QROPS/EURBS: Investment Strategy

What most QROPS and EURBS investors focus on are the potential benefits of reduced tax and access to cash.  What they often overlook is the investment strategy that goes with it. 

Pensions Do Matter! recommended investment strategy is to exercise caution and focus on instruments that create income over time and withstand the shocks that the stock markets of the world deliver from time to time. The emphasis is on low volatility and protection of the capital.

The Pension Do Matter! investment themes of Absolute returns and Income Builder are most appropriate for QROPS and EURBS as long term investment strategies. 

If you would like more information on our investment strategies, please contact us.

Pension Crisis

There are many factors which should drive an expatriate to consider a QROPS or EURBS. Freedom to invest as you wish, currency considerations, improved methods of payout, no IHT, no earnings cap, improved death benefits... 

Now a further one, which has been brewing for years. Many pension schemes are bust. It was estimated in 2012 that for example 86% of UK Private Final Salary Schemes were in deficit. Putting that in simple real terms, they do not have enough money to meet their obligations, the estimate of shortfall is that to cover these liabilities every UK Tax Payer will need to contribute £12,000 each. So if we continue to think that The UK Government is going to step in and help, we may be mistaken. However, this is just the tip of the iceberg, these numbers do not account for Public Sector, MPs, Police, NHS etc. ... it will end in tears.

In the US Detroit has filed for bankruptcy! Yes a whole city is broke; the pension deficit stands at a whopping 241%! The Detroit story is a financial disaster story. Some aspects occurred which were out of the city's control, the failure of the major employers, mostly motor manufacturers. Detroit also has a story of cronies, one crony helping another milk what they perceived to be the bottomless pit of the city coffers, ineptitude, and financial mishandling. Detroit incidentally is not the first US City to take this route. Once again the principle culprit was pensions!


We have been warned, the signs are most certainly there. Ignore the possibility of moving your pension at your own peril.

Contact Pension Do Matter! today for a professional review of your pension.

Foreign Medical Professionals who worked for the NHS are also entitled to pension transfers

Many non-British doctors and nurses have forgotten they have an NHS pension. Such lost pensions typically amount to £30-£50,000. QROPS is the only way to unlock your NHS pension.

As a non-British ex-public servant there are significant advantages in transferring your pension:

1. Tax free pension income.
2. 100% of your pension remain with your family in the event of death.
3. Your pension is placed in trust outside of the UK.


Important notice

A European court ruling against UK pensioners has vindicated moves by the UK government to cut inflation adjusted state pensions for British citizens who no longer live in the UK. Recent rumblings have increased the risk of the UK government defaulting on non-British public sector pensions. Click here to read the about the plight of UK pensions.
 

Click here to enquire about your NHS pension.

QROPS. What is it? Why do it?

The advantages provided by transferring to a QROPS pension for many Expats represent the Holy Grail. Ordinarily, as long as you are aged 55 or above and have lived overseas for a minimum of 5 years, the Pension Commencement Lump Sum (Tax-free cash) can be greater than normally taken from a UK scheme, and dependent upon the country in which you reside, the tax treatment of the actual pension can be considerably more beneficial than under UK rules. There are also benefits in terms of Inheritance Tax and even, in some cases the Lifetime Allowance may be enhanced in excess of the present £1.5million (reducing to £1.25 million in April 2014).

All of which make QROPS a very attractive proposition.

However, there are many factors to weigh; it is not a simple case of “I live outside the UK, so it’s the right thing to do.”

Many Expats are either currently, or have been, members of large Final Salary schemes, through which, as the name suggests, the pension payable is directly linked to the (Pensionable) Final Salary. In most cases there is guaranteed “index-linking” which provides inflation-proofing of the pension payable, in line with either the Retail Prices Index or Consumer Prices Index.

There are no such legal impositions on QROPS fund investment.

With regard to dependants, i.e. spouse and children up to the age of 18 or 23 if in full-time education, it is incumbent on Final Salary schemes to make provision. Some provide ongoing pension to a maximum of 4/9ths to a dependent wife; the not so well-funded schemes may merely provide for the balance of 5 years pension if the annuitant’s demise occurs within this period.

A QROPS scheme provides for the entire fund to be paid free of all taxes to dependants.

Many people think that they will continue to live overseas forever, and, given the factors of better climate, standard of living and lifestyle, it’s easy to see why. However, what happens if you should choose, or indeed be forced, for whatever reason, to return to the UK?

Quite simply, if you have already transferred your pension to a QROPS and return to the UK with the QROPS still active, there will be tax charges levied to a maximum of 55% on the tax-free cash and the pension will be taxed at the highest marginal rate.

It is clear then that the case is not as cut and dried as many are led to believe.

However, all is not lost.

Many expatriates still want to make the most of the financial opportunities afforded by living overseas and to maximise the benefits. The good news is, this is still possible without making potentially disastrous life-changing decisions at an early age.

There is no doubt that QROPS plans are hugely tax efficient and of great benefit in securing the futures of many Expats. However, they are not right for everybody.

There are alternatives to QROPS that will allow you to secure your defined benefits whilst providing flexibility and which are fully compliant with UK tax regime and remove the potential problems highlighted above. The selection of the most suitable product is highly individual. Given personal circumstances, it may be that a combination of financial vehicles is required to provide the most bespoke solution, which indeed, is what every client is entitled to.

