Thursday, 9 September 2010

QROPS Week - Day four

This is QROPS Week, on Financial Pages in Spain. An article will appear here daily dealing with different aspects of QROPS. Day four today deals with New Zealand QROPS.

  • Taking cash

  • HMRC Approved

  • Low annuity rates

New Zealand (NZ) QROPS have one feature which I have not seen in any other jurisdiction. After being UK non-resident for 5 or more complete tax years, the funds held in a New Zealand QROPS can be taken as cash, on the basis of a ‘return of capital’. The big question is why?

All QROPS have to be approved and are regulated and monitored by the UK tax authorities (HMRC). The Trustees of schemes have to report to HMRC all details of cash withdrawals for a period of 5 complete tax years. Those withdrawals must be in line with UK pension rules and law. After 5 complete tax years ( UK tax years starting on 6th April ), there is no requirement for the QROPS trustees to report to HMRC and crucially, the QROPS then becomes governed by the rules and taxes of the jurisdiction in which they are.

In the case of New Zealand rules, a lump sum can be taken and there is no tax deducted for non-New Zealand residents.

If, like me, you have seen many articles suggesting that NZ schemes are questionable, then I have to say they are just wrong. This short article is the most difficult one I have written this week, mainly because of misinformation about NZ. On the latest HMRC list of approved schemes, dated 23rd August 2010, there are more than 60 approved New Zealand schemes. To get access to the best NZ QROPS, please email me.

My own view is that the people most likely to benefit from NZ QROPS are ;

  • Where the fund is less than £100,000 (though there could be bigger cases)
  • Where the fund size is more than £18,000 (outside age ranges of 60 to 75)
  • Where the individual already qualifies as UK non-resident for 5 or more complete UK tax years
These are only guidelines and depend on personal circumstances. To get advice from a New Zealand specialist please email me.

With annuity rates being very low at present, the amount of income that be taken from a ‘small’ fund is very low indeed. I used a comparison site published by the Consumer Financial Education Body (CFEB) which used to be part of the Financial Services Authority.

I put in the following criteria;

Male aged 65
Fund of £60,000
Taking regular monthly income
Income increasing yearly in line with Retail Prices Index
Single life basis (no widows pension)
No guaranteed time period

The very best annuity available is £201 per month, from Canada Life!

So you’ve handed over £60,000 and all you get is £201 per month! That’s not all. If you want to provide for a widow you’ll get less.

With the help of a good adviser (email me for a recommendation), you would not get a better annuity rate but you would get better investment advice.

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Tomorrow I shall be dealing with a number of issues and summarising QROPS Week on Financial Pages in Spain.

If you have your own question, I’d be delighted to answer it. Those of you who live in Spain or intend to live in Spain should be very careful when choosing an adviser. Any adviser can advertise on the internet or in a newspaper but that does not guarantee that they are properly authorised and regulated.

You can write to me with your personal experiences or to be put in touch with my recommended adviser by sending me an email