Tuesday, 24 April 2012

Overseas Pension Schemes

Following many changes to UK rules, regulations and legislation, this article is a brief outline of International Pension Schemes as they exist from April 2012

Individual advice can be provided by referral to a correctly regulated and authorised firm of Independent Financial Advisers with qualifications that have been checked. Please email me for a referral.

  • QROPS (Qualifying Recognised Overseas Pension Schemes)
These became available from 2006 but went through a major review and changes made with effect from 6th April 2012 (Q-Day). It is a pension scheme set up outside the UK that is regulated and recognised for tax purposes as a pension scheme in the country in which it is located. QROPS have been established in countries across the world, many in jurisdictions with beneficial tax rules. For specialist advice click here

  • ROPS (Recognised Overseas Pension Schemes)
Though a Scheme authorised by HMRC, it has very flexible aspects. Contributions can be made by individuals or an employer. It is an accepted element that employees can give up income (salary sacrifice) to make contributions. There are also flexible retirement ages available.

Advice can only be given by those firms who are authorised by the Financial Services and Markets Act 2000, in other words, must be regulated. Get this advice by sending me an email with outline information.

  • QNUPS (Qualifying Non-UK Pension Schemes)
An arrangement which meets the criteria set by the regulations the UK government brought out in February of 2010. This is available for a UK or non-UK resident, which gives an opportunity to make contributions to overseas schemes, established as QNUPS, with the knowledge that those funds will be sheltered from UK Inheritance Tax (IHT). Individual advice should be taken in all circumstances from a regulated and authorised adviser. Please email for a recommendation.

·        Section 615 (UK employees with overseas earnings and responsibilities)
A Section 615 Benefit Scheme allows UK Limited Companies to establish retirement benefit packages for employees who have duties outside the UK. This Pension Scheme satisfies the criteria laid down by HMRC. Importantly, the arrangement is made under legislation which is tried and tested (Income and Corporation Taxes Act 1988, Section 615(6))
Every scheme is submitted and accepted individually, ensuring that the benefits will not be subject to challenge, at a later date. This grants full pension scheme status, which is recognised internationally as a genuine pension arrangement.

Do you get the impression that this is complex and that Professional Advice is vitally important?

I certainly do and can refer you to the right firm if you email me.

In addition to the Plans outlined above, it is also possible, especially where circumstances are complex, to seek advice from a Chartered Tax Adviser (CTA) who can develop a ‘bespoke’ solution for an individual, couple, family etc based on current legislation. Email me for such an introduction.

The following posts from Financial Pages in Spain may also prove informative;

New Generation QROPS 2012

Getting Professional Advice

Tax Avoidance and Tax Evasion

David Goodall
Financial Pages in Spain

Tuesday, 17 April 2012

New Generation QROPS 2012

New Rules from 6th April 2012

Major changes have been made by the UK Government to the rules and regulations about Qualifying Recognised Overseas Pension Schemes (QROPS). Though only formally announced on 21st March 2012, these changes became effective from the start of the new UK Tax Year on 6th April 2012.

This now reflects the listing and delisting exercise carried out by HMRC on 12th April 2012

Many of the new rules are administrative and do not affect most pension plan holders but others are more fundamental. These are as follows;

  • QROPS must pay a maximum of 30% of the pension fund as a lump sum of cash, because 70% must be held to provide future income. It is no longer possible for 100% ‘cash-outs’ to be made

  • Jurisdictions, where the QROPS Trustees are sited, MUST apply the same tax exemptions on pensions available to both residents and non-residents. This helps to create a fair and open market. Though HMRC have disqualified Guernsey schemes which comply with this rule

  • Under the old rules once a QROPS holder had five full and complete tax years of UK non-residency, the Trustees no longer had to report withdrawals to the UK Tax Authorities (HMRC). This has been extended to ten years.

  • All payments made from a QROPS must be reported by the Trustees to HMRC within 60 days. This used to be a full year.

New Generation QROPS

Independent Financial Advisers, who I recommend, can offer clients a ‘Whole of Market’ solution. They are, therefore, pleased that immediately they have more than one major jurisdictions which meet the new rules and that we can offer solutions. Email me for a referral

Guernsey was the market leader for QROPS but is unlikely to continue to be so. Internal laws have already been put in place to offer a solution known as 157E, but HMRC has made a pre-emptive strike to disallow these. This is a pension plan, fully compliant with HMRC rules but still not allowed even though they available equally to both residents and non-residents of Guernsey.

I suspect we haven't heard the end of this. If you already have a Guernsey QROPS please contact me by Email initially

New Zealand
Because NZ had previously made 100% cash-outs available, many financial services people thought that they would no longer be able to offer QROPS. This, however, is not the case and new ‘products’ are emerging which satisfy all of the new rules.

