Current accounts

It may be worth getting some financial advice about the current account you may need. Obviously you will need to have access to a different currency, but if you plan to roam the globe rather than stay in one place during your retirement, you will need an account with the flexibility to match that lifestyle.

Pensions

At first glance you may wonder why you need to reassess your pension needs at all. After all, pensions are something to be set up and left for decades, aren’t they? But like any financial product, pensions should be reviewed from time to time to make sure that they offer the best return and value for money.

If you are planning to be abroad for longer than five years, a QROPS is worth looking at. These are overseas pension schemes which offer members of UK schemes the chance to transfer their assets abroad without incurring any UK taxes. Whilst they may be liable to taxes in their own countries, the investor can pick where their QROPS is held, so in effect you may be able to choose how much tax you pay.

Whilst tax is what draws many investors into QROPS, members of these schemes also enjoy other advantages, like exemption from UK inheritance tax and the potential to take larger lump sums than the UK system would allow.

QROPS can also offer you the chance to hold underlying assets in structures that UK schemes do not offer or recognise. Guernsey in particular is known for having a wide range of QROPS options available.

If you have particularly unusual pension needs, a QROPS can be created around your individual requirements, so speak to an adviser about what can be achieved.

Finally, you may find that a QROPS is also worthwhile from the point of view of avoiding currency fluctuations. If you have moved out of the UK, why should you have to keep changing your pension from sterling into another currency?

The trouble is that you do not have to be a jet setting celebrity to find that the rules become complicated for tax reasons.

Before this year, it used to be the case that as long as you stayed outside of the UK for at least three quarters of the year, you would definitely count as a non-resident. But now the days when the taxman was satisfied by a little look at your calendar are long gone.

The Gaines-Cooper case, where HMRC pursued a multi millionaire for years’ worth of back taxes, has set the new rules about non-residence. Or rather, confirmed that the 90 rule no longer applies without really setting in stone a new set of standards to apply.

Under the new “regime”, HMRC officials are entitled to look at your whole life to see where its “centre of gravity” is. This includes looking at not only how long you spend in the UK, but also where your children are educated, where your spouse lives, and what property you own there.

With Gaines-Cooper, who still had property in Britain and whose wife lived there, it may have been simple conclusion for them to draw. But for the average expat who may have kept the family home in the UK and may pop back from time to time, the lines may be rather more blurred.

So what can you do about it? Ignoring the issue is not an option. Even if the bills you are likely to face from HMRC are not likely to run to millions, no one wants a surprise letter from a creditor – especially not from a creditor like HMRC.

It seems that the only course of action is to check in from time to time with your financial adviser to get a quick assessment of whether you have been sucked back into UK residency for tax purposes.

Leaving your pension behind in the UK means that the taxman takes his chunk out of it whenever you take a payment. It may also mean that you have to pay local taxes on the payments where you are.

A QROPS on the other hand, offers an alternative to this set up. The acronym stands for Qualifying Recognised Overseas Pension Scheme, and means a pension scheme that can receive UK pension assets without attracting UK tax.

There are a couple of conditions attached, of course. Firstly, the taxpayer has to stay resident for tax purposes outside of the UK for at least 5 years following the transfer. Breaking this rule may mean having to hand a large cheque over to the taxman.

The second rule is that the QROPS must be an overseas scheme that has been approved by HMRC. Failure to abide by this one may also mean giving a large cheque to the taxman.

As long as the QROPS is on the list of schemes that HMRC has approved, it can be in a number of countries. So you are open to choose one that treats pensions favourably. You may end up paying tax on your pension payments in your country of residence, but from this perspective the tax may be no higher than what you would have paid had you been receiving them from the UK.

Perhaps the most significant tax benefit to be taken from a QROPS is the fact that they are all exempt from UK inheritance tax. Whilst you may have assumed that leaving the UK means that you leave the inheritance tax net, this is sadly not true, and many a British expat (or more accurately the loved ones they have left behind) have a come a cropper believing this.

QROPS can theoretically be chosen in countries that may allow the lawful and direct transfer of pension assets to beneficiaries without incurring any local taxes either.

Some investors may be put off the idea of the perceived hassle that may be involved in transferring their pension assets to an overseas scheme. But if you have an adviser managing the transfer for you, there should really not be much to do.

The question should really be whether the benefits of a transfer would be worthwhile.

This depends on what kind of UK pension you have. It used to be the case that those with final salary schemes would almost certainly decide to keep their pensions in the UK, as they were unlikely to find schemes abroad that could offer that level of guaranteed income.

However, final salary schemes are being reviewed left right and centre, with some changing to career average schemes. Accordingly, if you have one of these it may still be worth chatting over your options with a QROPS adviser to see what our options are.

Have you taken any benefits yet from your scheme? If you have, this may even affect your ability to transfer your pension assets, as some schemes will not consider letting you make a transfer in these circumstances.

You may have got the impression from the media that QROPS are aimed exclusively at the superrich. However, this is not true. Whilst the superrich do take advantage of opportunities to invest offshore and overseas, QROPS are available to everyone. Some providers may have a minimum level of investment, but to be fair the fees involved may not justify the move if your pension is smaller than this amount.

Speaking of fees, you may find that the charges involved may be comparable to those charged by domestic pension providers. There is a lot of competition out there for your business, and a good QROPS adviser should be able to find you a good deal.

But when something happens in your life that makes you review your finances, what should you look for in a pension?

If you are taking a work placement abroad or moving to another country for a different reason, you may wish to consider a QROPS. Qualifying Recognised Overseas Pension Schemes are foreign pension arrangements that allow UK pension assets to be transferred into them without incurring UK income tax.

Aside from the condition that you have to remain outside of the UK for at least 5 years after the pension has been transferred, the rules and regulations surrounding them are not restrictive. So what are the criteria you should apply when choosing one?

Tax efficiency

Just because QROPS are not liable to UK tax, it does not mean that they are exempt from local taxes accordingly, you need to check what the tax implications of holding a QROPS would be from the point of view of the place you are moving to. QROPS can be held anywhere that HMRC has authorised to run them, so you may find it advantageous to live and have your QROPS in different places.

Freedom

Having been dictated to by HMRC and the UK government for so many years about how much and when you can make withdrawals from your UK pension, you may be surprised that at how flexible QROPS can be on the issue. Some QROPS can let you take larger lump sums sooner than UK schemes will allow.

Currency

QROPS can be held in most of the major currencies, so even if your pension is not in the same country that you live in, you may be able to hold your pension (and receive payments) in the same currency that you spend. This can cut down on the exchange rate costs, which will save you money in itself.

The recent legal case of Fry v HMRC may focus your mind on the issue.

It concerned a lady who had been diagnosed with terminal cancer. Given that she knew that she did not have very long left to live, she decided that she would not take the benefits to which she was entitled from her private pension when she turned 60. Her rationale was that she did not need the money.

However, little did she know that the effect of this decision would be to make most of the pension pot chargeable to inheritance tax.

Under the current rules on the subject, the law makes a distinction between pension assets that have crystallised and those that have not. A member of a UK pension is typically able to take her benefits from the age of 55, although the individual scheme may have provided for a later pension age. Before benefits are taken, the assets are said to be non-crystallised. Should the member die at this point, the pension assets would be outside of their estate for the purposes of IHT.

However, once the member has taken benefits, the residue that is left is typically chargeable to IHT.

From the analysis above, you may have expected Ms Fryer’s relatives to have received her pension assets directly without having to pay tax on them. However, HMRC took the view that her decision not to take benefits was a transfer of value which had reduced the value of her estate for IHT purposes. Accordingly, whilst she had not set out to put any tax mitigation plans in place, her estate was treated as though she had and IHT was payable on her pension accordingly.

The case shows that HMRC are increasingly trying to reach their tentacles further and further to claw back as much tax as possible. A QROPS was not available to Ms Fryer as she was UK resident. However, if you have left the UK, you may wish to take action to protect the pension that you have left in the UK. HMRC have confirmed that QROPS are exempt from UK IHT, whether you have taken your benefits or not.

An overseas pension specialist

The key here is to find not just a pension specialist, and not just an overseas investment specialist, but someone who has expertise in both aspects of offshore retirement planning. QROPS have been around since 2006, but retirement planning has been around for much longer.

Someone independent

If you were looking to buy a new house, would you limit yourself to just peering through the window of one estate agent? Of course not. But if you only consider getting a QROPS from just one provider, that is effectively what you are doing. Tied agents may provide good advice, but how can you be sure that their product is the most competitive out there for you if they do not have the freedom to shop around the whole world’s marketplace?

Someone who speaks plain English

Or, to be fair, someone who speaks in plain, straightforward terms, whichever language you happen to need advice in. Your pension should be something that you are not afraid to ask questions about. Accordingly, you must have an adviser who set out the basics for you, and can answer your questions without using technical jargon.

Someone with links to the United Kingdom

Whilst you may wish to leave the UK behind and forget all about the place, the tax benefits and exemptions that you enjoy from a QROPS are still dependent on UK legislation. Not only may there be changes to your own pension scheme that affect how HMRC views it, but there may also be change to HMRC attitudes and rules in general. Accordingly, it is helpful to have an adviser who maintains links with the UK and has a handle on HMRC’s views and plans.

The trouble with pensions is that they are often left on the proverbial back burner until it is too late. If you are moving abroad, you may understandably have other things on your mind, but failure to pay attention to what will happen to your pension may cost you dearly.

If you have a private UK pension, have you considered whether to leave it in the United Kingdom or move it abroad too?

The advantages of moving your pension abroad may include:

• freedom from the UK income tax system. As long as you are away for 5 years or more, you may be able to leave UK income tax behind for good;
• freedom from UK inheritance tax;
• greater investment freedom. Some foreign schemes may be able to hold a wider range of asset classes than you are used to investing in; and
• freedom to take your money when you want it. You may find that overseas schemes may be more flexible about when you can take a lump sum, and even about how much you can take.

To get the best out of moving your pension abroad, look into getting a QROPS. The acronym stands for Qualifying Recognised Overseas Pension Scheme and applies to schemes that have individually checked by HMRC.

QROPS are approved if they are taxed and regulated as pensions. But that does not mean that their structure and tax background need to mirror a UK style scheme. Accordingly, you have the choice of over a thousand diverse arrangements which can be found on a list on HMRC’s website.

If you use an independent QROPS adviser to help you, you can get advice on the whole of the QROPS marketplace. So what are you waiting for?

But there are more advantages to investing offshore. For instance, many offshore investment centres offer a confidential environment, where details of investments are not routinely disclosed. Some jurisdictions even keep the identity of a company’s shareholders secret.

The media can unfairly portray savers and businesses who seek confidentiality about their finances as being involved in something underhand or dishonest, but such assertions are unfair.

The tax authorities of respectable offshore investment centres will typically hand over information about an investor if they are reasonably suspected of money laundering, drug trafficking and in this day and age, funding terrorism. The recent flurry of Tax Information Exchange Agreements that have been signed on the advice/suggestion of the OECD ensure that governments who suspect that their citizens have something to hide offshore can get access to the relevant information for their investigations. At the same time, such agreements are meant to contain the checks and balances needed to ensure that a government cannot just go on a fishing expedition.

Confidentiality is particularly valuable is you are a high profile investor who does not want people to copy their investment decisions (and therefore affect the price of whatever you have bought). Keeping purchases of shares confidential is also helpful to those who are planning to mount a takeover bid.

In addition to tax and confidentiality, investing offshore also offers the opportunity to organise your assets in such a way that they are protected from potential lawsuits and insolvency situations. Arranging your affairs in this way to avoid a particular liability that has already crystallised is regarded as fraud, but by and large organising your assets to reduce the general risk of them being seized (before you have decided that you are likely to be sued on a specific liability) is not typically a problem.

Finally, another advantage to investing offshore is the choice that you have available. Whether you want innovative, traditional, high risk or low risk products, there is something out there for everyone.

A Qualifying Recognised Overseas Pension Scheme may be the answer to your problems, as transferring your UK pension to one means that you can enjoy your pension free from UK income tax.

Along the way to getting a QROPS, there are a number of choices that you will need to make as part of your retirement planning.

Choosing your QROPS adviser

If you choose an independent QROPS adviser, you have access to over one thousand different overseas pension schemes. Choose an adviser with years of experience in offshore investments, and you have someone who is well placed to pick the best one at your disposal.

Choosing your QROPS country

Choosing your QROPS country has a lot more to do with choosing what kind of a tax regime you want to be part of – although of course that will have a lot to do with your decision.

The final choice may come down to thinking about how politically stable an overseas destination is, and also the quality of financial institutions that operate from there. It may also be important to you that there are plenty of English speakers to help you with any enquiries you may have about your QROPS.

Choosing your QROPS

Choosing the scheme itself will involve considering how much the various scheme administrators wish to charge in fees. Your adviser can tell you which schemes offer value for money.

However, another issue to bear in mind is how user friendly the schemes are. Does the scheme let you take sizeable lump sums as early as you want to? Are there any particular asset classes that you want your pension scheme to hold?

You may also want to make the decision on the basis of how easy it is to transfer assets in and out of the scheme.

An hour

The first task that you have to perform when you are thinking about getting a QROPS is to find and read the documents that are related to your current UK pension arrangements. The time that this takes depends on how organised your paperwork is at home!

A couple of hours

The next thing to do is look for a QROPS adviser. If you look at a few when you are online, you may wish to consider how experienced firms are in dealing with overseas as well as UK based pensions. Other factors to take into account include the reputation of the firm that you choose, and the links that they have to the United Kingdom. Given that a scheme’s QROPS status depends on HMRC’s opinion of it, it is important to choose an adviser with strong links to the UK tax community.

24 hours or less

Once you have chosen an adviser, they should take less than 24 hours to get back to you, and obtain details from you about your current scheme. Depending on how straightforward or complicated your financial situation is, your adviser will then shop around the QROPS market on your behalf.

If you have chosen an independent QROPS adviser, they will have the world’s market to look around. A seasoned adviser will have years of experience to draw on to find the best QROPS for you.

4 to 6 weeks

When you sign up to use a QROPS adviser, you may be asked to sign a release letter, which authorises the adviser to deal with your pension scheme and open a new one on your behalf. Accordingly, assuming that your current pension scheme deals with the adviser in a timely manner, the transfer may be complete within 4 to 6 weeks.

Standard Life’s focus is primarily on the UK market, so its results were expected to mirror the roller coaster ride that the British economy has had. However, the upturn in pension sales has come as a pleasant surprise to commentators and initially to the Standard Life management team.

Despite a level of doom and gloom that exists in the economy, a spokesman for Standard Life said that the man on the street was more resilient than analysts had thought, and had continued to invest in pension products. New Chief Financial Officer Jackie Hunt said that she believed people were beginning to appreciate the need to save for their retirements, and that they had experienced a large increase in the number of people who were seeking advice on the subject.

The strong results were also underpinned by new deals the insurer has won to manage employee schemes, although a spokesman did confirm that existing schemes they managed had been affected by falls in recruitment and lower salary rises (which would have affected the amounts paid in as contributions).

It remains to be seen whether the strong results were due to Standard Life’s recent advertising campaign aimed at younger people, encouraging them to get a reality check on their finances. The campaign was launched over a variety of media including the TV channel Dave. Some of Standard Life’s competitors were initially sceptical, but the move seems to have paid off.

Legal and General and Aviva are due to announce results in the coming weeks, so it will be interesting to see if they have enjoyed a similar period of growth.

Stage 1: getting some advice

The first thing you need to do is go to a specialised QROPS adviser and get them to review the information you have about your current scheme. The adviser needs to see this information because:

• some schemes may prevent transfers if the member has already started taking benefits (i.e. payments). Accordingly, your QROPS adviser needs to check first of all that a QROPS transfer is actually possible; and
• for a small number of people with final salary schemes, the adviser may decide that the high level of guaranteed income that a defined benefit scheme offers may be too good to give up. In this case, the QROPS adviser may recommend that the investor sticks with what he has.

Stage 2: choosing a scheme

Once the QROPS adviser has taken down your information and learnt about your investment preferences, he or she will scour the market for the right deal for you. Fortunately, there are hundreds of QROPS out there for you to choose from, so whether you are an extremely cautious investor or have an appetite for the high risk and potentially high return type of scenario, you will be able to find something to suit you.

