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Cut through the jargon
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Get a professional Adviser
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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.
CNMV
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
DGS
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
FSA
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.
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
More accurately this should be called Pension Commencement Lump Sum (PCLS)
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.
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
