Transferring Uk Private Pensions Offshore

[Faramond]

Hi I have been working in Bangkok as a financial consultant for 5 years helping Expats manage their finances offshore and advising them on how to make the most of the benefits available to them living overseas.

A big part of how i have helped people as been to show them how to take advantage of the law introduced by the UK HMRC in 2006 allowing Brits living overseas to transfer their private pensions offshore and be able to take a tax free income from their pensions.

QROPS (Qualified Recognized Offshore Pension Schemes) have become very popular over the last few years, and the amount of people transferring their pensions to QROPS has trebled last year compared to the year before.

QROPS offer a number of key benefits to Brits living in Thailand

1. You have more control on how your pension is invested

You have a say in how the pension fund is invested, and can add extra protection against inflation. You can also hold different currencies so has to reduce the kind of currency risk we have seen over the last 2 years with the depreciation of the pound which has given Brits less spending power

2. There is no need to purchase annuity with a QROPS.

By law in the UK anyone who holds a UK Private Pension must purchase annuity by the age of 75. What annuity means is you trade the value of the pension pot that you have accumulated over the years for a guaranteed income for the rest of your life, which usually amounts to 6% of the fund if that.

3. You can take an income from your pension tax free

With a UK private pension depending on the tax bracket you come under you can be taxed anywhere up to 50% on the income you take from the pension

4. The ability to leave remaining funds to your wife/family without paying inheritance tax

With a UK Private pension if you were to die before you purchased annuity, upto 82% can be taxed. If you die after purchasing annuity the income dies with you

If you have any questions on QROPS feel free to message me, or if you have a UK Broker ask them about this. The last benefit (the ability to leave remaining funds to your wife/family tax free) alone is worth looking into it more. It is like having free life insurance.

Hope this info is useful and helps some of you put some plans together

[TheVinylMan]

What are the charges for transferring your UK pensions to a QROPS or an older less cost-efficient QROPS to a new scheme?

Many pension providers have two values for the pension - the fund value with them and the fund value they will transfer to another pension provider - transferring can cost a large percentage of a pension . What is the percentage of the plan that is lost?

[473geo]

By Private does this include a company run pension scheme which currently provides an income and increases year on year in line with the RPI?

[Morden]

This applies only to the transfer of funds before a pension is drawn, I think. Please correct me if I am wrong.

[Faramond]

What are the charges for transferring your UK pensions to a QROPS or an older less cost-efficient QROPS to a new scheme?

Many pension providers have two values for the pension - the fund value with them and the fund value they will transfer to another pension provider - transferring can cost a large percentage of a pension . What is the percentage of the plan that is lost?

Charges depend of the QROPS provider you use, the most cost effective I have come across is from one of the largest QROPS providers that charges £995 for the formation of the scheme and includes transfers from up to 4 different UK Pension schemes

Transferring from one QROPS to another can be done, and the charges depend on what has been set by the QROPS you are transferring out of

You are correct, the pension companies do have a value for the transferable amount. This varies with each UK pension company, there isn't a set percentage. What we usually do is contact the pension company and they tell us firstly if the pension can be transferred and if it can they will send the transferable amount along with the discharge paperwork. I have seen pension companies give the same transferable amount as the value of the pension.

Also company pensions and final salary schemes can be transferred and some companies are paying the clients incentives to transfer them to QROPS because they want the liability off their books

I would recommend anyone interested in QROPS to set them up in Guernsey, they are now considered the premier location for QROPS and they adhere to HMRC rules to the letter

[chiang mai]

And best make certain that you don't intend/need to return to the UK to live after getting into QROPS because if you do, the tax man will have you in a most unpleasant way.

[Faramond]

This applies only to the transfer of funds before a pension is drawn, I think. Please correct me if I am wrong.

You can transfer any pension whilst in draw down.

The only time you can not transfer is after you have purchased annuity

[Faramond]

And best make certain that you don't intend/need to return to the UK to live after getting into QROPS because if you do, the tax man will have you in a most unpleasant way.