Your QROPS adviser will also explain the tax consequences of your decision at this point. Whilst there will be no UK tax to pay, the scheme may attract tax from the jurisdiction in which it is based and possibly from your place of residence, if that is different.

Stage 3: the transfer

Assuming that you have signed all the appropriate forms, this is the stage where you can relax and let the adviser get on with it. The length of time a transfer may take to effect may vary, according to the efficiency of the scheme administrators. Investors should allow around 6 weeks for the process.

If you choose the wrong person, you could end up with less than you were expecting in your elder years. If you have the misfortune to have an incompetent adviser, you may even be mis-sold a product.

The importance of experts

If you have dipped your toe into the world of overseas pensions, you may appreciate how complex that world is. Not only do you need to contend with the UK rules and regulations on QROPS and QNUPS, but you also need to deal with whatever the jurisdiction in which you choose to invest may have to throw at you.

Accordingly, whilst a generalist financial adviser may have offered your family first class advice on your finances so far, getting a pension specialist to run their eye over your overseas plans is a good idea.

International reach

If you are going to be sent abroad on a work posting, using a firm of QROPS advisers with international reach is particularly important. After all, if you intend to be moving around from country to country, continuity in the advice that you receive is essential for a joined up understanding about your finances.

The bigger the better

As a private individual, being a customer of a large financial institution can sometimes feel a bit “David and Goliath.” Being just one voice, it may seem as though you have little bargaining power when it comes to fees and charges. However, if you use a large firm of QROPS advisers who are accustomed to dealing with investment houses day in day out, they may be able to secure a better deal on fees than one person alone.

A great number of expats have relocated to the Gulf region, mainly due to these individuals being of high calibre in their field of work. The growing economy is in high demand for the best and most abled experts. This has led to individuals and families from all parts of the globe, uprooting and relocating their life in Qatar, Dubai, Abu Dhabi, Saudi Arabia etc

If you are one of these few special individuals/families, you are faced with a number of problems and concerns and don’t forget – the excitement.

If you are leaving a UK pension behind, there’s now an option that allows you to bring your UK pension with you. Doing so as a whole host of benefits which can be read about on this site. This relatively new, confusing and miss understood thing is called QROPS.

Qrops

Deciding whether a QROPS pension transfer is right & which QROPS solution is best can be laborious, confusing & time consuming. QROPS.net are the Worlds Leading Experts, we take away the hassle & help you to transfer your UK pensions to the BEST Qrops available. Our role is to remove the hassle and paper work allowing you to continue with your career and family life in your new life.

Qrops Advice

We have had a staggering amount of interest in Qrops from the Gulf region. With overwhelming demand for independent information and advice, we have opened up a regional office in Doha, Qatar. The office has a dedicated team to service all clients within the region. Our advisers are some of the most experienced, able and highly-regarded professionals working in financial services  today, and with the highest standards and highly regarded regulations, QROPS.net are well established as one of the worlds leading Qrops transfer advisory service.

If you are based in Qatar, Dubai or any other area in the Gulf and want further information and advice, contact the us now using the contact form. One of our local advisers will contact you as a priority.

The QROPS Bureau was first opened to individuals in Spain but due to the amount of enquiries now being received via the website, the QROPS Bureau will answer all enquiries from around the world.

The HMRC supply a basic QROPS list along with generic rules and regulations about QROPS transfers. The government do not supply an office or a QROPS bureau as some believe, to give the general public specific advice and guidance. This is why we offer you unlimited advice and support.

The World Wide Web is littered with websites stating incorrect information or offering misleading QROPS guides, it’s becoming laborious, confusing and time consuming just sifting through the rubbish.

There has also been a large number of “information” websites being produced to attract potential individuals under the disguise of another company. This has lead to confusion for many people trying to research into QROPS themselves as these website owners are not advisers and write the content based on their limited understanding. These website then sell your enquiry to a company for a fee.

It is recommended that any advice taken, including website information, should only be from a reputable company that is regulated by the UK regulatory body, the FSA. Unless the advice is given from an FSA regulated advisory firm, you the individual are not protected and run the risk of following incorrect advice that could land you a heavy fine.

The fact is that everyone’s plans are different, so a simple FAQ page doesn’t answer most of the concerns in the real world. The QROPS Bureau will answer all questions relating to QROPS itself, your current pension scheme, your future financial plans, tax implications and investment options.

To contact one of the team at the QROPS Bureau simple complete the form on the contact page and one of our experts will return your email or return your call.

Where the individual continues to be a UK resident or has lived in the UK within the past 5 years there is a five year reporting period. During this period the scheme will be duty bound to report any unauthorised payments or investments. In effect this means that an individual would be restricted to UK scheme rules until they have been non-UK resident for 5 years. This would rule out investment in assets such as residential property and would restrict the pension commencement lump sum (tax free cash) element to 25%.

After the individual has resided outside the UK for 5 years, the requirement to report to the HMRC ceases and the pension regulations in your place of residence will apply instead.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future.

QROPS Rules

HMRC implemented new rules and regulation in April 2006 in the aim to make pension schemes and rules simpler. However there are still many complex rules and regulations to follow and it is also very important that professional tax advice is taken in the jurisdiction that an individual is resident/domicile before making the decision to proceed with a QROPS transfer.

Please note that the UK state pension is non transferable.

There is the risk of being fined 55% of your pension fund for an unauthorised pension transfer. That is why it is extremely important to speak with a UK authorised financial advisory firm to ensure your UK pension transfer to a QROPS is legal and authorised.

For further information on QROPS transfers and QROPS rules simply complete the form on the contact QROPS.net page or email us direct.

If you have already retired or your retirement date is imminent, you may assume that your pension is all sorted out and that it might as well stay where it is – back home in the United Kingdom. As customers of financial institutions we are conditioned to be loyal customers, but refusing to move your business may be costing you money.

There are a number of options that may be available to you if you are prepared to consider moving it abroad to a Qualifying Recognised Overseas Pension Scheme.

The following questions may help you make up your mind about what to do.

How much tax do you want to pay?

You may not consider this to be an issue over which you have any control, until you actually think about the options that are available. The main thing that attracts QROPS customers is the fact that, once their pension is safely outside the UK, it does not attract any UK tax.

The pension may attract tax in the country where you choose your QROPS. However, you and your QROPS adviser are free to choose any scheme in a number of jurisdictions – many of which are tax neutral.

What currency will you be spending?

Until you have watched the value of your pension being eroded by the changing exchange rates the fees that banks charge, you may not appreciate the value of being paid your pension in the same currency that you spend. With a QROPS, you can choose to hold your pension in pretty much any major currency.

When do you need your money?

Finally QROPS may be particularly attractive if you want to take early lump sums. QROPS may be more flexible than UK pension schemes, which may enable you to get your hands on your pension sooner than you would in Britain.

However, a thorough appraisal should also involve a discussion of what getting a QROPS might set you back. So how much does a QROPS cost?

Providers’ fees

When QROPS were first introduced, QROPS providers basked in their investors’ delight at the ability to get their money legitimately away from the taxman. Accordingly, QROPS providers felt able to charge high fees.

Now that there are over one thousand schemes that have been approved for QROPS transfers, however, the tables have turned. QROPS investors have so much choice that the providers have had to make their prices much more competitive. You may even find that some providers offer a QROPS for around £500 per annum.

The price you pay in fees may depend on how individual the scheme is. On one hand, it may be that you want a bespoke scheme where you are the only member. In this case, you may have to bear the brunt of disproportionately higher administrative costs than you would for an off the peg scheme with hundreds of members.

Tax

One of the main points of QROPS is the ability to pay less UK income and inheritance tax. However, your QROPS may be taxable in its own country, and the payments you receive may be liable to local income taxes where you live. On the positive side, your country of residence and your QROPS country are both places that you will choose. Accordingly, you may be able to choose locations which do not place a high tax burden on your finances.

Advisers’ fees

Some QROPS advisers do not make any charge for their services – instead they get a commission from the providers themselves. However, a good QROPS adviser should be able to save you money by negotiating a discount on what the providers charge. This is particularly true when you are dealing with a large firm of advisers who place several hundreds of thousands of pounds’ worth of business every year.

For members of UK pension schemes who move abroad, a Qualifying Recognised Overseas Pension Scheme may be the answer to their problems. QROPS, as they are known for short, are overseas schemes that were introduced in 2006 which enable UK pension scheme members to transfer their pension assets free from UK tax.

A further advantage of QROPS is that they are exempt from UK inheritance tax.

There may be tax due on payments from a QROPS in the country in which you live. However given that the choice of where to put your QROPS is completely up to you, you are free to choose one in a country that treats pension payments favourably from a tax perspective.

Many people focus on the tax benefits of QROPS when they are thinking about getting one. And why not, when you have been paying tax for the whole of your life!

But there may also be other benefits involved in getting a QROPS.

Part of the criteria that an overseas scheme has to meet to get QROPS status involves being regulated as a pension in its own jurisdiction. However, this requirement does not necessarily mean that the pension needs to be identical to a UK pension. Accordingly, by choosing a QROPS from the 1,000 or so approved schemes on HMRC’s list, you may be able to find a scheme that offers what UK arrangements cannot.

For example, an advantage that a foreign scheme may offer over a UK one may be earlier access to larger lump sums – which may be useful if you want to get your hands on some money to put down a deposit on your new home abroad. There may also be a wider range of underlying assets that could be held by your scheme.

As always, getting any kind of financial product requires professional advice from someone that you can trust. Accordingly, you should seek the help of someone who is well versed in tax and overseas pension issues when you come to choose a QROPS.

The deficit currently sits at an estimated £2 billion. However, the liabilities of final salary pension schemes are typically difficult to value as they change according to life expectancy predictions and stock market performances. The liabilities may also change according to variations in how payments are expected to be indexed.

But no matter how you do the sums, the BBC pension scheme is in trouble, and needs to sort out its defined benefit scheme to make it sustainable. There has even been talk of selling the BBC’s flagship building television centre and putting the proceeds into the pension scheme.

Senior managers are reported to have agreed to give up around £1 million worth of pay in lieu of pension contributions, to be seen as doing their bit towards reducing the deficit. However, this has had little effect on regular employees on more modest packages, for whom the idea of having £1 million of benefits to give up seems a world away.

So far the other proposals on the table have proved to be unpalatable to the staff. They include reduced payments, increased contributions and potentially retiring later. One proposal which has infuriated BBC staff is that increases in their pensionable salaries will be capped at 1% per year. This suggestion would erode the value of the pensions that members have already accrued, thanks to inflation.

But who on earth will vote for retiring later for less? The National Union of Journalists has indicated that unless the current rights that have been built up are protected, they will strike on the issue.

The BBC is not the only big organisation with a large deficit that is struggling with negotiations with staff. British Airways has famously had many heated discussions in recent weeks, leading to strikes that have been called off at a moment’s notice.

Following Liberal Democrat leader Nick Clegg’s surge in popularity since his television triumph last week, he has enjoyed a rise in support in the polls. But whilst an outright Lib Dem win is unlikely (due to the very first past the post system that Clegg is so desperate to reform), a hung parliament is possible, with his party being able to punch above its weight.

Would this be as disastrous for the economy as the Tories make out? There hasn’t been a hung parliament in the UK for decades. Given the unfamiliarity of this possibility, people are holding their breath to wait and see. Both main parties have warned that having no decisive winner could mean the UK’s credit rating could be downgraded, due to the unpredictability of this scenario.

However, senior Lib Dems have been quick to rebut this suggestion. Former party leader Paddy Ashdown pointed out that out of the top 8 countries in the OECD (Organisation for Economic Cooperation and Development), 7 have coalition governments who have managed to make a decisive response to the economic crises. Further, he pointed out that Greece’s majority government has not really done it many favours.

Political stability is a key factor that is taken into account when investors choose a place to grow their money. Not only does a change of government threaten tax changes, which could affect the overall profitability of the investment, but changes in the rules can bring unwelcome restrictions.

Perhaps this explains why many offshore financial centres are backwaters as far as politics is concerned, who boast about nothing happening for hundreds of years.

What is a QROPS?

First and foremost, what is a QROPS? QROPS stands for Qualifying Recognised Overseas Pension Scheme. They were introduced by HMRC so that members of UK pension schemes who were no longer resident in the United Kingdom for tax purposes could take their UK pensions overseas without incurring a tax charge.

Is there much choice?

There are over a thousand QROPS to choose from. The schemes are offered by a number of recognised financial services providers.

QROPS do not have to be based in the same country as the expat who is looking for one, which means that an investor can choose from a variety of jurisdictions that offer them. Accordingly, your QROPS could be on the other side of the world from you, if one is available in a jurisdiction you like the look of.

Is there a catch?

There is no catch, but there are rules that have to be adhered to strictly – otherwise you may risk a large tax bill and possibly a penalty if HMRC suspect that there was any skulduggery involved.

The first rule is that the QROPS must be one that HMRC have vetted. Whilst they do not recommend schemes, they do check over the details of individual arrangements to make sure that they are taxed and regulated as pensions in their own countries.

The second but no less important rule is that the expat concerned must reside outside of the United Kingdom for at least five years after their pension has been transferred. If you do not plan to be away from Britain for as long as that, you may wish to consider an alternative investment vehicle. However, if your plans to emigrate are long term, a QROPS may be ideal.

It was announced recently that the government changed the rules about how pensions should keep up with the reality of inflation.

Up until now, the commonly used index was the RPI, which tracked a number of prices including accommodation costs. It typically gave a figure of 5%.

However, the CPI excludes the costs of mortgages, and stands at around 3.2%.

It’s true that such actuarial changes may not be the most exciting news to read about, but for millions of members of UK private pension schemes, the change presents a significant drop in their income.

Investment company Hargreaves Lansdown have estimated that some on a pension of £10,000 per year would find that indexed up to £25,270 in twenty years’ time if their pension is based on RPI. However, if their pension is increased in line with CPI, they would only receive £18,875. The difference is clearly significant, especially if by that time the retiree is very elderly and in need of expensive care and sheltered accommodation.

Some pensioners may escape this rule because their pensions are expressed to be specifically indexed in line with RPI. Others, however, merely state that pension trustees must use the index that is prescribed from time to time by the government – which is now CPI.

Aside from the impact that this move may have on pensioners’ incomes, part of the controversy surrounding this change is the fact that the coalition did not consult on it. Instead they presented it as a fait accompli. Pensioners’ groups have been furious, and the Department of Work and Pension’s response has done little to appease them.

When asked why the DWP did not bother to consult on the issue, a spokesman said that it was always open to firms to pay more and choose RPI instead. Are any firms likely to do this in the present climate? That seems as unlikely as a new employee in the private sector getting a final salary pension.

The previous government had planned to make the state retirement age 66 (up from 65) from 2020, but David Cameron’s government’s emergency budget has speeded that change up to 2016.

However, the NAPF has said that workers simply need longer to factor this change into our retirement planning. Joanne Segars, the NAPF’s Chief Executive, said that many people in their fifties had been planning with retirement in some detail for years, and that it is now too late for them to make any adjustments to take into account an extra year without a pension.

Whilst criticising the speed with which the changes are being implemented, Segars did admit that changes need to be made. To make a state pension sustainable and indeed sustaining for those trying to live off it, Segars conceded that the state pension age does indeed have to rise. However, if the retirement age must rise, then people need to be helped to stay in work for longer.

Dr Ros Altman is an independent researcher and commentator on the pension industry, who offer advice on policy. She is also on the same wavelength as the NAPF when it comes to raising pension ages.

In fact, in order to make the state pension a more meaningful amount, Dr Altman proposes a tiered system where the payments that a retiree may receive are tiered in accordance with their age. Such a system would take into account the gradual reduction in the amount of work that the older person did, until they were entitled to a higher level of pension payments from, say 70 or 75.

Terrible as that sounds, that is a £17billion improvement on the position of the schemes at the same point last year.

Only five of the FTSE100 companies have a surplus. The situation has become so severe that ten FTSE companies have liabilities bigger than their market capitalisation. Some companies even have pension liabilities that are twice the size of their own market value. British Telecom, Invensys and British Airways are among such companies.