NZ will strictly follow the new rules, especially no lump sums in excess of 30% and will continue to pay income without tax deduction. The new schemes will be available to both residents and non-residents.

When the original QROPS rules commenced in 2006, Malta was in no position to offer a pension plan which complied. However, by December 2010 the appropriate legislation in Malta was enacted which allowed QROPS.

Malta will be the biggest beneficiary of the new rules. It’s QROPS plans are now established and all potential objections removed as both UK and Malta are full members of the European Union (EU). To many clients in Europe, this is a big advantage especially as Malta’s currency is the Euro.

There is now, more than ever before, the need to get Professional, Independent Advice.

Trust their qualifications NOT their adverts

I have already ensured that only the best will be recommended. The individuals will have the appropriate qualities and qualifications and their organisations will have technical expertise and strong administration. You can email me in confidence for a recommendation.

You might also benefit from earlier posts on my Blog;

Getting Professional Advice

‘I thought about QROPS but it’s not for me’
Considering alternatives maybe New Generation QROPS are better?

UK Pension Scheme but you live in Spain

No adviser that I recommend ever charges an up front fee

David Goodall
Financial Pages in Spain

Friday, 6 April 2012

Pensions - Definitions, terms & Expressions

Includes QROPS Update

·         Cut through the jargon

·         Get a professional Adviser

·         Understanding QROPS & QNUPS

This is a straightforward alphabetical list which helps to cut through the jargon often used when discussing pensions.

A Day
6 April 2006 was the day the UK Government pension simplification rules came into effect.

ASP - Alternatively secured pensions
At the age of 75 an alternatively secured pension would allow an individual withdrawal of income, similar to an unsecured pension fund such as income drawdown

Since 6th April 2011, no new ASP can be commenced but existing ones can continue until the next review date. The existing ASP fund can be transferred to Income Drawdown (Unsecured Pension) plan or an annuity commenced.

AVCs – Additional Voluntary Contributions
A pension top-up for an occupational pension scheme. The scheme members pay contributions into an arrangement run by the employer to boost the main pension.

FSAVCs – Free-Standing Additional Voluntary Contributions
A pension top-up policy for an occupational pension, but separate from the employer’s pension scheme and normally run by an insurance firm.

Comision Nacional del Mercado del Valores is the principal financial services regulator in Spain and responsible for authorising investment products. A CNMV adviser can be recommended, please click here

Direccion General de Seguros y Fondos de Pensions is the Spanish regulator for insurance products which can be marketed in Spain. Email me to be referred to an authorised adviser

The Financial Services Authority - the UK's financial services regulator. The FSA also ‘passports’ authorised advisers to operate in Spain. For a recommended adviser click here

Group Personal Pension
A type of personal pension offered by some employers but not classified as occupational (see money purchase pension).

Lifetime allowance
This is a limit on the value of retirement benefits that you can draw from approved pension schemes before tax penalties apply. The Lifetime Allowance is £1.8m in the 2010/11 tax year.

Lifetime annuity
A lifetime annuity converts money from a pension fund into pension income, which is taxable. There are different types to suit different circumstances and generally treated favourably for tax purposes in Spain.

Money purchase pensions
Some occupational pensions and all personal, group personal, stakeholder, FSAVCs and some AVCs are money purchase pensions. The contributions are invested in, for example, the stockmarket or bonds. The size of the fund depends on the contributions and how well the investments perform. At retirement, there is a choice of options to provide you with a retirement income.

Occupational pension
These are only available through employers and run by pension scheme trustees. There are two types – salary-related (defined benefit) and money purchase (defined contribution).

Personal pension
A pension policy taken out by an individual from an insurance company or another financial institution and into which personal contributions are made. It may also be offered by employers.

Protected rights pension
This is the part of a pension fund which was used to contract out of the UK State Second Pension (SERPS or S2P) that must be used to buy a protected rights annuity.

QNUPS -  Qualifying Non UK Pension Scheme, which means it meets the criteria set by the regulations the UK government brought out in February of 2010. This means that or a UK or non-UK resident, there is an opportunity to make contributions to overseas schemes, established as QNUPS, with the knowledge that those funds will be sheltered from UK IHT. Individual advice should be taken in all circumstances from a regulated and authorised adviser. Please email for a recommendation.

By definition, a QROPS is a QNUPS but the reverse cannot be said.

Q - Day
6th April 2012 is the day on which fundamental changes to QROPS became effective.