I would suggest setting up a QROPS if you are intending on staying overseas for the tax benefits. You can take them back to the UK, once you return back to the UK the QROPS provider will report back to HMRC. You will then be taxed as on a normal pension, but you do have the benefits of not having to purchase annuity and also being able to pass the pension fund to next of kin

[chiang mai]

And best make certain that you don't intend/need to return to the UK to live after getting into QROPS because if you do, the tax man will have you in a most unpleasant way.

I would suggest setting up a QROPS if you are intending on staying overseas for the tax benefits. You can take them back to the UK, once you return back to the UK the QROPS provider will report back to HMRC. You will then be taxed as on a normal pension, but you do have the benefits of not having to purchase annuity and also being able to pass the pension fund to next of kin

I'm sure you may be correct Faramond but in light of ever changing regulations from HMRC and the ever changing HMRC6, posters really should check out the latest position on this point with HMRC directly, my current understanding is slightly different from yours but please don't let that stop you from trying to drum up some business.

[Faramond]

I'm sure you may be correct Faramond but in light of ever changing regulations from HMRC and the ever changing HMRC6, posters really should check out the latest position on this point with HMRC directly, my current understanding is slightly different from yours but please don't let that stop you from trying to drum up some business.

I would recommend people to use the more established jurisdictions such as Guernsey or Isle of Man to set up QROPS, and also choose from the larger providers who have a proven track record. Just remember with Isle of Man you come under their pension tax rules, pensions are 20% taxable. And they also have to pay 18% tax on money passed on to next of kin

Guernsey is the better option as there is no tax deducted on income, and money passed on is completely tax free. The providers have to go through strict due diligence to set up there, and must adhere to all HMRC rules.

I would stay away from all of the newer jurisdictions applying for QROPS status. Singapore was a country who at one time had status but strayed from HMRC rules and were allowing pension busting which is frowned upon.

But you are absolutely correct Chaing Mai, I would recommend everyone to do their own homework first before considering QROPS

I will answer any questions you or anyone else has, and pass on any information needed

Edited March 27, 2010 by Faramond

[jesimps]

I have twice been told by established companies that I cannot transfer to a qrops because I am already in drawdown in a final salary pension scheme. Surely these companies wouldn't turn away my business if this wasn't the case.

[somtampet]

A new company in Pattaya starting up very soon and an expert in this field,my cousin actualy.He will be spending 6 months here and 6 months at his business in England for the next couple of years,then full retirement here.

Very honest and a great guy too,and i have just transfered my funds with him.

To me,the most important part of dealing with any company in Thailand is trust and piece of mind,you will certainly get this with my cousin.

[JohnC]

I would be interested to know what security there is with these offshore companies!! i.e are they covered and indemnified by the Financial Services Authority? What happens to your hard earned pension if they go pear shaped??

[GuestHouse]

Three things to note:

1. You do not have to put your pension offshore in order to receive your pension tax free - UK tax laws allow anyone who has lived overseas for the ten years prior to drawing their pension to do so tax free (most the expats I work with who retire overseas make use of this clause to get their pensions tax free while still protected by the UK pension laws).

"Financial Advisors" selling QROPS out of Bangkok/elsewhere in Thailand are presumably targeting the market of people already overseas who have not yet drawn their pension - I've never heard any of them mention this clause .... wonder why not.

2. If you take your pension into a QROPS and are then forced to return back to the UK within five years of transfer you are liable to punitive tax penalties that would essentially wipe out your pension.

3. QROPS might be a good idea for you, but why use an unregulated "Financial Advisor" in Thailand when you can use a fully regulated advisor based in the UK?

I personally would not let any "Financial Advisor" in Thailand within sight of the £10 Premium bond my granny bought me for my tenth birthday - let alone let them near my pension.

Each and everyone of the laws governing Financial Advisors in the UK were brought in as a result of breaches of trust, criminality and huge losses by investors.

You'd have to be brain dead to forgo the protections offered to people using Financial Advisors in the UK for what passes as "Financial Advisors" in Bangkok.