Before making the decision to transfer to QROPS, ask yourself these questions:-

1. Am I willing to exchange a guaranteed pension for QROPS flexibility?
   
2. What taxes, if any, will I pay on my pension in the country I retire in?
   
3. Am I likely to return to the UK and become resident there?
   
4. Am I allowed to transfer my pension?
   
5. Is there a QROPS alternative more suited to me?
   

For expert assessment and a full written report detailing your options, please contact us.

Smart Expats Move Quickly

The legislation and rules around QROPS are constantly open to change. That is the nature of the industry. What this means to you is that your pension and QROPS options can change quite quickly.

Such a change in legislation happened resulting in the popular 100% cash release via New Zealand QROPS no longer being possible.

It is almost certain that every new change in legislation will leave you with fewer and fewer options.

So don't delay.

Contact us today and book your free evaluation to find out exactly what your options are.

A QROPS may or may not be right for you. But you need to find out what the case is, while there is still a good range of options available to you.

Our advice to all British expats who haven't yet transferred their pension is this: evaluate your options now, before it's too late.

If you value certainty, security and freedom in your future then contact us now for a free, no obligation pension evaluation.

 
You don't have to decide what to do with your pension now; you just need to decide to book your evaluation.

Window of Opportunity!

In this year’s Budget, the Lifetime Allowance on tax-exempt pension allowance has been reduced from £1.5Mn to £1.25Mn from April 2014. In addition the amount one can contribute into a pension is reduced to £40K p.a.

However legislation will also introduce a transitional protection regime which basically allows you, if you think your pension pot will exceed £1.25Mn but reach £1.5Mn by the time you take your pension benefits, to effectively ring-fence that differential. If you don’t achieve this within a three -year period it is annulled & all you will get tax-free to transfer out of a UK pension is £1.25Mn!

What this effectively means is two things:

a) if you have a UK pension within this sort of valuation, protect yourself – & AT THE SAME TIME more sensibly get it into a QROPS
b) look at creating larger Offshore tax-exempt retirement funds because the Government is focussing on reducing the tax-exempt contributions that can be made – there is no limit to a QNUPS trust’s contributions into an Offshore trust fund.

Contact Pensions Matter! today if you would like to discuss the above. Thank you.

Forgotten or Lost Pensions

At a time when many people are facing retirement with insufficient provision it is estimated that over £3 billion of personal pensions or occupational pension funds remain unclaimed, and the Unclaimed Assets Register estimate this figure to be as high as £20 billion.

Were you one of the millions of people who 'contracted out of SERPS', the state second pension or state earnings related pension scheme and have since lost track of who is holding those valuable national insurance contributions which you may not be able to claim when you retire?

Or maybe you are one of the millions who have cited for swapping jobs over a number of years as the reason for losing track of pensions. On average, one in five people will have changed jobs five times by the time they reach 34. One in three people also have multiple pension policies and losing track of these policies does happen. A huge number of people do not bother searching for old pensions as they do not actually think it is worth the effort.

Insurance and pension companies will initially try to reconnect individuals with their pensions. However there may be reasons why this task can prove fruitless. It could be that investors have moved home and jobs a number of times throughout their lives. A change in name due to marriage and divorce is another factor that can make investors harder to find.

Tracing old pensions can prove very lucrative for some people. Reports of lost pensions providing sums of £20,000 plus are not uncommon.

If you think that you have a lost pension, there are a number of details that will be required to help pension trackers complete a search. Required details will include a combination of National Insurance numbers, previous addresses and previous employment details. The more information the claimant has the more thorough the search should be. Searches should take a couple of days at most.

Pension trackers can also look for the pensions of a deceased partner or a deceased relative. This is another common reason why pensions are lost. Partners or relatives may have taken out pensions but not informed partners. Details can be used such as National Insurance number and employment details to find occupational and personal pension plans.

Moving house and changing employers are the main reasons people need to trace their lost or 'frozen' pensions but it could be that a previous employer or pension provider has changed their name, address, been taken over or even gone bust!

The good news is that there is a database of over 200,000 pension schemes and an easy search facility to see if you 'contracted out' of SERPS which can be accessed to help you locate your pension funds and then decide what to do next.

Pensions Do Matter!  can help you to track your pension and ensure that it is then invested, transferred or added to your existing pension fund. Contact a us today and ensure you claim the pension you are entitled to.

Private sector Final Salary Schemes have been closing their doors to new entrants

Private sector Final Salary Schemes have been closing their doors to new entrants for some years, and clearly that pace has accelerated.
Final Salary Schemes place the full onus on the company to ensure that at retirement there is sufficient in the pension pot to provide the retired employee with his salary based pension for the full period of retirement, and frequently a widow’s pension as well. With investment returns falling behind old inflated estimates of just how much money a pension fund may return, and retirees living significantly longer, what has been termed “Pension Black Holes” have emerged. That was also before The Bank of England introduced Quantitate Easing, which further exacerbated the problem. Now a new issue arises, with a revision as to the current method of calculating the retail prices index reckoned to add a further £20 billion on top of the current estimated deficit of £50 billion, just for the FTSE 250 Companies alone. However, if you have pensions held in a Final Salary Scheme, this may be the best time to transfer to a QROPS or SIPP, provided you understand and recognize the risks. This is because transfer values are some 80% higher than they were six years ago.

Most certainly the decision whether to transfer needs a great deal of thought and consideration. However, my belief is that you are not able to make a judged decision without having all the information in front of you. I suggest that if you do hold an old final salary pension scheme and have held off considering a switch that perhaps it may be politic to obtain the relevant information, and make that decision based on facts and not blind judgment.



Please contact us for more information.