviser to manage the portfolio for her She is unsure where she will retire but she is very close to her family so it is likely to be in the UK but could also be Belgium.

26 A UK SIPP has been recommended for Emma as:

27 Case study 2 She is a long way from retirement (13 years until she is 55) She is unsure whether she will retire and remain offshore Even is she retires in Belgium keeping the pension in the UK could be more tax efficient (DTA?) A SIPP will allow her to consolidate her existing benefits A SIPP will allow her beneficiaries to receive 100% of the fund value if she were to die before before age 75 (Post 75?) A SIPP is considerably more cost effective than QROPS and affords her all of the same benefits as QROPS at her stage of life She can transfer into a QROPS in the future if necessary

28 Conclusion There is no one size fits all with pensions: multiple products across various jurisdictions are required.

29 Summary

30 Summary Significant changes to UK pensions Full flexibility Tax consequences With such major changes happening anyone with a UK pension (or QROPS) should review their arrangements to assess their suitability.

31 Questions?

32 Contact Details BROOKLANDS TRUSTEES LIMITED 41 Lothbury London EC2R 7HG United Kingdom +44 (0) (0) FCA No BROOKLANDS TRUSTEES (GIBRALTAR) LIMITED Suite 215B Neptune House Marina Bay Gibraltar Tel: FSC No. FSC1223B

33 Compliance Statement This presentation is of a general nature only and is not intended to be a substitute for professional advice, nor to be relied upon, nor used in formulating any business decisions without first seeking such advice; no liability is accepted for any consequences arising from any transactions embarked upon in connection with this presentation. Different rules could apply to different individuals. No warranty regarding the appropriateness of transferring to any BROOKLANDS Pension Plan is being given and none of the comments should be construed as financial or tax advice; the member should always take independent tax advice, as their personal circumstances and country of residency may mean the comments within do not apply. Advice should be sought as to the tax implications on any payment of benefits in the members country of residence.