Final salary schemes are onerous for companies to provide for their employees, because the member’s employer guarantees a certain income for the retiree, for the rest of their life. If the scheme has not performed well enough, the employer has to make up the difference from its own resources.

PCS’ research revealed that 57 of the FTSE100 had to make such contributions in the last twelve months. The total amount that was contributed reached £11.8 billion.

From the pension trustees’ perspective, it must feel as though they are going two steps forward and one step back. For example, just as the cash contributions have been made, actuaries have claimed that the life expectancy of men and women has gone up, adding a few more months’ worth of payments to the liabilities that pension schemes have to meet.

No doubt some relief was felt when the government announced that payments can be indexed in line with CPI rather than RPI (which was traditionally higher). Indexing is necessary because otherwise inflation would wipe out the value of a final salary scheme without it.

However, the announcement must have sent pension trustees to their lawyers to get the small print of their schemes checked – some schemes may have RPI written into their DNA as the index that must be used.

Introduced in 2006, QROPS enable members of UK pension schemes to transfer their pension assets to schemes outside of the UK without paying British income tax.

At first glance, the system seems too good to be true. However, the QROPS scheme is tightly regulated, with rules that must be adhered to strictly.

Must be a proper QROPS

The first rule is that a QROPS is only a QROPS if it has been examined and considered to be a QROPS by Her Majesty’s Revenue and Customs. QROPS are only judged to be such if the foreign scheme is regulated and taxed as a pension in its own country. This does not mean that the schemes must be taxed as heavily as UK pensions – merely that the overseas jurisdiction in which a QROPS finds itself must be treated as a pension in its own country.

Transferring your UK pension into a scheme that has not been adjudicated to be a QROPS is dangerous because it may attract a penalty and back taxes when HMRC find out.

Five year rule

The next rule that needs to be born in mind is the five year rule put simply, QROPS investors must be resident for tax purposes outside of the UK for at least five tax years from the date that their pension is transferred in order to benefit from the tax exemption.

Tax residency has become more difficult to determine following the court case of Mr Gaines-Cooper, who was considered UK resident for tax purposes because his wife lived in the UK, and his child was being educated there. This was held to be the case despite the fact that he was outside of the UK for at least nine months of the year.

If you have any concerns about your residency status, it is best to seek professional advice at the earliest possible moment, because getting it wrong can be very costly indeed.

Given that the UK system forces members of private pension schemes to purchase an annuity at (or before) the age of 75, many investors find that their hands are forced into opting for a deal that may not be the best for them.

Not only is this unfair from the point of view of your own retirement planning, but also from the point of view of your beneficiaries. Put simply, if you die after the age of 75, the taxman gets most of the residue left in your income bearing product. If you die before the age of 75 (assuming that you haven’t yet purchased an annuity), the taxman will still get a hefty sum if your estate is worth more than the IHT threshold. Given that the UK IHT threshold, though changed every year is around the value of a family home, more and more pensioners are going to find their estates qualify.

If you have moved abroad for your retirement or are planning to do so, there is another alterative. If you have a private UK pension scheme, why not consider a QROPS? By transferring your pension into a Qualifying Recognised Overseas Pension Scheme you can take the opportunity to try to outmanoeuvre the taxman and let your beneficiaries enjoy the benefits of your hard earned cash.

QROPS are spread among around a hundred countries across the globe, and some of those will permit the direct transfer of your pension assets to your beneficiaries without the crystallisation of any IHT liability at all. Such direct transfers are completely lawful, and may offer a considerable saving on the UK pension option.

Taking a moment to consider the IHT aspects of a QROPS may also focus your mind on your estate planning, and provide the opportunity to update your will, if appropriate. Administering an estate is a difficult enough task if the deceased held assets in one country, but if your affairs are not in order your executors may have considerable difficulties in completing this task if your assets are spread in different countries.

Researchers Mercer have confirmed that FTSE 100 companies have added 7 months to the life expectancy projections of future retirees, while current retirees are estimated to live a further 5 months longer than had previously been estimated.

Women have statistically been far more likely to outlive their male counterparts, but the difference between their projected lifespan and men’s is getting smaller – men are expected to live to 87, and women to 89.

The changes can be put down to medical advances, and healthier lifestyles. If you are 45 now, your total lifespan is predicted to be two years longer than someone who is 65 now.

So how does this affect pension liabilities? The schemes who are affected most are defined benefit arrangements. In these schemes members are promised a certain level of income. Sometimes such schemes are drawn on a final salary basis, where the income that will be paid is a proportion of the member’s last wage with that employer.

As employers have found to their cost over the past few years, poor stock market performance, miscalculation of how much needs to be contributed and increasing longevity mean that there is less available in the pot to meet those obligations.

FTSE100 companies are estimated to have plugged £17 billion into their final salary schemes last year, but announcements such as this latest about longevity merely open up greater holes.

For employees and self employed people with defined contribution arrangements the news is also bad. It means that their pension pot must be spread over a longer time period, which means that their annuity rates will go down.

At least people will be able to work for longer now that the government is scrapping the default retirement age. The question is, will be working into our nineties?

The Panthera ROSIIP pension fund was formerly granted status as a Qualifying Recognised Overseas Pension Scheme, which meant that it was authorised by Her Majesty’s Revenue and Customs to receive UK pension assets free from UK income tax.

However, following an investigation into the way in which the Singaporean scheme was run, it was stripped of its QROPS status. It was widely reported that HMRC were concerned that the scheme was permitting unauthorised asset classes and allowing investors assets to larger cash lump sums that the QROPS system was designed for.

Under the QROPS rules, an authorised foreign pension scheme must be regulated and taxed as a pension in its own jurisdiction. Those requirements do not have to be carried out in the same manner that the UK system treats its own pension schemes, so investors have a wide range of different jurisdictions to choose from among the 1,000 or so QROPS that are on the HMRC’s permitted list.

Choosing a scheme that has not been authorised by HMRC, or continuing to have assets invested in an unauthorised scheme means that the investor risks facing a penalty tax bill at a rate of up to 55%.

HMRC struck the Singaporean QROPS off their list some time ago, and Panthera have been keen to get themselves restored to it.

However, HMRC are reported to have been less than keen to listen to their protestations. The current ruling was under a pre-action protocol in the English courts, where HMRC tried to strike out Panthera’s challenge to their ban on acting as a QROPS.

Now that the High Court has ruled that Panthera’s case can be heard, the fight between Equity Trust (Singapore) and HMRC can well and truly start.

This is not the case with QROPS. If you have a UK pension and have left or are thinking of leaving the United Kingdom, a QROPS is well worth a look.

The thing that attracts most people to QROPS is the fact that they are exempt from UK income tax. Accordingly, British expats can release their pension assets from the UK without making a substantial donation to the Treasury of a country where they no longer live.

Another tax advantage of QROPS is their exemption from inheritance tax. It has recently been confirmed by HMRC that assets that have been transferred into a Qualifying Recognised Overseas Pension Scheme are exempt from IHT from the moment that the transfer takes effect – which has a considerable advantage over other IHT saving schemes because they may typically take seven years to take effect.

However, a significant advantage of getting a QROPS over leaving your pension at home is the choice of schemes at your disposal.

Given that you have over 1,000 QROPS to pick from, there is a scheme out there for every investor. Do you need to get your hands on a lump sum quickly? If so, there will be a QROPS that will allow it. Do you have a particular asset that you want to carry across to your foreign scheme? If so, as long as it is not residential property, you will be able to find a scheme that can accommodate you.

Even if there is not a QROPS out there that matches your requirements exactly, you can create one around your own needs. While the fees may be slightly higher than for an off the peg solution, this option gives you the comfort and the convenience of designing your pension scheme around your individual future plans.

The basics

QROPS stands for Qualifying Recognised Overseas Pension Scheme. Introduced in 2006 as part of the government’s Pension Simplification initiative, they give members of UK pension schemes the chance to free their pensions from the UK taxman.

QROPS are available for the transfer of UK private pensions only – it is not possible to transfer your state pension entitlement.

When a QROPS adviser decides whether an investor is an appropriate candidate for a QROPS he looks at:

• whether the investor’s current scheme will allow a transfer; and
• whether it is a good idea from an investment perspective.

Your QROPS adviser will look at the rules of your current scheme’s rules in detail to ascertain your current provider’s policies on pension transfers. If you have already started to take benefits from the scheme, you may find that a transfer may not be allowed.

QROPS are available in so many countries around the world that, if your UK scheme is a defined benefits one, your adviser should be able to find an international arrangement that can at least match its investment potential.

However, if your current UK scheme is a final salary one, it could be difficult to find a solution with a guaranteed income to match that level. In which case, a QROPS may not be the answer for you.

Are there any other advantages to QROPS?

The main benefits to QROPS are their tax advantages, because you can free yourself from the obligation to pay at least 20% of your hard earned pension to the taxman. However, in the process of looking for a QROPS, you may find that you can select a scheme that gives you far greater flexibility than you had in your UK scheme regarding the availability of lump sums.

Accessible

Overseas and offshore investments may be more accessible than you think. Some providers may have minimum levels of contributions for their QROPS, but many do not set any such limit.

As long as your pension pot is large enough to justify the fees incurred by the transfer, then you are as welcome as anyone to enjoy the low tax benefits that a QROPS can offer.

Beneficial

Speaking of the benefits of a QROPS, what are they? QROPS are famous for offering members of UK pension schemes the chance to transfer their pension assets overseas without having to pay UK income tax. However, they can also offer greater choice of underlying assets, exemption from inheritance tax and the chance to get your hands on a larger lump sum sooner than you would have done had you left your pension in the UK.

Cheap

How much do you pay in fee for your current financial arrangement? The chances are that this information is not at your fingertips, because as British investors we tend to pay the management fees of a financial product without complaint.

However, with QROPS, competition in the international marketplace to manage your money has become so intense that there are over a thousand schemes crying out to accept your pension assets.

The fees that are payable depend on the service that you need, but some QROPS are available for a couple of hundred pounds per year.

When you are weighing up the cost of pensions, don’t forget to add tax into the equation. With a QROPS, even if the fees you pay are no cheaper than for your UK scheme, you may find that with no UK tax to pay, you are much better off over all.

In one fell swoop, the deficits in private salary pension schemes were reduced by this announcement, because the amounts that now need to be found to meet the schemes’ liabilities have been cut. A move to CPI will only be possible in schemes where the rules explicitly allow it – some pension schemes had it written into their DNA that the amount they would provide would rise with RPI and are therefore impossible to change.

As you might expect, employees’ groups and unions were furious with the announcement, but employers’ organisations welcomed the announcement as a positive step forward. Employers collectively heaved a sigh of relief that their pension liabilities would now be more affordable.

After today’s announcement from The Pensions Regulator, a different sigh might be heard at the Confederation of British Industry. David Norgrove, the Regulator’s Chairman, has claimed that any savings that would have been made from the switch should be applied to reduce the pension schemes’ deficits. In real terms then, employers will be no better off but employees’ defined benefit schemes should be safer.

It seems that an enormous pension deficit is announced to the press every day, and we have become so used to the large sums involved that a pension deficit of a couple of billion pounds no longer has the impact on the news that it used to. The issue is compounded by the fact that actuaries argue about how bad the same scheme’s deficit is – pensions are such long term liabilities that there is as much art as there is science in coming up with realistic figures.

But whatever the exact numbers may be, UK final salary schemes are in trouble. 160 schemes have been taken over by the Pension Protection Fund. Poor stock market returns and increasing longevity compound the problem. Whatever The Pension Regulator or the Pensions Minister comes up with next, this is an issue that will run and run.

Your current scheme

Ironically, the first step involved in getting a new QROPS is looking at your current proposals. Some UK private schemes have rules about when transfers can take place. Accordingly, some members may find that a transfer is impossible after they have started to take benefits. On the other hand, it may also be the case that your current scheme is such a good deal that your QROPS adviser does not recommend transferring. However, this is only likely to be the case if you have a gold plated final salary scheme.

For most people with a standard UK private occupational scheme or a SIPP a QROPS is worth looking into.

How much will it cost you?

QROPS are priced in a variety of ways. Some may charge fees for transfers in and out, whereas others may simply charge an annual fee. Given that there are several hundred QROPS available, you may be pleasantly surprised at how competitively they are priced.

The tax consequences

The tax consequence of getting a QROPS that you will be most interesting in is the part where you do not have to pay any UK income tax. However, there may be a tax charge for the country where you live, and for the country where your QROPS is based.

Your QROPS adviser will take these into account when selecting an appropriate QROPS for you.

Other issues

Other issues that you may have to bear in mind may include when you want to get hold of your pension funds, and how you want them to be invested. These issues may depend on how far into your retirement you are. Some QROPS do allow early access to lump sums, but there are also some that are more restrictive.

The default position for people who leave the United Kingdom but continue to draw a pension that is based here is that they must pay UK income tax on their withdrawals. That tax rate depends on the individual’s personal circumstances.

If you are no longer living in the United Kingdom and therefore no longer benefitting from the services that these taxes are meant to be providing, then no doubt continuing to pay UK income tax must be immensely frustrating.

QROPS are available to people who leave the United Kingdom for at least 5 years. The exemption is dependent on the scheme member being non-resident for tax purposes during that time. The occasional visit back to the United Kingdom is permitted to visit relatives, but QROPS investors need to be careful not to get clawed back into UK residence accidentally. If you are in any doubt about this, it may be best to consult a professional financial adviser on the issue.

From a practical perspective, if you go back to live in the United Kingdom during that time period, you may be faced with a penalty and a large tax bill on your return.

During that initial five year period, QROPS administrators must make reports to HMRC about the QROPS’ activity – e.g. what, if any, withdrawals have been made. However, after that period, HMRC has no right to know about these things and the reporting requirements fall away.

It should not be forgotten that whilst your pension may have escaped UK income tax, you may be liable for taxes in your new country of residence. However, your QROPS adviser should be able to take steps to mitigate your tax bill.

Tax efficiency

First and foremost, investors are attracted to QROPS because they offer a chance to stop paying UK income tax on their pensions when they are abroad. But it is important to remember to take into account the effect of foreign tax systems when you are looking for a QROPS. There are potentially two tax systems that you need to be aware of. Firstly, there is the country where your QROPS is based. Your QROPS adviser should explain the tax consequences of wherever you choose to site your QROPS.

Secondly there is the country where you live, if this is different from your QROPS country. Many investors choose a QROPS in a “tax neutral” place like Guernsey (which means that they pay no tax there), and only pay tax in their country of residence.

IHT efficiency

Whether it is because people don’t like thinking about their own death or about taxes, IHT is often forgotten about. But IHT planning is an important part of wealth management. It has been confirmed this year that QROPS are exempt from IHT in the United Kingdom. However, there may potentially still be a charge in the country where your QROPS is based.

Adaptable

Have you got your retirement all mapped out, or will you just take it as it comes? If you plan to do certain things at certain times, you may need access to lump sums early on in your retirement. Accordingly, you will need a QROPS that allows you to do this.

Some QROPS insist on compulsory annuitisation, but others have no such requirement, so discuss the mater with your QROPS adviser to see whether this is an issue that affects you.

Iain Duncan Smith had previously said that the retirement age should go up to 66 by 2016, but over the weekend has told the press that even this fast rise could be accelerated.

In order to “sell” the idea, IDS pointed out that by deferring your pension by just one year an older person’s pension pot could be increased by up to ten percent. This is a significant factor at a time when the state pension is famously tough to live on.

IDS has made great efforts to make it clear that he wants to help older people back into work, and intends to give training and support to help them. However, employers are reluctant to give up the idea of a default retirement age.

If you are approaching retirement, what are the considerations you might bear in mind if you are thinking about whether to give up work?

Can you afford to retire?

This will no doubt be at the top of your list. The prospect of giving up a wage to live on a pension can be scary, particularly in a world where the costs of accommodation, food and utilities seem to be going up all the time.

What about a part-tirement?

Of course, as long as your employer agrees, there is a middle way. A recent survey showed that more and more older people are opting to work part time and draw a pension, thus easing their way into retirement.

What will you do with yourself?

Finally, you may wish to consider what you will do with yourself when you retire. Some older people have been dreaming about this for years – decades even. Others may be terrified by the prospect of all that free time on their hands.