[Morden]

I would be interested to know what security there is with these offshore companies!! i.e are they covered and indemnified by the Financial Services Authority? What happens to your hard earned pension if they go pear shaped??

A very good and important question! Many have learned to their cost that trusting an adviser is not enough. Pension companies and independent advisers in the UK are very tightly regulated by the FSA these days, as John C says, a potential saver or investor should check:

1. That the company is registered with no relevant restrictions or black marks.

2. The IFA is similarly registered.

3. That he is protected by UK law and regulations if he is other than a UK citizen residing in the UK.

4. The terms of business of the company and the IFA.

You can examine the FSA register here, although it's off line as I write this:

http://www.fsa.gov.uk/register/

Thailand law does have some consumer protection but I doubt whether all would-be advisers here are properly accredited or even sufficiently knowledgeable.

Investors and policyholders should take great care, even with house, auto and health insurance purchases in Thailand.

[Faramond]

Three things to note:

1. You do not have to put your pension offshore in order to receive your pension tax free - UK tax laws allow anyone who has lived overseas for the ten years prior to drawing their pension to do so tax free (most the expats I work with who retire overseas make use of this clause to get their pensions tax free while still protected by the UK pension laws).

"Financial Advisors" selling QROPS out of Bangkok/elsewhere in Thailand are presumably targeting the market of people already overseas who have not yet drawn their pension - I've never heard any of them mention this clause .... wonder why not.

2. If you take your pension into a QROPS and are then forced to return back to the UK within five years of transfer you are liable to punitive tax penalties that would essentially wipe out your pension.

3. QROPS might be a good idea for you, but why use an unregulated "Financial Advisor" in Thailand when you can use a fully regulated advisor based in the UK?

I personally would not let any "Financial Advisor" in Thailand within sight of the £10 Premium bond my granny bought me for my tenth birthday - let alone let them near my pension.

Each and everyone of the laws governing Financial Advisors in the UK were brought in as a result of breaches of trust, criminality and huge losses by investors.

You'd have to be brain dead to forgo the protections offered to people using Financial Advisors in the UK for what passes as "Financial Advisors" in Bangkok.

I would agree with most of what your saying,

The big advantage of using QROPS is you do not have to purchase annuity and being able to pass on the pension pot to your next of kin tax free.

If you purchase annuity and was to die the next day the pot of cash dies with you, some companies will pay your wife an income for the remainder of her life afterwards but you will have to read your private pension companies rules of this. Most Private pensions state that a British wife is entitled to 50% of the income you were receiving and that a foreign wife (Thai) is only entitled to 25% of the income you received. You should ask your pensions provider what their stance is on this matter if you also want to ensure your wife future is ok

Being able to pass the pot of cash on to your next of kin tax free is also a big plus, if you die before purchasing annuity you can pay anywhere up to 82% tax on the pot you accumulated, and if you die after you purchase annuity the company has already taken your pension fund. If someone has taken the time and accumulated such a pot of cash, do they really want it to go to the government or pension company when something happens to them?

You should only use Financial advisors who or UK regulated, or have a UK Office that the transfer goes through. You should like i mentioned only use Jurisdictions such as Guernsey and the Isle of Man that are UK Regulated by the FSA and offer the client protection on their pensions.

You also should only use the large QROPS providers and do your homework on them first, QROPS is a specialist market so you want an established and experienced provider

[Faramond]

I would be interested to know what security there is with these offshore companies!! i.e are they covered and indemnified by the Financial Services Authority? What happens to your hard earned pension if they go pear shaped??

Hi John, as mentioned you should only set up a QROPS scheme in Guernsey or Isle of Man which are both regulated by the FSA. All the providers who want to set up in these Jurisdictions must go through a strict due diligence process and be accepted by the HMRC. Also any financial company setting up in Guernsey or Isle of Man must contribute to the insurance pot which the local governments have put in place so as to offer the investors added protection, by law 90% of any investment held in the Channel Islands is protected

Stay a way from the small or newer offshore centres applying for QROPS status, and make sure you get the correct advice first. There are a lot of IFA's advising on these the wrong way. QROPS are there to provide an income for life and 75% of the fund must stay within the fund to supply that income. This is one of the laws set by HMRC, and one that Singapore strayed away from. IFA's in Singapore were telling people that by setting up a QROPS they could take all the money out of their pensions tax free (pension busting). This led to HMRC taking away Singapore's status.