QROPS - Qualifying Recognised Overseas Pension Schemes
These became available from A-Day. It is a pension scheme set up outside the UK that is regulated and recognised for tax purposes as a pension scheme in the country in which it is located. QROPS have been established in various countries across the world, many in jurisdictions with beneficial tax rules. For specialist advice click here

Salary-related pension scheme (final salary or defined benefit)
A type of occupational pension. The amount of pension you get is worked out on your salary at or near retirement, or when you left employment, and your pensionable service.

Stakeholder pension
A type of personal pension that has to meet certain standards set by the UK Government. An individual can take one out or it may be available through an employer, but is not classified as occupational. 

State Pension
The UK Pension Service (part of the Department for Work and Pensions) will pay the basic State Pension based on an individual’s National Insurance contribution record. In addition, individuals may also qualify for the State Second Pension based on their own earnings and National Insurance contributions.

State Second Pension
The State Second Pension is an additional State pension paid on top of your basic State Pension. This was called SERPS. Self-employed people cannot build up a State Second Pension.

Tax-free lump sum
An amount of cash set by tax law which you can take at retirement free of tax. Salary-related occupational pension schemes may have different rules on the amount of tax free cash you can take. This is only tax-free to UK residents. Tax-free cash should correctly be called ‘Pension Commencement Lump Sum’ (PCLS) since it can only be taken as the first benefit from a pension Plan

Unsecured Pension (Income Drawdown)
This is an alternative to buying an annuity but provides an income whilst the pension is still invested. At age 75, the unsecured pension must cease and be replaced by either a Lifetime Annuity or ASP. For non UK residents or those intending to become non-resident, QROPS could be another alternative.

Pensions Advisers, including the ones that I recommend, will be happy to cut through the jargon. Email me for a recommendation

The following further reading is also recommended;

QROPS (UPDATED) - Comparing Jurisdications

UK Pension but you Live in Spain

Getting Professional Advice

David Goodall
Financial Pages in Spain

Sunday, 1 April 2012

March 2012 Review – Financial Pages in Spain

Topical issues

At the end of the calendar month, I like to reflect on the main issues and topics on ‘Financial Pages in Spain’ during March 2012. The issues which were most read during the month covered these subjects


  • Professional Advice

  • UK Budget

These are the issues that contributed the most readership. I’m always pleased to receive emails either to seek further advice or to comment on my articles.

Using the statistics provided by my service contractor, I can also indicate the most popular posts in terms of the number of people who visited the pages. They were, in order;

  1. QROPS

During the month, first through a leak and then confirmed, the new arrangements for Qualifying Recognised Overseas Pension Schemes (QROPS) for 2012, were announced.

These were first trailed in a consultation document in December 2011 and therefore not a great shock. The very best advisers and there providers had already made all of the necessary changes to satisfy the new rules.

New Generation QROPS shows more detail. It is however clear that from now on there will be three major jurisdictions;

      New Zealand

  1. Getting Professional Advice

During March, I have been contacted by three expats in Spain who have been victims of appalling advice, bordering on fraud. Had these cases happened in the UK I would have referred them to either the Financial Services Authority (FSA) or the Financial Services Ombudsman.

But Spain is different and largely unregulated. It is still possible to get properly authorised and qualified advice.
I regularly refer readers of Financial Pages in Spain to authorised advisers that I have checked out.  Please email me for a referral

I deal, not just with financial advisers but also the following professionals;

·                                             Suitably qualified accountants
·                                             Professional lawyers
·                                             Chartered surveyors in Spain
·                                             Property professionals (AIPP)
·                                             Company formation for property ownership specialists

Getting Professional Advice is the detailed post.

  1. UK Budget

I posted two articles on this subject

The latter proved controversial !

* * * * * * *

Financial Pages in Spain continues to grow, as I can see from the statistics. Whilst Spain and UK dominate the views of both the Website and Blog, there have been readers from many other countries including Germany, New Zealand, Malta and Canada.

Any issues which arise can be answered on an individual basis if you email me. I’m happy to receive questions from anywhere but my real expertise relates to the UK and Spain.

I am happy to take suggestions from readers about future articles. Please email me with your own ideas or issues that you think need raising.

REMINDER from Financial Pages in Spain

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So I’ve linked up for a new foreign exchange service. It is available in any major currency around the world but doesn’t offer cash transactions. This is a bank to bank arrangement and is priced to beat the major banks.

But you can test it for yourself! Get a quote from your normal supplier, and then get a quote from La Torre Fx.

Even on a transfer from the UK branch to the Spanish branch of my own bank, I made a big saving using La Torre Fx. It costs nothing to get a quote. But if it’s a better deal for YOU the application process is quite straightforward. Check here

Thank you for previous feedback and requests for referral

David Goodall
Financial Pages in Spain