Since 2006, there has been no excuse for this. Qualifying Recognised Overseas Pension Schemes were introduced that year as part of the Pension Simplification initiative. Not only does it mean that the pension regulations were meant to become more straightforward, but the scheme was also meant to ensure that the tax consequences of moving abroad were fairer for British expats.

How do QROPS work?

The exact mechanisms of a QROPS will depend on their individual rules. Generally speaking, a QROPS is available to someone who is going to leave the country for at least 5 years for tax residence purposes. So if you plan to come back within that time, you may like to consider other tax planning opportunities.

The QROPS rules only apply to those schemes that are on the HMRC’s list, so you cannot simply pick any foreign scheme and relax in the knowledge that you will never pay UK tax on your pension ever again.

What other considerations are there?

A QROPS may offer other benefits too. For example, QROPS are exempt from UK inheritance tax, and depending on how efficiently you plan the transfer could also be structured so that no death duties are attracted in any country. Accordingly a QROPS could offer you the opportunity to transfer your assets in their entirety to your beneficiaries on your death.

There are other advantages too. If you consider that your QROPS can be located in a number of countries, you have the choice of several hundred pension schemes to choose from. QROPS may offer you more flexibility in how to manage your pension than you have been used to in your UK arrangements. If you want earlier access to lump sums, a wider choice about the underlying assets your scheme can hold, and an opportunity to build an overseas pension scheme around your individual needs, then a QROPS may be well worth a look.

A common myth

It’s a common myth that QROPS are just for the superrich. Brits typically associate offshore and overseas investment opportunities with the superrich, rather than with people who have just worked hard to save a decent pension pot.

But QROPS are available to a range of people. Most QROPS providers do not specify a minimum level of investment (although some do). If you are unsure about whether a QROPS is worthwhile for you, then your QROPS adviser should be able to work out what the fees and charges would be.

The 5 year rule

No figures are available to say how many of the thousands of people who leave the UK every year intend to be away for five or more years. The QROPS rules state that, in order to be able to take advantage of the UK tax exemption, QROPS investors must be non-resident for more than 5 years. Accordingly, if you are planning to take a work placement abroad for a couple of years, a QROPS may not be for you.

Final salary schemes

The only other reason why a QROPS may not be suitable could be if an investor has a final salary scheme backed up with a gold plated guarantee (e.g. already accrued public sector benefits). However, given that such schemes are fast becoming extinct, it is unlikely that all of those Brits who became expats in the last few years had final salary schemes.

Inertia

Finally, we come to the real reason why thousands of Brits miss out on QROPS each year. Loyalty to their current financial institution plus apathy towards looking around for something else are typical traits of the British consumer. But when you consider exactly how much this inertia may be costing you (in terms of UK tax you could legally avoid), you may realise that a QROPS is worth looking into after all.

Provider fees

Given that there are over one thousand QROPS on the market, there is a huge variation in the level of fees that are charged.

When QROPS were first introduced, it’s fair to say that providers took advantage of the fact that investors were so grateful to escape paying UK income tax. The fees they charged were high. However, now that a QROPS investor has so many options, competition has driven down the costs of QROPS fees.

There are even some QROPS out there for only £500 per year. However, these are likely to be off-the-peg solutions. If you want a bespoke QROPS for your own individual circumstances, you may have to pay a little more for the work involved in designing and setting it up.

Advisers’ fees

Whatever your QROPS adviser charges you, you should be aware of their pricing structure from the start. Some advisers are paid an hourly rate by the person they are advising. Others are paid commission by QROPS providers whose schemes they sell.

If your QROPS adviser accepts commission rather than taking a fee from you, you may wish to accept whether the cost of that commission is built into the cost of the QROPS.

Tax

Finally, reducing your tax bill is probably why you want to get a QROPS in the first place. But once you have celebrated escaping the clutches of the UK taxman, you may want to make sure that the tax you are paying in your country of residence is what it should be.

Don’t forget that assets in your QROPS can sometimes be moved to another QROPS scheme, so if there is a budget that is unfavourable to your circumstances in your current QROPS location, you may be able to move it to a lower tax destination.

However, getting a QROPS does not mean that you escape HMRC’s notice completely. After all, for the first 5 years following the transfer, your QROPS administrators will have to report back on what goes on with the scheme. When those 5 years have elapsed, HMRC has no right to be notified of any gains or losses your pension scheme makes.  

A Qualifying Recognised Overseas Pension Scheme is only capable of attracting the tax exemption if it has been approved by HMRC themselves. This means that HMRC will have examined the plans and proposals of the QROPS provider and deemed that it is taxed and regulated as a pension in its own country.

This “approval” does not mean that HMRC recommend any particular product, or indeed that they endorse that it would be a good idea to transfer your UK pension to it. QROPS are typically mentioned on a list that is kept on the HMRC website. Some confidential ones are available, but these are typically not open to members of the general public.

If your QROPS should for some reason fall foul of the QROPS rules (e.g. by misinterpreting them in some way), the QROPS may lose its HMRC approval. In this case, the UK tax exemption may be at risk, and advice from a specialist QROPS adviser needs to be sought as soon as possible.

When you get your QROPS, your QROPS adviser should tell you all about the potential tax liabilities is brings. Accordingly, you may have to fill in returns in the country in which the QROPS is based and the country in which you live, if different.

During the past 12 months, £18 billion less has been invested by that age group, according to LV=’s annual State of Retirement survey. It seems that the over 50s have found their funds diverted to day to day living expenses, rather than making extra pension contributions.

According to the survey, one in five of those asked have reduced the amount that they save per month by £324.

Last year, the average reduction in savings was £137 per month. The fact that this amount has doubled this year gives some indication of how desperate that age group feels about their finances.

The survey found that one in three of those over 50 were relying on an upturn in the economy to recue their retirement plans. When you look at the figures for the over 60s, the percentage of those living on hope is higher – 46%. No further information is available, but it could be argued that this age range is the one that may be more property focussed, and therefore be more affected by a house price dip.

A rather worrying statistic was the 15% of those surveyed who will be fully reliant on the state to keep them in their old age.

So what action has this age group taken to plan for their retirement? Only one in five have consulted an independent financial adviser, according to LV=’s figures.

No reason was given for why the other four out of five have not spoken to anyone about their finances. Perhaps they were concerned about mis-selling scandals or the cost of the fees. One thing that is for certain is that the cost of doing nothing about your retirement planning will be more than an hour or so of an adviser’s time!

Fees

Like any pension product, QROPS providers charge fees. But you might be so caught up in the tax advantages that the scheme offers to work out how much the arrangement may cost you.

Pension schemes may charge fees for setting up costs, transferring assets in and out and annual management fees, so what constitutes a cheap deal for someone who puts their assets in and leaves them there may not be such a great deal for an investor who is always shifting their pension around.

When QROPS were first introduced, providers took advantage of their clients’ joy at being able to avoid paying UK tax legally and imposed high fees. However, now that there are more than 1,000 QROPS available, providers have upped their game and lowered their fees.

Choice

Sometimes when you are choosing a financial product it feels that there is actually very little choice between providers. Everyone seems to offer the same thing, but on marketing materials in different colours with different logos.

With QROPS on the other hand you can actually choose the pensions regime you want to invest in. Wide variation of underlying assets and tax neutral system? Try Guernsey. Early access to lump sums? Try New Zealand. But in addition to the choice of regulatory systems that is available, you may also have access to a range of providers that you would not otherwise have considered in offshore investment destinations.

Access

If you are retiring abroad, you may have everything planned in great detail. Does this include details of when you want to get hold of your money?  When you decide on which QROPS to get, check that it will permit you to access your money when you want it.

QNUPS

The expression QNUPS means Qualifying Non UK Pension Schemes. The expression was born in the summer of 2010, when government regulations clarified that certain types of overseas pension scheme would be exempt from inheritance tax.

Since April 2006 (known as “A” day), thousands of British expats have transferred their pension assets into Qualifying Recognised Overseas Pension Schemes, known as QROPS. These enjoy freedom from UK tax, but until the QNUPS regulations were published there was some uncertainty about whether they all enjoyed freedom from IHT as a matter of course.

Prior to A Day, certain overseas schemes benefited from exemption from IHT. However, the “simplification” measures managed to convey the impression that their IHT exemption was lost.

It is not often that HMRC or the Treasury admits a mistake. But it is even rarer that they admit that a mistake has been made which has had an adverse effect on taxpayers and needs to be rectified. But this is what happened – hence the clarification and explanation of QNUPS.

A QNUPS is not a product in itself. Rather, it is a label that may be conferred to a pension scheme if it meets HMRC’s criteria for exemption from IHT. Given that QROPS meet the definition of QNUPS, they are “safe” from UK IHT, even if you got yours a while ago as the provisions operate retrospectively back to A day.

What about ROPS and OPS?

ROPS (Recognised Overseas Pension Schemes) and OPS (Overseas Pension Schemes) are capable of falling into the QNUPS definition, but it cannot always be assumed that they are exempt from inheritance tax in the same way that you can be sure that a QROPS will be.

From this, it is safe to draw the conclusion that professional advice on overseas pension matters is always essential, to make sure that you fully understand the tax consequences involved.

But when the Public Sector Pensions Commission estimated that public sector pensions need to make savings of 20% to be sustainable, there was uproar from the unions. A deal, they claimed, is a deal, which the government does not have the right to renege on.

The Public Sector Pensions Commission does not have one particular “answer” to the public sector pension problem, where generations of workers have been promised a level of retirement income that is now unsustainable. Instead, the Commission has recommended a “menu” of changes. Or, as the unions may interpret it, attack from every side.

Just over half of public sector workers can retire at 60 – compared to a quarter of private sector workers with a comparable pension scheme. On the other hand, nearly 7 out of 10 workers in the private sector must wait until the state retirement age of 65 to draw their private pension. Raising the age at which public sector workers can draw their pensions not only extends the time during which they would be making contributions, but it also reduces the length of time after retirement for which a pension is actually required.

There is much discussion of fat cats in the public sector, but the unions always rebut these claims with tales of how little the lower paid workers actually receive. Accordingly, in an attempt to keep both sides happy, the Public Sector Pensions Commission has floated the idea of capping the level of salaries that are pensionable. Accordingly, those with lower paid jobs would not be affected, but those with the so called “fat cat” pay packets would not be able to accrue eye watering pensions at the public expense.

Finally, the Commission has introduced the possibility of a “hybrid” between defined contribution and defined benefit schemes. Presumably, the employer would guarantee an income of a certain level, with the “balance” to be on the basis of the performance of the investment.

However, despite all of these interesting ideas flying around, public sector scheme members do not yet know their fate, as Hutton’s commission have not yet reported their findings.

Choosing an approved QROPS

To qualify as a QROPS a foreign pension scheme must meet HRMC’s criteria of being taxed and regulated as a pension in its own country. It must also have been vetted by HMRC and approved as a QROPS.

Unfortunately, it is not open to investors to choose any pension scheme in a country that has been approved as a QROPS destination. If the scheme has not been individually approved by HMRC, is does not matter if it meets the other criteria – you may still risk a bill from the taxman.

The 5 year rule

Unless QROPS investors remain non-resident for at least 5 years following their pension transfer, they may risk losing the tax exemption the QROPS system gives them. This may not only mean a tax bill, but also a penalty.

Breaking the 5 year rule may be easier than you think because HMRC’s definition of residence is nebulous. Instead of being decided with reference to how long you spend in the country, it depends on where your “centre of gravity” is, which is a question that may be best left to a professional adviser.

Keep your finger on the pulse

Finally, just as QROPS can be added to the list at any time, they can also be taken off it. Accordingly, if your QROPS is removed from the list and your money is still in it, you could find yourself with your pension assets invested in a non-qualifying scheme. You could also find the taxman on your doorstep. If your QROPS adviser has their finger on the pulse they should be able to adviser you if there is any danger of this happening.

With most final salary schemes in the United Kingdom in deficit, and spectacularly so at that, from an employee’s point of view tighter regulation would be welcome.

What does the European Commission have in mind? It has recently published a Green Paper outlining its ideas for solvency requirements for pension schemes, similar in nature to those that will be required from insurance firms from 2012.

Given that the idea was only expressed in a Green Paper, the proposal is in its infancy. The European Commission recognised that the concept needs to be tested, in particular in relation to how solvency requirements would affect the availability of pensions and their price. The European Commission have also acknowledged that the Solvency II requirements for insurers cannot simply be transferred to pension schemes, given the long term nature of pension arrangements.

Reaction from the pension industry has been mixed and cautious, to say the least. From the point of view of the National Association of Pension Funds, which is an industry body that represents pension schemes, there is a concern that the European Union contains pension and investment products that are so different they would be impossible to regulate under the same umbrella. NAPF also pointed out that the United Kingdom already has a robust regulatory regime. In recent cases the Pensions Regulator has handed out significant contribution notices, proving that it can and will use its might to enforce pension rules.

The CBI expressed a concern that such solvency requirements may make pension funds too timid in their choice of investment, leading to small rates of growth in pension assets.

What might the changes mean from an employee’s point of view? Given that the idea is only a Green Paper, any changes are likely to be a few years away, if they happen at all.

If you have experienced a major change in your life, like a marriage, birth of a child or a move abroad, you way wish to consider making a new will.

Without a valid will in place, your assets may not be distributed in accordance with your own wishes, as the appropriate country’s laws and regulations act to deal with your possession as they see fit. Accordingly, for that reason alone a will is worthwhile.

If you live abroad there are other reasons for sorting this out as soon as possible. For instance, some countries do not recognise legal constructs that we take for granted in the United Kingdom like trusts, so you may wish to get local legal advice about how to put your wishes into effect.

From an organisational point of view, your executors would thank you for making a will. Without one, if your assets are scattered across the world they will find it very hard to deal with your estate.

Then comes the issue of tax. Inheritance tax can take a sizeable chunk out of your estate. However, there are steps that you can take to mitigate this. A competent financial adviser can show you legitimate ways in which you can hold your assets, or distribute them to your would-be beneficiaries, and reduce your estate’s potential IHT exposure.

If you are planning to be away from the UK for more than 5 years, a QROPS may help your IHT planning. Qualifying Recognised Overseas Pension Schemes are often talked about in terms of reducing the amount of income tax you pay. However, they may also be able to reduce the amount of inheritance tax your estate has to bear. Using certain types of QROPS can even facilitate the direct transfer of pension assets to your beneficiaries on your death.

QROPS.net are well versed in the rules and regulations of QROPS and their sister product QNUPS. Depending on your circumstances, we may be able to help reduce your estate potential IHT bill – a find you a great pension in the process.

The global luxury brands industry was said to have shrunk by some 8% last year, according a recent report by consultants Bain & Co. But the improvement in the performance of equities markets has restarted spending on luxury goods. Demand from the emerging markets has also propped up expensive brands, with the luxury sector growing by 15% in China alone in 2009. Well known brands are flocking to open stores there, and the Chief Executive of Louis Vuitton has reportedly signed her four year old son up for Chinese lessons on the grounds that he should be groomed to do business one day in this region!

According to Bain & Co., clothes, accessories and high end tableware are the fastest growing products in the luxury sector. US department stores have posted positive reports for March, and in fact this trend is repeated in most major economies worldwide with the exception of Japan.

The global recession has had an effect not only on the way we shop, but the way we want to be perceived as consumers. Being frugal last year was seen as responsible and cool. The report cites “luxury shame” as the reason behind the growth in online sale of 20% during 2009. It was apparently seen as distasteful to be purchasing expensive goods in an age of supposed austerity.

Meanwhile, another signifier for confidence that luxury is returning is the rise in fortunes of the private jet industry. Decimated by the recession, many high net worth individuals had put their aircraft on the market. However, the private jet industry has also seen a rise in enquiries from corporations who are daring to believe that the risk of a double dip recession is ebbing away. According to the aircraft finance department of UBS, 2010 will be a steady year, with growth in the market expected to take off (if you will excuse the pun) in 2011.

Some decades ago, it used to be the case that only the very rich paid inheritance tax. However, if you have paid off the mortgage on a modest family home, the chances are that the increase in value of the building you have worked hard to pay for all of your life has pushed your estate above the IHT threshold.