Here are couple of articles from The Times, and The Telegraph regarding QROPS

http://www.telegraph.co.uk/finance/persona...for-expats.html

http://www.timesonline.co.uk/tol/money/tax...icle3907530.ece

Edited March 28, 2010 by Faramond

[Faramond]

I have twice been told by established companies that I cannot transfer to a qrops because I am already in drawdown in a final salary pension scheme. Surely these companies wouldn't turn away my business if this wasn't the case.

Hi jesimps, it depends on the company and the trustee you are trying to transfer from. What happens is the company that you set the QROPS up with, first has to contact the company holding the pensions and ask them firstly if the pension can be transferred and if it can, obtain the transferable amount and the discharge paperwork. Final salary pensions can be transferred if the company allows it to. So with your case maybe the trustee or company said no

with final salary schemes most companies will allow the transfer just to get the liability off their books. They calculate how much they will transfer and they are usually generous with the amount and add incentives

also there may be benefits included in your final salary scheme that can not be transferred, and this may be the reason they are saying no. if there are benefits attached to the scheme i would recommend keeping it where it was

i could look into why if you wanted me to

Edited March 28, 2010 by Faramond

[Faramond]

By Private does this include a company run pension scheme which currently provides an income and increases year on year in line with the RPI?

Yes it includes company run pensions. When you request to transfer from the company run pension they will take into account that the income increases and calculate for you an amount that they will give you to transfer, they are usually generous with the amount. If you are not happy with the amount they offer you should just leave it where it is. With the QROPS you have more control on how the money is invested so you can generate growth tax free, which increases the income you can take each year

As mentioned to Jesimps, it is up to the company and trustee if they will allow the transfer, as there may be benefits attached that can not be transferred

Edited March 28, 2010 by Faramond

[Gambles]

I have twice been told by established companies that I cannot transfer to a qrops because I am already in drawdown in a final salary pension scheme. Surely these companies wouldn't turn away my business if this wasn't the case.

Many advisors in Bangkok haven't written many QROPS so far and therefore don't know the details.

It's perfectly possible and I've been involved in several cases where it's been done for Bangkok-based expats from a number of schemes. Trustees can technically delay this until next year if they want to be awkward but if spoken to in the right way, they will invariably co-operate.

MBMG use a guy based here who has been responsible for around 2% of the total global QROPS transfers and regularly writes about and lectures on QROPS. It's very much a specialised skill - so if Faramond intends also specialising in QROPS, there's definitely plenty of room for more good guys in this area

I think that Chiang Mai is getting at the fact that if you're not ex-UK for 5 years you may face a surcharge or have to transfer back to a SIPP or suitable UK plan at point of return - however that should be factored into your actuarial comparison of your current scheme versus transferring.

Every case should have a detailed comparison undertaken and while QROPS will be right for some but not for others, I believe that everyone should conduct a comparison of all costs, taxes and benefits.

We do have a UK tax & pensions expert flying into speak alongside Billy, the QROPS expert next week. PM me if you're interested in receiving an invitation.

Cheers,

Paul

[ESB7]

To take the TFC what is the minimum age.

[Faramond]

To take the TFC what is the minimum age.

The age you can take the 25% tax free lump sum is 55 years old

[Gambles]

To take the TFC what is the minimum age.

The age you can take the 25% tax free lump sum is 55 years old

Beat me to it, F!

I think that the real key though is that this is fantastically complex - the gradual increase of the minimum age being just one of the complexities.