There are a number of steps that you can take to reduce your IHT bill. Depending on your circumstances, you may have considered making gifts or setting up trusts to redistribute your assets.

If you have moved abroad or are thinking of doing so, then a QNUPS may be well worth considering.

A QNUPS is a Qualifying Non UK Pension Scheme. These were introduced in 2010, and are exempt from UK inheritance tax, as long as the scheme meets certain terms and conditions.

How do QNUPS differ from their older relation, the QROPS? If you have been researching the possibility of getting one, you may have come across QROPS on the internet or in marketing material.

QROPS are all QNUPS, which means that they are all foreign pension schemes that are taxed and regulated as pensions in their own countries. Individually assessed by HMRC, they must continue to meet these criteria to retain their UK tax free status.

However, unlike QROPS, QNUPS do not need to be in countries with double taxation agreements with the United Kingdom.  This means that QNUPS do not have the same reporting requirements as QROPS (where the activities of your pension are reported back to HMRC).

From an IHT perspective, QNUPS benefit from IHT exemption for pension assets that have been transferred from a UK pension (and as such have been tax relieved when they were contributed), and those that have been contributed by someone who used to reside in the United Kingdom.

Accordingly, the change in the indexation rules will effectively mean that employers are not going to be obliged to pay their former employees as much as when their obligations were indexed using the RPI.

Since they came to power, the coalition government has engaged in some heavy rhetoric about bring public sector pensions under control. A commission is currently looking into the issue and swingeing cuts are expected. However, in the interests of fairness, the government has seen fit to bring the indexation rules for both private and public sector pensions into line. Unfortunately for private sector workers, this means that they will come down to the lowest common denominator – the CPI.

Employers are likely to welcome this change, as it decreases the burden on the schemes. Not only does the change mean that the amounts they pay out on a month to month basis will be less, but it also means that the schemes look more sustainable in the long term. This is an important consideration as it seems that every week there is a news story of another final salary scheme closing or being under threat from closure.

Any payments made by the Pension Protection Fund will also be indexed according to the CPI, which will also take a bit of pressure off that organisation.

So what will this mean for individual pensioners and workers? Some commentators have put the decrease in their expected pensions as between 10% and 25% – a significant change no matter how well off you are.

Originally built on wealth generated by the oil industry, Dubai is also now a centre for financial services, tourism and shopping. Imagine being able to live the five star lifestyle every day!

But if you are retiring to Dubai, what do you plan to do with your pension? If you leave it behind in the United Kingdom, the British taxman will still be entitled to take his cut.  Considering that you will be living in a virtually tax free place, needlessly handing over some of your hard earned cash could be difficult to stomach.

The advantages of living in Dubai and having a QROPS

One of the main advantages of living in Dubai is having virtually no tax to pay. And this is where getting a QROPS can really come into its own.

Unlike France or Spain, there are no complications or problems with trust like structures for QROPS. Accordingly, the UAE may be the perfect place to have one.

On the other hand, if you fancy holding your pension elsewhere, you’ll be pleased to learn that QROPS can be based anywhere in the world that HMRC has approved. So you could get a QROPS from a provider based in another low tax regime, like Guernsey, and receive the income in Dubai, without paying any tax at all. If you think this sounds like having your cake and eating it then you would be right!

Finding the right QROPS

Since you moved to the UAE you may have found that all kinds of financial advisers have contacted you and tried to offer you investment products. The trouble with QROPS is that the HMRC rules surrounding them are very complicated. Accordingly, using a financial adviser in the UAE who has no connection with the United Kingdom could be risky. Overseas investment products are tricky enough, but pensions are in a league of their own when it comes to complexity.

If an unregulated adviser gets it wrong, you could end up with a hefty tax bill to pay – and may even be liable for penalties on top of that. On the other hand, a QROPS adviser with a good understanding of HMRC’s rules can help to guide you through the rules and regulations to a lucrative QROPS for a Dubai dweller.

Whose best interest are they working in?

If you are the client of a financial adviser, you may assume that they are working in your best interest. However, what about if the adviser is a tied agent, who is only allowed to recommend products that are provided by their employer?

Whilst the investment opportunities that are recommended may be the best on offer from that particular provider, they may not be the best available from the whole of the market. When you are thinking about offshore investment, that market is global. So why confine yourself to just one provider, or even one continent?

By choosing an offshore investment adviser with access to everyone, you are more likely to come across a competitive deal.

Expertise and Experience

If you are looking at investing offshore for the first time, finding an adviser who specialises in offshore matters may be the best option for you. After all, the tax issues involved are so complicated because they may involve more than one jurisdiction.

Not only do you need an offshore investment adviser with a long history of experience in the sector, but also someone with his or her eye on what will happen in the future. Of course, no one has a crystal ball, but given that the tax changes introduced in budgets can take a year or so to come into effect, it is reasonable to expect your offshore investment adviser to be aware of major changes to international rules, and more importantly the effect that those changes are likely to have on you.

International reach

Just as you would like someone to advise you about products from a variety of providers, it may also be beneficial to learn about products in a variety of countries. Accordingly, if you pick an adviser with knowledge or contacts of a variety of offshore destinations, you may have more choice.

Before QROPS were “invented” in 2006, a British expat had to keep their pension in the UK and hand over at least 25% per year of their withdrawals in tax. So when Qualifying Recognised Overseas Pension Schemes were introduced in that year, there was some excitement among the British expat community.

It’s true that people do not generally get excited about financial products and retirement planning. However, being able to transfer your pension to a foreign scheme and legally deprive the Treasury of a cut of your hard earned pension was, and still it, something to get excited about.

There are of course a few terms and conditions to abide by. For instance, the QROPS investor has to leave the country for at least 5 years following the transfer for the tax exemption to hold. Otherwise, they may have to meet a very large tax bill.

Of course, visits back to the United Kingdom during that time are allowed, but an expat needs to be careful not to get sucked into UK residency again. If you are at all in doubt, it is best to take professional advice on your residency.

Once you have a QROPS, your actual tax bill depends on where the scheme is based, and on where you live. So if, for example, you choose a QROPS in France or Spain, you may find that your tax bill is higher than if you choose a scheme based in Guernsey or the Isle of Man.

You may also find that the inheritance tax treatment of your pension may depend on where the scheme is based. So a QROPS in an older, traditional European country may be caught within its IHT rules.

However, all of these things are issues that a QROPS adviser should take into account, and discuss with you when you make your final decision.

As long as your current UK scheme is a private one and is not yet in payment, transferring it to a QROPS is probably allowed by its rules, although of course a QROPS adviser should look over the details before any transfer is actually made.

However, assuming that your current scheme will permit a transfer, a QROPS may have the following 4 advantages leaving the assets behind in the United Kingdom.

Tax

 The first thing that draws investors’ attention to QROPS is their tax advantages. Given that no UK income tax is payable on QROPS (as long as you remain outside of the United Kingdom for at least 5 years following the transfer), you can see why thousands of people have been tempted by them.

Whilst you will fall into the tax regime of the place that administers your QROPS and also where you live, you have the luxury of choosing both of these places, and as such you may choose jurisdictions that may give favourable tax treatment.

IHT

People do not like to think about inheritance tax, but it could take a large chunk out of the amount available to be passed on to your dependants. Accordingly, if you choose a QROPS in a jurisdiction that treats your pension assets as exempt from IHT, you may be able to mitigate your potential IHT bill significantly.

Choice

Do you have a particular underlying asset in mind to underpin your pension? If so, you may wish to escape the restrictions of the UK pension regulatory regime and strike out into the world of QROPS, where you may find that pension rules offer you more choice.

Flexible access to your money

There is nothing more frustrating than working hard all your life to provide a comfortable retirement and then being told how to spend your own money. With QROPS, if you shop around for the right product you may find that you can access bigger lump sums than the UK system would permit you to take.

With the Organization for Economic and Co-operation Development’s drive for a cleaner, safer and fairer world economy, the small group of islands realised which way the wind was blowing – and changed its behaviour accordingly. The British Virgin Islands quickly realised being whiter than white, and being seen to be whiter than white, were essential characteristics for any modern international financial centre.

The British Virgin Islands now have 17 TIEAs in place, and are at least in talks with every OECD member country about bringing new agreements into force.

A TIEA involves giving the tax authorities of another country the authority to access information about an individual or corporation, if they have reasonable grounds to suspect foul play. However, rather than authorising general “fishing trips” to see whether any information about criminals can be unearthed, the foreign tax authorities must have genuine grounds about specific individuals in order to gain access to their information. Such checks and balances go some way towards preserving individuals’ privacy.

Now that the TIEA programme is well under way, the OECD has rolled out a Peer Review system, in which the British Virgin Islands is now participating, which means that it passes comments and judgements about the effectiveness of other states’ tax exchange measures.

From the point of view of the individual investor, very little will change on a day to day basis. Given that banks and insurance companies are already au fait with money laundering “know your customer” requirements, anyone whose investments are above board should not notice any different in how their bank or investment house will treat them.

The issue has come to the fore because Europe faces some serious demographic challenges. Time magazine estimates that by 2050 there will be twice as many people aged over 65 as those aged under 15. Put simply, Europe will not be producing enough younger workers to pay for their elders’ pension through their tax contributions.

The Green Paper invites comments and suggestions from all sectors of the European Union. No doubt the Commission realises that the “pain” will have to be shared among everyone – employees, employers and older people alike. The paper envisages that no single measure will be enough to solve the problem. Lower payments, higher contributions and higher retirement ages may all have to be imposed.

Some of the criticisms that have been levied at the European Commission so far include the suggestion that they are trying to impose a one size fits all solution on a selection of diverse nations.

For example, take the issue of state retirement age. In the United Kingdom and Ireland, the retirement age will be 68 in a few decades’ time.  Whilst there has been concern expressed in some sections of the community at this prospect, the workforce typically (albeit reluctantly) acknowledge that something has to be done to preserve the state pension. Germany and Spain are considering raising their age to 67 from their current 65. Likewise, this will not be popular.

In France however, the powerful unions have called tens of thousands out on strike and organised protests in the streets at the government’s ridiculous suggestion that their retirement age should be – wait for it – 62. Compared to their European neighbours, this is still very low retirement age.

If you are planning to retire abroad but keep your UK pension back home, you may wish to consider what restrictions your UK pension may impose on your retirement. Fortunately, compulsory annuitisation is being scrapped so older people will not find themselves shoe horned into purchasing an income bearing product as their 75^th birthday looms on the horizon.

However, the UK pension regulatory regime may still have a hold over your retirement plans. Were you planning to release a lump sum to buy a property in your new homeland? Perhaps you had designs on your investments to provide the funding for a once in a lifetime holiday or to help out with your grandchildren’s school fees, or even to help them onto the property ladder. Given that the restrictive nature of UK pensions may not allow lump sums to be withdrawn that are large enough to be any help, what can you do about it?

The answer to that question may depend on whether you have started taking benefits from the pension yet. If you have, your options for transferring it to another destination may be limited. However, if you have not, you may be able to get a QROPS.

A QROPS is a Qualifying Recognised Overseas Pension Scheme, which means that it is a foreign pension scheme that has been authorised to accept transfers of UK pension assets. Not only might you be able to find a scheme in a jurisdiction that may authorise larger withdrawals than the UK does, but your pension will also be free from UK tax!

Such a huge decision means that getting professional advice is a must, because making the wrong decision could cost you dearly, both in terms of lost potential returns and the time you may have wasted. Also, a financial adviser who deals in this kind of thing all the time may be able to suggest issues solutions that you may never even have considered before.  They may also have access to more financial products that those available on the open market, as some IFAs are sent “special offers” by top investment houses.

That said, there is nothing wrong with swotting up on the basics so that you have an informed starting point when you consult your independent financial adviser for help.

So what might you be looking for in an offshore investment opportunity?

The main draw for moving money offshore is usually tax. Whether offshore investments mean that your tax bill can be deferred, reduced or even eliminated, your financial adviser may be able to find a tax advantage for you in offshore investments.

Some offshore investment destinations are “tax neutral”, which means that instead of charging tax on their own soil they pay interest and/or income gross and leave the taxing part to your own country of residence. Even if an offshore destination is not, strictly speaking, tax neutral, there may still be an advantage in investing there if its relationship with your own country of residence means that you will have a low tax bill.

It is sometimes easy to get caught up in the whole tax mitigation issue and neglect the other things that you may wish to consider when choosing an offshore investment. These are namely the political and economic stability of the country where the investments are being made (which may have a bearing on the security of your investment), and of course how well regulated financial services are in that place.

Most public sector pension schemes (with a few notable exceptions like the local government schemes) are unfunded. That means that the public sector workers may typically benefit from a buy now, pay later attitude. On joining they signed up for a particular deal, but commentators claim that they have not made enough contributions to make that deal sustainable, leaving it for later generations to sort out. The government is now saying will be too onerous to pay out.

When it came to power in May 2010, the Con/Lib coalition promised to have a good, hard think about what to do about pensions, thanks to the perceived unfairness that the private sector felt at how their own retirement planning was panning out. Accordingly, it promised a commission to look at this issue, which former Labour minister John Hutton has agreed to chair.

The Public Sector Pensions Commission on the other hand is a joint effort by the Institute of Economic Affairs and the Institute of Directors. Led by Peter Tomkins, from the Institute of Actuaries, it is an independent organisations and is separate from the new government’s new appointed body, but has previously welcomed the arrival of John Hutton’s commission onto the scene and has publicly expressed its interest in what they are trying to do.

Tomkins has compared the public sector pension system to Ponzi schemes, after complex fraudulent “investment” scams that were only uncovered during the credit crunch when the flow of money into them was not so great.

Having had nine months to examine the issue, the Commission has produced a paper called “Solutions to a Growing Challenge”.  Rather than being a general swipe at the way in which public sector pensions have been dealt with, the report proposes practical solutions.

The solutions proposed include raising the retirement age, increasing contributions and gradually moving away from a defined benefits scheme towards a defined contribution based set up. These moves are controversial in themselves, but will be even more unpalatable given the atmosphere of cuts and redundancies that looms over public sector employees.

QROPS investors may transfer their pension assets to foreign pensions that have been approved by HMRC for the purpose. They will not face a bill from the taxman unless they return to the United Kingdom within 5 years of the pension transfer. They will, however, fall into the tax regimes of the countries where they live and invest. If they have chosen low tax destinations, this will not be a hardship.

There are of course terms and conditions to abide by. Aside from the 5 year rule, you must only choose a pension scheme that HMRC has individually approved. But if you are concerned about whether that requirement may limit your choice, it may be a comfort to know that there are over one thousand such schemes to choose from.

The tax advantages are not the only thing that draws thousands of members of UK pension schemes per year into foreign ones. Investors may also find that QROPS are more flexible than UK schemes, perhaps allowing larger lump sums to be withdrawn or a wider range of underlying assets to be chosen.

There may also be an advantage from an inheritance tax point of view, as some QROPS may offer structures which mean that an investor’s estate’s potential IHT bill can be next to nothing.

Finally, whilst this may not be the only reason why you consider a QROPS, expat investors who have been used to drawing their pensions in sterling may find that they are able to get a QROPS in the currency that they spend. Accordingly, there would be no exchange fees, and no more uncertainty about exchange rates.

But much, much fewer people turned out for the protests at the end of June. Commentators estimated that only 20,000 were there which to British eyes may sound like a lot, but not in the context of a country with high union membership.

The protests were centred around government plans to raise the pension age to 65 (which may seem normal to people in other countries but retirement in your mid 50s was considered normal in Greece). Pay freezes for public sector workers, and pension payments are being cut.

Despite an international campaign to encourage tourists to come to Greece and spend some much needed money there for their holidays, visitor numbers have been down since ferry boat operators have called random strikes and blocked the harbours of the small islands that used to be so popular with holidaymakers.

Air traffic controllers have been a little more long sighted about the issue and have not joined in the strike, so that planes bringing tourists could land and take off. However, when island hoping is such a popular pastime of tourists to Greece, why risk it if you cannot go between the islands because the boats are on strike?

Aside from cutting pension payments and welfare benefits, the Greek government is considering other, more radical ways of raising money to fill its deficit.

It has been reported that parts of the island of Mykonos, which is partially state owned, may be up for sale or at least for long term rent. Selling some land would no doubt raise a significant amount of money, but at the expense of Greek pride.

One thing is for sure, if parts of the islands are sold to private investors, they will expect the ferry boatmen to stop their strike.

It’s an unusual way of plugging the gap in a fund, that’s for sure. But when you look at the details, it suddenly makes sense. In addition to making conventional cash payments to the pension scheme, Diageo will transfer up to 2.5 million barrels of whisky to the pension scheme within the following 15 years. During the time that the pension scheme owns the barrels they will have aged, and therefore increased in value. The trustees of the scheme will then be able to sell the barrels back to Diageo at t profit.

For the record, the whisky barrels are a mixture of malt and grain barrels that come from well known distilleries like Talisker and Oban. The cash payments that form part of the deal are significant, with £197million being put upfront and £25 million being paid every year.

Diageo is not the only company with a pension scheme in deficit. Defined payment (sometimes known as final salary) schemes are notorious for running large deficits, and many are closing, altering the benefit entitlement or changing their structures to cope.

The Diageo announcement makes you wonder what companies whose schemes are running large deficits are going to do next. When Sainsbury’s and Marks and Spencer announced earlier this year that they would be transferring properties, or at least shares in ownership of some property, into their schemes, this was considered to be innovative compared to using cash payments.

Diageo, it seems, have raised the bar for unusual assets used to prop up pension schemes. What will be next? Fine wines? Antiques? Suddenly, pensions are becoming more interesting!

According to a joint poll conducted on behalf of accountancy giant KPMG and business leaders’ organisation the CBI, 53% of those polled felt positively about their future in London. Whilst a majority, this is hardly a resounding endorsement, although it is up from 47% who gave the same answer six months ago.

The CBI surveys 125 businesses every six months. The results of this survey were collected between 22 April and 12 May 2010. 58% of the firms asked plan to expand in the next six months, although rather tellingly only 32% plan to expand in London.

When asked what concerns them about doing business in England, 78% of firms said that the cost of doing business there was a significant weakness, followed by the inadequate transport system (46%). A significant 57% believed that the 50p rate of income tax would affect their choices about whether to do more business in London in the future – some were tempted to move business away for this very reason.

44% of those polled said that skills shortages posed a problem for them when running a business in London. At first glance it may be tempting to put that down to an exodus of high earning professionals who want to escape the higher rate taxes. However, this may not be the whole story, as in previous years the survey showed that even higher percentages of businesses felt that skills shortages were a problem (with 74% of businesses being of this opinion in 2007).

Finally, the survey asked what impact the Mayor of London Boris Johnson had on the capital. Often perceived as a comedy figure with appearances on topical satirical news programmes, it seems that Mayor Johnson has shown a serious side too and proved that he can help business in London succeed.

Given that Jersey QROPS have so far only been open to residents, anyone who has been tempted by the Channel Island’s pension investment opportunities so far has only been able to look upon them longingly from across the water. There are 125 Jersey QROPS on HMRC’s list – a high number given that there are only 91,000 people living on the island. This high number may be because many Jersey residents have invested in QROPS – but on the other hand it may not be much of a clue to their popularity, as a QROPS can have as few as one member.

One of the advantages of QROPS is that they can be bespoke. So if you are an individual with particular needs, you may find that you can get your advisers to set up a scheme just for you. It is possible that some of these 125 schemes result from such circumstances.

Jersey’s neighbour, Guernsey, may be particularly interested in the news that the island is striking out into the non-resident QROPS market. Details of the Jersey schemes have yet to be released, but commentators expect that the percentage of the pensions that can be taken as a tax free lump sum and the rate of tax applicable may be set in direct competition with those available in Guernsey.

Guernsey’s QROPS are traditionally tax neutral, which means that for non-residents no tax liability bites – instead the investor may have to pay tax in the place where they are now living.

From an investor’s point of view, an increase in the competition available can only be a good thing. Investors may expect Guernsey and other offshore investment destinations to up their already impressive game, and offer better and better schemes.

With hundreds of successful transfers, QROPS.net advisers are positioned as the leading advisory service in transferring your UK pension overseas to New Zealand.

Contact us today to discuss your requirement and to learn more about what a New Zealand QROPS can offer you.

Qualifying Recognised Overseas Pension Schemes started out back in 2006. It may feel like there was never a world before the global financial crisis, but there was, and expats were still trying to pay less tax.

Without a QROPS, the default position for British expats who still kept their private pension in the United Kingdom was that they would pay UK income tax on their withdrawals.

The introduction of QROPS in 2006 meant that UK pension scheme members could transfer their pension assets into approved foreign schemes and place themselves fairly and squarely beyond the reach of the UK taxman.

Of course, as with any tax concessions there are strings attached. To qualify for the tax exemption that a QROPS permits, pension scheme members must remain outside of the United Kingdom for at least 5 years following their pension’s transfer. Occasional visits may be permitted, but investors must take care that they do not fall into UK tax residence, and into the arms of the taxman.

After that initial 5 year period has passed, the pension and its proceeds are out of the reach of HMRC.

It would be misleading not to mention that QROPS investors may fall into other tax jurisdictions and may attract tax bills from other countries. However, given that where you live and where you invest are matters of your choice, the tax bills you have to pay will not come as a surprise, and may be managed.

When people talk about tax they may typically focus on the income and capital varieties. However, inheritance tax may also take a sizeable chunk out of the amount that you intend to leave your loved ones. This is why a good QROPS adviser should bring up the issue with you. He is not just being morbid. Instead, he may have spotted an opportunity for some inheritance tax planning!

At first glance, this may seem odd. After all, you live where you live, don’t you? But tax authorities may have a strange definition of “residence” and failure to abide by their rules could cost you dearly.

It used to be the case that HMRC in the United Kingdom looked at the number of days you stayed in the UK per year. In some circumstances, they would even have looked at the total number of days you stayed their over a three year period. The “limit” for being considered a resident for tax purposes was around 90 days. Rather than being the preserve of superrich jet setters, this was dangerously easy to achieve for normal expats. A long Christmas stay and a summer tour to visit friends could soon add up.

However, since the Gaines-Cooper case which did, as it happens, involve a superrich person, the rules have changed. The taxman can now look at where your “centre of gravity” is.

This is a spectacular example of how HMRC can move the goalposts, without actually telling anyone where they have put them. The case itself may not offer much help. Few expats may have lives that  match up with Mr Gaines-Cooper’s, so comparing the facts of the case and your own circumstances may not offer much help.

Instead, you may wish to seek professional advice on the issue. Clues to what may lead to HMRC deciding that your “centre of gravity” is in the United Kingdom include having a spouse who lives there, and educating your children in Britain. Keeping valuable property and antiques may also be clues. However, rather than relying on clues, ask your financial adviser for their opinion on the issue. It’s better to be safe than sorry about a large tax bill!

If you are not planning to be outside of the United Kingdom for more than 5 years, you may find yourself with a large tax bill. This is because QROPS are only free from UK income tax for those who are resident for tax purposes outside of the United Kingdom for five years or more following the transfer of their pension assets.

Another limitation may be what your current scheme is like, and the stage you may have reached with it. For instance, if you have started receiving benefits from the scheme, its rules may not permit a transfer at this time.

Regardless of whether the rules of a final salary pension scheme permit its transfer, it may not be advisable to move your pension assets outside of such a scheme, if you are still lucky enough to have one. Such pensions are closing to new members so quickly that they will soon becoming rarities. Having a guaranteed income, especially if the scheme of which you are a member is “safe”, is not something that should be given up in a hurry.

However, given that final salary schemes are becoming rarer than hen’s teeth, most people have a definition contribution scheme that a QROPS adviser may be able to match on the international QROPS marketplace.

Assuming that your QROPS adviser is an independent one, they will be able to look at more than one thousand schemes on your behalf, to choose something that is the most appropriate. When the adviser presents you with your choices, you may find that they are more flexible and more lucrative (and taxed at a lower rate) than what may also be on offer in the United Kingdom.

You may be surprised to learn that many countries may offer QROPS to people who are not resident in their jurisdiction. Accordingly, just because you are going to emigrate to, say, Australia, this does not mean that you have to buy a QROPS there. Instead, you may choose from any QROPS on the list, in accordance with your professional adviser’s guidance.

However, whilst everyone has been swift to crack down on tax evasion, offshore destinations do still provide opportunities for lawful tax mitigation, and some, like the Cayman Islands, are even free from direct taxes. The difference between the tax regimes in offshore jurisdictions and mainland financial centres will become even more defined as austerity measures come into play.

Comparison of tax rates between countries is not as simple as drawing a straightforward graph to show what percentages are charged on gains and incomes. Instead, investors have to weigh up a number of other costs to putting their money into a particular place, including the level of professional fees that are charged there and how restrictive the regulatory regime is.

Nevertheless, low tax rates do attract outside investment. This is a fact that is not lost on the Jersey government, as its latest consultation document about its tax regime reveals.

The document concentrates on corporation tax, and sets out a number of possibilities – some of which are more realistic than others.

The possibilities range from abolishing corporation tax completely (so that they would be on an even setting to the Cayman Islands, which has no direct taxes but that does impose business fees), to a flat rate of corporation tax, to a tax credit system.

Judging from the wide range of options under consideration, the Jersey government seems to be open to suggestions about what to do next. In their stated objectives about what they want to achieve, the government says that they want a system that (among other things) is simple and provides businesses with certainty. Whatever solution they impose, if they achieve these two objectives it will be a relief!

Luxembourg has recently come under fire from the European Commission for inheritance tax provisions which were said to discriminate against people who were not resident in the country.

The original position was that non-resident heirs had to jump through extra hoops to inherit assets that had been left to them. When an investor dies, his or her heirs technically owe the government an amount equivalent to the IHT on the estate.

Non-residents have to provide a guarantee that they will pay the amount before they can take possession of the assets. If the court officials cannot secure an adequate guarantee from the heir then the estate can be frozen.  Assets are not frozen if the heir is resident in Luxembourg.

The European Commission have taken the view that this is not consistent with the freedom of movement of capital that is meant to exist between Member States of the European Union.

This example illustrates the complexity that can arise in matters of probate when there is a cross border element. Accordingly, any inheritance planning that investors undertake will have to be planned by an adviser who appreciates the tax systems in a wide range of countries.

Inheritance tax planning measures are perfectly legal methods of arranging your affairs to mitigate your tax bill. This may include a number of measures such as making gifts and setting up trusts. It may also be possible for your inheritance tax planning to include a foreign pension scheme.

If you are a non-UK resident, some overseas schemes may be structured to permit the lawful distribution of your pension assets to your beneficiaries without any inheritance tax bills at all.

Of course, this is complicated stuff, and should only be attempted with professional advice. But like all financial planning, the sooner you get started, the better.

The move was announced in the March budget this year, which saw rates rise and personal allowances for non-resident investors scrapped.

In case you were wondering why anyone would want to put their hands up to this, the Isle of Man authorities are going easy on interest and penalties that would have been due had the liabilities been uncovered under normal circumstances.

The amnesty applies to companies and individuals, whether they are resident or non-resident. Despite the Isle of Man’s government’s invitation to welcome new taxpayers with open arms, anyone with anything to declare may do well to get professional advice to assist them with their tax returns. Whilst penalties and interest may have been suspended, no doubt the Manx taxmen will be going through the documents they receive with a fine toothed comb.

Amnesties are becoming a popular way of welcoming would be taxpayers into the arms of tax authorities. Italy and the UK have also recently run successful tax amnesty programme which have generated millions of pounds (or euro, as the case may be) of extra tax revenues.

However, the move may be controversial among taxpayers who have paid their bills on time – or paid a penalty and interest when the payments are late. Some commentators believe that the amnesty system may encourage taxpayers to sit on their tax money until the next one comes along, so that they can have the benefit of the interest payments. However, if anyone were found out to be doing this, they would be in serious trouble, although of course it would be difficult to prove.

Notes and disclosure forms are available on the Isle of Man Government’s website.

QROPS were introduced as part of the previous government’s Pension Simplification initiative. So as an expat or would-be expat, how can they make your life simpler?

Currency issues

On a day to day level, you may find it easier to have your pension in the same currency that you spend. This way there are no uncertainties about how much your pension will buy you, and perhaps more importantly there are no bank fees to be incurred for exchanging the monies or for transferring the currency across.

Tax

It may not make your life simpler exactly, but paying no UK income tax on your pension will certainly make your life better, and more lucrative. Assuming that your scheme continues to meet the criteria of being a QROPS, you may be able to save thousands by not having to make a donation to Mr Osborne every year.

Whilst you may have to pay tax where you live, or at least fall within another tax jurisdiction, the location (and therefore the nature) of that jurisdiction is entirely your choice. 

Flexibility

The new UK government may have announced that they are scrapping compulsory annuitisation. However, there are other aspects to the UK pension system that do not make it easy for an investor to plan their retirement how they wish.

For example, you may wish to have early access to lump sums for a particular purpose. Yet under the UK regime, it seems that there are always obstacles in your way. If you are getting a QROPS on the other hand, if you explain your future needs to your QROPS adviser he or she may be able to suggest a QROPS in a jurisdiction that permits early access to lump sums.

A simple choice

Do you know what kind of QROPS you are looking for? With more than a thousand QROPS available around the world, another advantage they have may simply be a matter of choice. Why restrict yourself to one pension jurisdiction, when could have the world to choose from?

If you are planning to invest some money offshore, what are you looking for in an offshore financial centre? If you are new to offshore investments you may not have given this much consideration. However, you may be surprised to learn that offshore destinations may have quite a number of differences between them.

Low or no taxes

Tax may be the driver behind your decision to move your money offshore. Some popular financial centres like the Cayman Islands have no direct taxes, which does sound very appealing! On the other hand, before settling on an account or financial product, you may wish to crunch the numbers for the whole transaction – products in a tax free jurisdiction may impose higher fees than a similar opportunity in a lower taxed place. You have to work out which will give you the best result.

Well regulated

These days it seems that financial centres all around the world are falling over themselves to show you how well regulated they are.

Being well regulated does not necessarily mean that a place and its institutions are tied up in red tape. In fact, good regulation involves the application of appropriate rules without imposing too heavy a burden on those being regulated!

This may not seem as important until you consider that a well regulated jurisdiction is one that seeks to keep your money safe.

Access to good people

Whether the offshore financial centre you choose is an older, well established place or a new centre of innovation, you may want to make sure that there is plenty of choice of high quality financial professionals.

English speaking?

As an investor you may feel bombarded with marketing about financial products, both offshore and onshore. With such a lot of information available online and in the press, it seems there is a danger of drowning in choice. The other problem is the pessimism that exists at the moment. Of course, the global economic crisis has been dire, but rather than getting depressed by all the doom and gloom, why not find your way to an adviser with the experience of navigating their clients through the last recession, and the one before that?

Anyone who claims to have a crystal ball deserves to be treated with suspicion. But by the same token, your adviser should be able to look at your aspirations for the future and come up with a clear vision of what you are aiming for, and where you want to be financially.

Likewise, a financial adviser who tries to blind you with technical jargon should be given a wide berth. It should be possible for an adviser to now what they are talking about, and get the message across in a manner that means that you do too.

Finally, and perhaps most importantly, you may wish to consider using an independent adviser. Using someone who is tied to a financial institution may mean that you miss out on juicy offers from other providers. Not only might you be missing out in terms of the choices of the types of investment available, but you could also be missing out on fee discounts and other special deals that are around in the wider marketplace.

The company was accused of seeking to use an insolvency scheme to avoid or reduce its pension liabilities, when it put its UK subsidiary “Bonas” into liquidation in 2006.

The Pensions Regulator has now served the Belgian parent company with the notice that requires it to make up some of the deficit in its final salary scheme.

At first glance you may think that the regulator has dragged its feet on this case, given that the corporate restructuring took place in 2006. However, until 2008, the regulator would have had to face the insurmountable hurdle of providing evidence that the corporate restructuring was for the purpose of avoiding the pension liabilities. Since 2008, a change in the law means that the Pension Regulator needed only to prove that the reorganisation caused a significant worsening in the pension scheme’s projected deficit. No evidence of intention to avoid liabilities is necessary.