To understand all the costs, benefits, tax-breaks, risk factors, flexibilities and also regulatory protection (for instance to pick up on F's excellent point earlier - you could easily have UK FSA regulated funds inside a Guernsey FSC regulated trust managed by a UK FSA regulated discretionary manager - which is 3 levels of regulation!!) but each comparison is necessarily different and each solution individual. F's given some excellent answers but really you'd be best, I'm sure F would agree, taking a personal comparison. MBMG provide these free of charge, as I'm sure does F. No obligation just a simple as possible actuarial analysis that enables you to decide which, if any, pension action is suitable. All the more relevant in light of Gaines-Cooper as failing to do the analysis may render you UK resident even though you think you're an expat!!

Paul

[chiang mai]

Three things to note:

1. You do not have to put your pension offshore in order to receive your pension tax free - UK tax laws allow anyone who has lived overseas for the ten years prior to drawing their pension to do so tax free (most the expats I work with who retire overseas make use of this clause to get their pensions tax free while still protected by the UK pension laws).

"Financial Advisors" selling QROPS out of Bangkok/elsewhere in Thailand are presumably targeting the market of people already overseas who have not yet drawn their pension - I've never heard any of them mention this clause .... wonder why not.

2. If you take your pension into a QROPS and are then forced to return back to the UK within five years of transfer you are liable to punitive tax penalties that would essentially wipe out your pension.

3. QROPS might be a good idea for you, but why use an unregulated "Financial Advisor" in Thailand when you can use a fully regulated advisor based in the UK?

I personally would not let any "Financial Advisor" in Thailand within sight of the £10 Premium bond my granny bought me for my tenth birthday - let alone let them near my pension.

Each and everyone of the laws governing Financial Advisors in the UK were brought in as a result of breaches of trust, criminality and huge losses by investors.

You'd have to be brain dead to forgo the protections offered to people using Financial Advisors in the UK for what passes as "Financial Advisors" in Bangkok.

Which just goes to show that we all live and learn something new everyday, thank you GH, I didn't know that.

[fletchsmile]

....

Each and everyone of the laws governing Financial Advisors in the UK were brought in as a result of breaches of trust, criminality and huge losses by investors.

....

Indeed, and some people still don't learn. These pension scandals continue to happen in the UK as anywhere else. Equitable Life probably the most notable recent example of "a reputable company", "protected by UK rules and regulations" etc etc, yet still honest individuals lose out.

Then throw in the UK governement with their shifting goalposts. Retirement age for a personal pension soon to move from 50 to 55, delaying access to your own money. Higher tax relief disappearing fast...

For me, QROPs have some disadvanatges - particularly relating to charges, but at least they let you get at your own money.

When it comes to UK pensions for expats: invest the minimum possible so that you get your employer's contribution for free. After that stay away and try to avoid putting your own money in. Then you've no need to worry about UK pension vs QROPs as neither are very good investments for your OWN money. Comes down to lesser of two evils which depends on individual circumstances.

I stopped contributing to UK pensions over a decade ago - as such I've now reached a financially independent situation where I can stop work on my own terms, not someone else's.

Edited March 28, 2010 by fletchsmile

[GuestHouse]

Then throw in the UK governement with their shifting goalposts. Retirement age for a personal pension soon to move from 50 to 55, delaying access to your own money. Higher tax relief disappearing fast...

I doubt very much that the vast majority of expats in Thailand who are being targetted by QROPS salesmen have sufficient funds in their pensions by age 50 to attain a sustainable early retirement.

The big pension pots are almost always final salary pension schemes which usually come with a whole lot of benefits that should not be given up lightly.

But like other ways to get your pension tax free, QROPS salesmen are not too keen to discuss these other benefits their punters might loose out on .... There's just no percentage in doing so.

[fletchsmile]

...

I personally would not let any "Financial Advisor" in Thailand within sight of the £10 Premium bond my granny bought me for my tenth birthday - let alone let them near my pension.

You'd have to be brain dead to forgo the protections offered to people using Financial Advisors in the UK for what passes as "Financial Advisors" in Bangkok.

Just curious, how many IFA s in Thailand have you ever actually met? Taking a step further, how many do you actually know personally?

I have a few decades working in accounting, investment banking, finance, risk, etc - including a decade or so in Thailand.