Commenting on the case, a spokesman from the Pensions Regulator revealed many cases that may have resulted in a contributions notice have crossed his desk. However, the majority are settled with voluntary contributions into pension schemes because companies want to avoid publicising their predicament. The spokesman reckoned that hundreds of millions of pounds had been secured on behalf of British final salary schemes in this way.

It’s been reported that the Michel Van De Wiele may seek to contest this ruling. No information is available about how long any challenge may take. In any event, the case serves as a warning to other schemes that the Pensions Regulator is awake, and prepared to hand out onerous sanctions.

There had apparently been some debate among pension scheme trustees about whether or not the Pensions Regulator would force payments to be made during the recession. This case proves that a global economic crisis is no defence to shirking your pension responsibilities.

Only 48% of Brits are managing to set aside enough to fund a comfortable retirement – down from 54% last year. This is the first time ever that the figure for non-savers or “not enough”-savers has fallen to less than half.

Interestingly there are clearly defined groups among those who are managing to save enough. Unsurprisingly, higher earners are managing to squirrel some money into their pensions.

Public sector workers are also maintaining their contributions, which they have perhaps been terrified into doing with all the media scaremongering about what will be done to their schemes. After all, if they suspect that future benefits may be cut, it must be best to put as much into the schemes as possible now because any entitlements that have already been built up at the time the changes are announced are likely to be maintained. There is also the inertia factor. If your contribution is deducted before your payslip gets printed, it would involve a considerable amount of hassle with the HR department to make an alteration to it.

Pensions, it seems, have also become a gender issue, with women over 50 are not making adequate contributions. Only 38% of this age group had made adequate contributions according to Scottish Widdows. Analysts at Scottish Widdows have suggested that this generation of women may have seen the dot com bubble burst in the early noughties and then the impact of this recession and taken the view that putting much more into their pension plans would have been throwing good money after bad.

Who else is not saving enough? The Scottish Widdows survey also found that the self employed were not putting enough into pension vehicles. However, the results of this research may be misleading, because the retirement plans of a self-employed person probably include selling their business and living off the proceeds.

Finally and unsurprisingly, those with three children or more are not making enough pension contributions. However, this habit may change when the children are no longer dependant on their parents.

QROPS stands for Qualifying Recognised Overseas Pension Schemes. Introduced in 2006, thousands of UK pension scheme members have taken advantage of them to mitigate their tax bills.

Let’s break that acronym down and see what it means.

Qualifying

Foreign pension schemes may qualify as QROPS if they are taxed and regulated as pensions in their own country. Don’t let that “taxed” part put you off – it simply means that the scheme must be treated as a pension for tax purposes in the jurisdiction where it is based. So you could find a QROPS in a country that does not tax pensions very highly.

Recognised

It is not enough for an overseas scheme to meet these criteria. HMRC has to have inspected a scheme’s individual details and recognised its credentials. HMRC does keep a list on its website of most of the recognised foreign schemes, but there are also some that are kept confidential and stay off-list. If you are invited to join any of these, do make sure that your adviser checks the scheme’s credentials with HMRC.

Overseas

QROPS cannot be based in the UK. Neither, for that matter, can their investors for the 5 years following the transfer of the pension scheme. Accordingly, you may wish to check that your plans are consistent with getting a QROPS before you go ahead and move your pension assets. The consequences of getting this wrong may include a visit from the taxman waving a large bill.

Pension Schemes

Just because a QROPS has to be regulated as a pension scheme in its own land, it does not mean that you are restricted to “plain vanilla” schemes when making your choice. In the UK we may have the excitement of SIPPs, but if you look around the approved QROPS destinations you may find a variety of more appealing structures and underlying pension assets available.

What is your current scheme like?

If you are a member of a final salary pension scheme then you can look forward to a planning your retirement with some certainty. After all, you know exactly how much you will receive from your pension benefits, and when you can take them. In that case, trying to match this deal elsewhere could be difficult, and your QROPS adviser may tell you to stick with what you already have.

On the other hand, for most people who are members of private UK defined contribution pension schemes and SIPPS, QROPS are worth investigating because they offer products of a similar level of investment risk.

What are you going to do with your retirement?

Do you plan to leave your money to grow for a while, or would you like to get your hands on your pension assets as soon as possible? The beauty of looking for a QROPS is that you can shop around not only for the product that suits you, but for the regulatory regime that allows you to do what you need with your own money.

For instance, if you need to access a larger than average lump sum early on in your retirement to purchase your new home abroad, you may wish to consider a QROPS from New Zealand. Alternatively, if you have your heart set on investing in an unusual asset class, have you considered a Guernsey QROPS?

A tailor made QROPS

Most of the QROPS on offer are “off the peg” products, and these are the ones that may be the most competitively priced. However, it is possible to build a QROPS around your needs. Speak to your QROPS adviser to see if this is an option for you.

The provisions heralded a stark age of austerity, and no doubt the devil will be in the detail as full briefing papers emerge from the Treasury. In the meantime, some of the points that will affect British investors include:

CGT raise

The budget contained changes to the CGT regime which George Osborne claimed would bring in an extra £1 billion into the Treasury’s coffers.

For low and middle earners, CGT will be kept the same, at 18%. But for higher earners, the rate will rise to 28%. It is perhaps surprising that the previous government did not get around to doing this before, as taxing income and capital gains separately had long been seen as a loophole for higher earners to take advantage of. It was common for pay packets to be structured so that some of an executive’s pay would be received in share or other non-income forms, so that a tranche of their payment would fall into the “capital” category rather than “income”.

In practical terms, these changes will be felt most heavily in for people who sell their shares and second homes.

To encourage entrepreneurialism, CGT on investments in certain types of business will be extended from 10% on the first £2 million of the gain to 10% on the first £5 million.

Income tax

For income tax, personal allowances will be raised by £1,000 next April, and it is expected that the allowance will eventually reach £10,000 in the coming years.  But the effects of this for higher rate taxpayers will be set off by a reduction in the earnings threshold for higher rate taxpayers – effectively bringing more people into the net.

VAT

Perhaps the most significant increase was in VAT. Going from 17.5% to 20%,  the rise is set to bring in an extra £13 billion per year until 2014/2015.

Cuts to public servants’ salaries were forced through the Spanish parliament by a meagre single vote earlier this year, leaving many feeling poorer already. Can the Spanish public bear any changes to their labour or pension laws?

With sky high unemployment (at 20%), few would argue that there is a need to make it easier for Spanish employers to hire and fire workers. Spanish politicians feel the need to shed the country’s image of cosseting workers and open itself up to foreign investment. But who would open a factory in a country where the employee, rather than the customer (or shareholder) is always right?

Prime Minister Zapatero tried in February to increase the state retirement age to 67 from 65, but the proposals were met with scenes of outrage on the streets and in negotiating rooms with union leaders.

When you think about a Spanish retirement, the image that springs to mind might involve a calm, tanned older people sitting by the sea, drinking wine and eating food cooked in life-preserving olive oil. That is certainly what attracts thousands of Brits per year to retire there!

But increasing life expectancy all over Europe means that pensions are going to cost more.

According to the Spanish statistics agency the INE, there were 6 people of working age to every pensioner in the 1970s. Spanish economists now estimate that if life expectancy continues to rise at its current rate and birth rates continue along their current trajectory, by the 2050s there will be only 1.5 people working to support every person of pensionable age.

When you put those figures into perspective, it seems that the Spanish government has little choice. Currently a minority government, the Spanish socialists may have to force their pension reforms through the parliament and risk unpopularity.

Whether you choose an occupational or a personal plan, you just need two things to get started. First, independent advice is essential to help you select the right product. Second, you need the impetus to start saving as soon as possible.

But while on one hand the sooner you start saving the better, it’s never too late to make some kind of difference to your retirement pot.

As a nation, only 37% of Brits save for their retirement using a private pension. Our reasons for not doing so may include the cost, suspicion about pensions and financial institutions and inertia.

Anti-pension inertia is what the government’s planned auto-enrolment scheme (NEST) is designed to tackle. By automatically enrolling employees into the scheme, a contribution to the pension scheme will be deducted every month. Workers can opt out of the scheme, but the intellectual architects of the system hope that they will never get around to filling in the paperwork and will stay members of it by default.

Perhaps NEST is based on an unfortunate assessment of people’s character, but it shows the despair that the last government felt at individuals’ reluctance to save for their retirement.

If you have serious intentions of retiring abroad, you may be no stranger to long term planning, as it can take a while to sort visas and find accommodation in your preferred destination. But while you may have thought about these day to day details, have you considered what will happen to your pension?

Your state pension can be drawn overseas but not moved in any sense, but shifting your private pension abroad may present some exciting investment opportunities.

In 2006 the previous government brought in QROPS, which stands for Qualifying Recognised Overseas Pension Schemes. Individually approved by HMRC, QROPS allow members of UK pension schemes to transfer their pension assets into foreign pension arrangements without paying UK income tax. There may be other benefits to using one too, with more choice and flexibility available in the worldwide QROPS market compared to what is on offer at home.

This is what the British Airways scheme has achieved, despite its £3.7 billion deficit. The scheme’s trustees concluded negotiations with the appropriate unions and financial officers in the spring of this year, and have agreed a deal that involves propping up the existing arrangement with a joint effort between the company and employees. Most importantly, it means that the main BA pension schemes can stay open – for now.

The unions have accepted that members of the largest BA pension schemes can either opt to accept lower benefits on retirement, or increase their own contributions to collect what they originally expected to receive.

As for BA itself, the company will continue making its current annual contributions of £300 million. These payments will also be indexed in line with inflation, so are therefore expected to increase by approximately 3% annually.

There may also be additional contributions from British Airways itself, if their cash balance exceeds £1.8 million when it gets to its year end.

It has been reported that this newly agreed structure will arrive on the desk of the Pension Regulator later this month. The deal has been seen as a positive step by the markets, as BA’s shares rose modestly this morning. However, even though the deal keeps the schemes open, it surely cannot solve their enormous deficit problem.

But the trustees’ agreement not to shut the schemes may have other, far reaching effects on BA’s business – they have shown their staff that striking pays.

BA’s cabin crew, pilots and ground staff this year have taken part (or rather, not taken part) in 22 days strikes that have cost the airline an estimated £150 million pounds. No figures are available for how much has been lost in bookings because passengers do not want to risk their holiday ruined by striking airline staff.

If you transfer your pension into a QROPS and remain outside Britain for at least 5 years, you wave the taxman goodbye forever. The 5 year timescale is significant because if you return within that time, you risk a tax bill.

During those first few years, your QROPS is obliged to make reports to HMRC about your pension’s activities. However, after that time has elapsed, the taxman no longer takes an interest in your pension affairs.

What kind of pension scheme can be awarded QROPS status? HMRC does not just look at the pension regulations of overseas countries generally to decide where a QROPS can be based. They look at the rules of individual schemes. Only when they are satisfied that a scheme is taxed and regulated as a pension in its own country does HMRC approve a foreign pension scheme as a QROPS.

Having been attracted to QROPS because they are outside of the UK income tax regime, you may be surprised to learn that tax may be payable on your QROPS in the country where it is based, or on the country where you receive its income (if different). However, this is a consideration that your QROPS adviser will bear in mind when choosing a suitable QROPS for you.

Tax is not the only reason why people look to QROPS. The growing choices and flexibility of QROPS are also attractive.

For instance, compulsory annuitisation has recently been earmarked for the chop by the UK government. However, with no firm timetable in place for its abolition, the obligation to have an income bearing product in place still appears like a large spectre in the background to anyone with a private UK pension approaching their 75^th birthday.

Even when the rules have been changed, QROPS may still be able to offer more flexibility than UK pensions. After all, with over a thousand pension schemes to choose from in a variety of jurisdictions, offered by hundreds of financial institutions, the choice alone is appealing.

QROPS were introduced in 2006. Their full name is Qualifying Recognised Overseas Pension Schemes, and they are schemes which have been sanctioned by HMRC to accept transfers of UK private pensions. Unfortunately, you are not allowed to transfer your state pension entitlement, even if you do believe that you could do a better job of planning for your retirement than the government!

As long as the investor remains a non-resident for tax purposes for at least 5 years following the transfer, there should be no UK income tax bill. There may also be an opportunity for inheritance tax planning.

So how much will getting a QROPS cost?

Fortunately, since 2006 QROPS fees have come down a lot. When the schemes were first introduced, investors were so grateful to have found a way of prizing their private pension scheme out of the taxman’s grasping hands that they would pay high charges to QROPS providers. However, four years later and with a healthy amount of competition in the international QROPS market, fees have come right down.

The amount you pay in fees typically depends on what kind of QROPS you want. After all, for an off-the-peg scheme you may not have to pay as much as a bespoke arrangement that a QROPS provider has created especially for you.

There are ways of bringing down the fees that are quoted. In fact, your QROPS adviser should do some of this haggling for you. If your adviser is part of a large firm, you may find that that they can negotiate a good deal on fees on your behalf, as the QROPS provider may want to encourage them to bring more business their way. The adviser may even be on the receiving end of some exclusive offers, so make sure you ask them what the latest deal is.

The Commission’s remit is to examine and comment on the sustainability of public sector pensions, and to suggest solutions that are acceptable to both the taxpaying public and the public sector workforce.

The appointment comes in the wake of announcements last week by the Office for Budget Responsibility, which claimed that the shortfall in public sector pension spending will be £9 billion in four years’ time. Commentators have suggested that these figures are just setting the groundwork for George Osborne’s emergency Budget tomorrow. Some have argued that the figures are not that bad when viewed over a longer term, as would be more appropriate for pension liabilities.

Whether the figures are worst case scenario ones or not, Lord Hutton certainly has his work cut out.

Lord Hutton can justifiably claim to be an expert in the field, as he was Secretary of State for Work and Pensions for a considerable length of time. He claims that the Commission will perform a root and branch examination of the long and short term liabilities of the public sector pension schemes.

Lord Hutton’s appointment marks the start of a thorough overhaul of the public sector public sector pension system, but it has also attracted much attention because of his political allegiances. Being a Labour grandee, his fellow Labour party members have passed various insulting comments on his decision to work with the coalition government. John Prescott in particular has called him a “collaborator.”

But he is not the only Labour figure to have accepted appointments from the coalition government. Frank Field, former social security minister has agreed to head up a commission on poverty, and Kate Hoey is also giving the coalition advice on other matters.

Despite the disapproval of senior Labour party figures, this may be an example of exactly the kind of grown up politics that the public prefer.

The figures showed that whilst the current cost of public sector pensions was £4bn in 2010/2011, this is set to rise to £9bn by 2014.

With final salary pension schemes being something of a myth in the private sector, Clegg said that it was not equitable for taxpayers’ money to continue to plug the gaps in largely unfunded public sector schemes.

The government has been accused of exaggerating the financial mess that the country is in, so that they can highlight the needs for the cuts that are coming in the emergency budget. Will the public believe the claims about how bad things are, or will they suspect the government of cooking the books to make things look worse?

Dave Prentis, General Secretary of Unison said that even if the £9bn figure was right, it was still an unnecessarily pessimistic view of public sector pension liabilities. The trouble with accounts after all is that they are just a snapshot on a particular day of how the person compiling them thinks things will turn out.

Prentis blamed the frightening figure on poor recent stock market performance. If the accounts had been compiled on a good stock market day, they would have given a rosier prediction. Prentis also claimed that by only rolling the clock forward a few years, the nature of the liability that was being presented to them is misleading. Pensions, he claimed, were better looked at over a 20 year time span.

Nevertheless, Clegg is convinced that public sector pensions in their current, unaltered form are unaffordable, and something has to change.

No doubt public sector workers will be watching the emergency Budget with interest to see where the axe will fall.

The rules on accessing private pensions in the UK changed this year. Before April 2010, savers could access their pension benefits from the age of 50. However, the former government delayed this to make sure that people did not use up their savings too early and end up relying on the state in their later years.

If you are planning to leave the United Kingdom for your retirement you may be considering getting a QROPS. With a Qualifying Recognised Overseas Pension Scheme, you can choose any foreign pension scheme HMRC has approved for the transfer of UK private pensions. The age at which you will be permitted to access pension benefits would depend on the regulations in your QROPS’ host country.