There are quite a lot of extremely dodgy characters in Thailand, but there are also a few decent ones. Very unfair to tar them all with the same brush.

And before you ask - no I am not an IFA here and no I do not sell pensions or QROPs - just someone who knows the financial markets - with a balanced view on life and able to sort the wheat from the chaff.

[fletchsmile]

Then throw in the UK governement with their shifting goalposts. Retirement age for a personal pension soon to move from 50 to 55, delaying access to your own money. Higher tax relief disappearing fast...

I doubt very much that the vast majority of expats in Thailand who are being targetted by QROPS salesmen have sufficient funds in their pensions by age 50 to attain a sustainable early retirement.

The big pension pots are almost always final salary pension schemes which usually come with a whole lot of benefits that should not be given up lightly.

But like other ways to get your pension tax free, QROPS salesmen are not too keen to discuss these other benefits their punters might loose out on .... There's just no percentage in doing so.

For a defined benefit (final salary) scheme that's fair comment and you need to consider all the other benefits. It's a different situation though for defined contribution, where all you have is a money pot where they eventually force you to buy an annuity. Many people have large pots here too. Particularly executive schemes from SMEs or successful entrepreneurial companies.

It's very important to distinguish the two and not tar them all with the same brush.

Funnily enough, going forward you'll see less and less people with final salary schemes, and the "big pots" you describe. They are being phased out. Most large (eg FTSE) companies have now stopped these for new members, and running them down.

[Gambles]

Then throw in the UK governement with their shifting goalposts. Retirement age for a personal pension soon to move from 50 to 55, delaying access to your own money. Higher tax relief disappearing fast...

I doubt very much that the vast majority of expats in Thailand who are being targetted by QROPS salesmen have sufficient funds in their pensions by age 50 to attain a sustainable early retirement.

The big pension pots are almost always final salary pension schemes which usually come with a whole lot of benefits that should not be given up lightly.

But like other ways to get your pension tax free, QROPS salesmen are not too keen to discuss these other benefits their punters might loose out on .... There's just no percentage in doing so.

For a defined benefit (final salary) scheme that's fair comment and you need to consider all the other benefits. It's a different situation though for defined contribution, where all you have is a money pot where they eventually force you to buy an annuity. Many people have large pots here too. Particularly executive schemes from SMEs or successful entrepreneurial companies.

It's very important to distinguish the two and not tar them all with the same brush.

Funnily enough, going forward you'll see less and less people with final salary schemes, and the "big pots" you describe. They are being phased out. Most large (eg FTSE) companies have now stopped these for new members, and running them down.

Thanks Fletch, some very good points

I would just add that increasingly analyses on final salary schemes are leading members to decide to transfer - partly because values are so high with yields being so low but also because people are now realizing that a transfer can be more secure than staying within a scheme and relying on the limitations of the pensions compensation arrangements.

My take is that DB, DC, personal or any kind of transferable scheme needs to be analysed individually and then the pros and cons listed side by side so that the member can decicde what is most important to their situation. Everyone is different and I'm sometimes shocked at the reasons why people decide to transfer or not as I wouldn't have thought that the main criteria used was their biggest priority. You have to set everything out and let the member choose.

Cheers,

paul

[GuestHouse]

Just curious, how many IFA s in Thailand have you ever actually met? Taking a step further, how many do you actually know personally?

The issue is nothing to do with who I know, personally or not, rather the lack of legal controls here in Thailand.

I actually know three financial advisors in Thailand - All of them make claims and statements that simply do not add up - read 'they are liars'.

Wether they tell porkies regarding the products they sell I don't know, I would not use their services, but the certainly tell some whoppers regarding their personal lives.

I say three....... One has recently left Thailand for reasons relating to deals he's been doing.

I had another Financial advisor try to 'get to know me' last month, turned up at my office asking for a few moments to see me.

I asked him who gave me my contact details, he responded with some bullshit about not wanting to betray a confidence.

Carpet Baggers to a man.

If I want help with my UK assets I'll seek help from a UK based, UK regulated and UK law controlled advisor. Not some Carpet Bagger in Bangkok.