Given that you do not have to live in the same country as your QROPS, you can essentially select a QROPS jurisdiction with rules that suit you.

If being able to draw the state pension is relevant to your retirement plans, your projected retirement age is changing all the time. For a long time British pensioners have expected to have a long retirement, starting at 60 for women and 65 for men, and lasting for 20 years or so. Women’s state pension age will shortly be equalised to 65. But since the government deficit has reached eye watering levels, politicians have been looking at ways to save money on pensions.

The new Work and Pensions Secretary Iain Duncan Smith has revealed that he is investigating the possibility of linking the state pension age with life expectancy. Given that this century most people can expect to live into their eighties a state pension age of 70 might even be on the cards. People who are planning to retire sooner than that will have to save more to plug the ever widening gap between their private funds and the state pension being available.

As with all financial planning, the sooner you think about it the better. If you are planning to move abroad, it may be a good time to review all of your finances – not just your pension.

On your first visit to a QROPS adviser, it helps if you bring details of your current scheme. This is to see not only what kinds of return and benefits you are getting for your money, but also whether the scheme’s rules will allow a transfer.

If you have already started drawing benefits from your current UK scheme, its administrators may not permit you to move your pension to an overseas scheme.

But even if a transfer is allowed, your QROPS adviser will have to consider whether or not it would be a good idea. For most people with a defined contribution scheme, a QROPS is well worth a look. On the other hand if you have a final salary scheme from a financially stable former employer, it may not be worth taking the risk of coming out of that arrangement.

If you do decide that a QROPS is worthwhile, the next question is which one you should get. There are well over a thousand approved schemes on HMRC’s list, and to find the right one your QROPS adviser will need to know what your plans are for your retirement. For example, if you plan to pay off a mortgage or help grandchildren onto the property ladder, you may need early access to lump sums to fulfil these plans.

Further, if you have a preference for a particular asset class, your QROPS adviser will need to know about it so that they can select an appropriate product.

Finally, the other issue that your adviser will want to take into account is tax. Given that HMRC have decreed that QROPS are free from UK income tax, your adviser will want to make sure that you will not end up paying much tax elsewhere. A good QROPS adviser should have their finger on the pulse and be aware of which jurisdictions offer favourable rates to QROPS investors.

When you have selected which scheme you want to use, your QROPS adviser should be able to take care of the whole transfer on your behalf.

The fees themselves

When QROPS were first introduced in 2006, there were very few schemes available for British expats to choose. Accordingly, the scheme administrators felt that they could set the charges relatively high, as there was not a great deal of competition for expats’ business.

But in the last four years more and more schemes have been added to the list, and more and more countries have been approved by HMRC as possible QROPS locations. This means that with a greater level of competition in the QROPS marketplace, fees have come down.

The fees you will be charged depend on the complexity of the QROPS that you want to set up. If your scheme is an “off the peg” model, you may be able to find something for as little as £500 per year.

If, on the other hand, you want an adviser to build a bespoke scheme around your needs, you may find that the charges involved go up.

If you received your QROPS advice from a large firm of advisers, their buying power might benefit you. Firms that place hundreds of thousands of pounds of business every year can negotiate reductions in the fees that QROPS providers charge, and may even be privy to exclusive offers that are not released to the public.

Do not forget to consider every type of fee that could be charged. For instance, in addition to annual fees, your scheme’s trustees may charge fees for transferring assets in and out of the scheme.

Tax

Although QROPS are often sold as a method of escaping UK tax, investors should not forget that their pensions will be subject to the tax regime of the country where the QROPS is kept. Whilst your QROPS adviser may be able to select a destination that is tax favourable, there may still be a charge, so do not forget to take this into account when you are forecasting how much you will have to spend in your old age.

If you keep your private pension in the United Kingdom after you have moved abroad, you may wish to think long and hard about those questions.

A Qualifying Recognised Overseas Pension Schemes (“QROPS”) could be the solution to those problems. QROPS have been around since 2006, but only a small percentage of expats have taken advantage of the schemes in the time that they have been around.

QROPS are available to members of UK pension schemes who are going to be resident for tax purposes outside of the UK for at least 5 years. By transferring your pension to a QROPS, you break free of the obligation to pay UK income tax on your pension, although during those 5 years the schemes have to make reports to the British taxman on your pension’s activities.

When that 5 years has elapsed, you can enjoy your pension free from the prying eyes (and outstretched hand) of the UK taxman.

What has that got to do with currency issues? Well if you are no longer in the United Kingdom, you no longer need to keep your pension in sterling. The transfer to a QROPS offers a chance to “fix” your pension assets in a different currency and end the fluctuations in income you may experience in due to the ups and downs of the pound. Your QROPS does not have to be located in the same country as you, so QROPS investors have a wide variety of currencies to choose from.

Aside from being eroded by currency fluctuations, your pension may also be under attack from expensive bank exchange charges and transfer fees. If you choose a QROPS that can be held in the same currency that you are currently spending, you may be able to escape such charges. 

There are other advantages of QROPS too. Given that you can choose from schemes in a number of countries, you can cherry pick the place with the rules that suit you best. So if you want a scheme that allows you to access lump sums early, your adviser can help you find one.

Tax

If you leave your pension behind in the United Kingdom, it will remain in the British taxman’s grasp. Qualifying Recognised Overseas Pension Schemes were introduced in 2006 by HMRC to provide a lawful method for members of UK schemes to move their money into approved foreign ones.

If the UK scheme member will be outside of the UK for tax residency purposes for at least 5 years following the transfer, their pension will be free from UK tax. It’s as simple as that. Whilst the pension will be subject to the tax regime of the place the new pension is based, you simply choose a low tax jurisdiction to transfer it to.

IHT

Perhaps this should have been mentioned under the heading above, as it is technically a tax too. If you have annuitized your pension, you may bear a particularly heavy IHT burden by leaving your pension behind in the United Kingdom.

Transferring your pension into a QROPS gives you the chance to do some IHT planning and choose a jurisdiction which may permit your assets to be passed on direct to your beneficiaries.

Choice

Since 2006 when QROPS were first introduced, over a thousand schemes have been opened to accept the transfer of UK pensions. So not only does a QROPS offer you the chance to escape the clutches of the UK taxman, you may also find that you have more choice in terms of the products available than your options are at home.

Currency

In tumultuous financial times, who knows what is going to happen to the pound, or indeed the euro? Some QROPS offer you the opportunity to fix your pension into the currency of your choice, so that you are unaffected by the currency fluctuations that some British expats may experience if their pensions are still held in pounds.

Flexibility

The new government has promised to end compulsory annuitisation in UK pensions. However, there are still tight restrictions on when you can access your money. Some QROPS destinations have regulations that allow earlier access than the UK, meaning that you can have your money when you want it.

Since QROPS were introduced in 2006 more and more schemes have been added to the list of approved pension arrangements. There are now over one thousand overseas schemes on that list, in countries ranging from Malta, the Isle of Man and Guernsey.

Accordingly, to benefit from the choice that is available, only an independent QROPS adviser will be able to look at every QROPS on the market to find the deal that best suits you. A tied agent can only offer the best products from their employer or principal, so you may be missing out on the most competitive or suitable product out there.

Given that QROPS have only been in existence for four years, no one can claim to have decades of experience with them. However, it is still worth using an adviser who has an established history of giving high quality advice about overseas financial products. Likewise, a well qualified adviser who has developed an expertise in this area will be much more aware of the particular loopholes and considerations that apply to this area than a general practitioner.

After all, good QROPS adviser really has his or her work cut out. Not only do they need to be able to interpret UK pension rules, but they also need an awareness and understanding of the pension regulations and tax implications of investing in different countries around the world. And whenever there is a foreign Budget or tax rule change, your QROPS adviser needs to be able to keep on top of the current rules.

But aside from the technical knowledge, the right QROPS advice will come from someone who appreciates your individual needs. After all, there is no “one size fits all” answer to pension planning. The right QROPS for you depends on your appetite for risk and your plans for the future. Getting good QROPS advice is also about having an adviser who is a good listener.

France’s President Sarkozy has no choice. The country’s pay as you go state pension system is proving to be too expensive. With only 1.5 workers to support each pensioner (compared to 4 workers per pensioner 40 years ago), France simply cannot afford to have its workers retire at the current pensionable age of 60. Older people in France currently draw their pension for many years – 28 for women and 24 for men, thanks to the high life expectancy.

What can President Sarkozy do about this? He has a number of options open to him. Firstly, there is the question of raising the retirement age. Such a move is bound to provoke outbursts of dissent. There have already been vocal protests from the unions at this proposal. A long, financially secure retirement is deeply engrained in the French mentality, and waking up to the reality that this way of life is over will be an unpleasant national experience.

Other options include raising contributions or increasing the number of years for which a citizen must pay into the scheme. However, these are unlikely to be paths that he chooses because the tax burden on French residents is already high.

Whilst any plans to reform pensions have been unpopular in the past few months, is there any sign that France is coming around to the idea that something has to be done to prevent it from becoming another Greece? Rating agencies have indicated that its AAA rating could be under threat if the government does not exhibit any willingness to cut its liabilities, one of which is its state pension.

The unions are certainly unwilling to budge on the issue, but the prospect of being viewed as an economic basket case like Spain or Greece strikes fear into the heart of the nation’s honour.

Even if they are reluctant to see their state pension ages get any higher, private sector workers will at least welcome a review of the gold plated pensions that employees in the public sector enjoy. There is a growing resentment that the public sector workers get a better deal than they deserve, which may sound familiar to observers of the United Kingdom’s pension set up.

If President Sarkozy manages to impose pension reform in the coming months, he has a chance to shore up his country’s finances. The question is, will his people thank or punish him for it in 2012?

Who is in the biggest trouble? According to the PCS study, BT and British Airways have pension liabilities of more than three times their stock market value. Both former state owned monopolies, BT has a deficit of £9 billion, which almost dwarfs British Airway’s £3.5 billion shortfall. How can they possibly bridge these gaps?

Billions of pounds have been shovelled into the black holes that final salary pension schemes have become. The PCS report said that £11bn had been paid in last year alone. So why had this amount failed to make a dent on the outstanding amounts?

Commentators have blamed the fact that the money was invested into low yielding bonds rather than equity investments, which means that the pension schemes’ investments did not benefit from the stock market gains that would have accrued had the money been invested in shares. On this point one could have some sympathy for the scheme’s fund managers – having been criticised for being too cavalier they have played it safe and still lost out.

It seems that the grocers are leading the way with alternative methods of reducing their deficits. Marks & Spencer and Sainsbury’s have recently announced that they will be transferring some of their properties, or shares in their properties into their final salary schemes to help fill some funding gaps.

How much longer can the final salary scheme last as a concept? The authors of the PCS report claim that they are likely to be extinct by 2013. Rising life expectancy and gloomy forecasts are proving to be their downfall.

Meanwhile, the PCS report did name some companies with some good news to share about their pension schemes. Companies with well funded schemes in surplus include Land Securities, Prudential and the London Stock Exchange.

Once you have conquered QROPS (Qualified Recognised Overseas Pension Schemes), you may come into contact with the term “QNUPS”. What does this stand for, and do you want one?

A QNUPS is a Qualifying Non-UK Pension Scheme. Compared to QROPS which were introduced in 2006, QNUPS are the new kids on the block. Accordingly, advice, or rather good quality professional advice on getting one is essential. If HMRC spots any loopholes that they have left in the legislation, you can rest assured that they will swoop down and close them as soon as possible.

So what is the difference between them? At the risk of appearing to be contrary, the easiest starting point is to look at how they are the same. Like a QROPS, a QNUPS has to meet certain criteria set out by HMRC. A QROPS is always a QNUPS. However, a QNUPS is not necessarily a QROPS, because QROPS have a higher regulatory burden to meet.

So why get a QNUPS? QNUPS benefit from inheritance tax exemptions on the assets it holds, pension funds transferred from UK tax relieved scheme and contributions from current and previous UK residents.

QNUPS do not have to be situated in countries that have a double taxation treaty with the United Kingdom. To a certain extent this makes them confidential, as there are limited reporting requirements. It also technically makes them available in more countries than those in which QROPS are found.

QNUPS do not have strict restrictions on what they can hold, so you may find yourself able to invest in fine wines in your foreign pension fund!

However, QNUPS are very new, and as yet untested regarding HMRC. Not known for their generous interpretation of tax avoidance mechanisms, they are to be approached only by those who have investigated the schemes thoroughly with their tax and investment advisers.

Introduced in 2006 under the last government’s Pension Simplification initiative, Qualified Recognised Overseas Pension Schemes offer members of UK schemes the chance to move their pension assets overseas, without paying UK income tax.

Why was this allowed? It does seem counter-intuitive that the taxman should allow you to take your pension out of his tax net. However, it does mean that expats can get their hands on their pensions without paying tax to a country that they have long since left behind.

You will be subject to the tax regime of the place where your QROPS is located, but a competent financial adviser should be able to point you in the direction of a QROPS location that does not tax pensions heavily.

There are of course hoops to be gone through if you want to get a QROPS. However, with appropriate advice, these are not too burdensome.

Your adviser should first verify that you qualify for a QROPS. If your UK scheme is not yet in payment, and you are going to be a UK non-resident for at least 5 years after the proposed transfer, then you probably meet the conditions.

Having established that you are a suitable QROPS candidate the next thing to decide is which scheme to choose.

HMRC approved schemes on the basis that they are taxed and regulated as pensions in their own country. But rather than restricting that approval to schemes that resemble a UK pension, you may find that HMRC have given their stamp to a range of over a thousand schemes in a variety of countries, from Australia to Ireland.

Most of the approved schemes are on a list HMRC publishes on its website, although some remain confidential. HMRC approval does not mean that the taxman has vetted the scheme or that it is tipped as a good investment – your financial adviser will have to make those enquiries and recommendations for you.

Once you have settled on a QROPS the transfer should take around 6 weeks to complete. In the meantime, you can look forward to a retirement as an expat without paying UK tax!

Royal Mail’s annual accounts have revealed a black hole of 6 billion pounds in its pension funding. Despite some significant action taken by Royal Mail bosses to plug the gap in the scheme in the past including cash injections and funding commitments, the firm’s accountants have still arrived at this spectacular figure.

In fact, when the official actuaries’ (three yearly) valuation of the scheme is published in the next couple of months, the deficit is expected to be even bigger. Some commentators report that the deficit may even be as large as £10 billion.

Like most final salary pension schemes, this one has been closed to new members for a while. It has also been partially replaced with a “career average” scheme which typically entitles members to a lower pension than they would have received under the final salary arrangement. In a further step to curb the deficit, the Royal Mail also raised its retirement age to 65 a couple of years ago.

The accounts show that Royal Mail paid in £867 million into the scheme during its last financial year. Whilst a large sum, this amount seems like a drop in the ocean compared to the huge deficit.

Yesterday the coalition government announced plans for the partial privatisation of Royal Mail, but the business is not an attractive proposition for outside investors given this enormous deficit. Some commentators have said that the pension deficit even threatens the viability of the business itself.

Given that Royal Mail has a legal obligation to close its pension funding gap, no doubt the government will be looking at alternative ways to fund the scheme. Will taxpayer’s money be poured into the scheme?

If the deficit continues to grow in this manner, there may be no alternative, no matter how unpalatable that may seem to a cash strapped Treasury.

Recent research by consultancy Hewitt measured the gap between people’s expectations about their retirement income and the real amounts that had been invested. That gap measured at £1.2 trillion, which was fifty percent bigger than when the last batch of similar research was carried out in 2004.

How can they measure this “expectation gap”? Hewitt interviewed workers about their expectations of what they would receive from returns their current pension savings would deliver. For instance, a 43 year old man on an average salary of £25,000 who is contributing 6% of his salary expected around £15,000 per annum on retirement from his UK private pension fund. This saver would no doubt have been horrified to discover that to achieve that amount he would have to up his pension contributions to 19% of his salary or work until he was 70 years old. On his current rate of savings, his retirement income would only be £5,900 per year.

The research shows that more than 4 in 10 workers are relying on the state alone to fund their retirement, with 42% or workers not belonging to any employer sponsored scheme at all. It seems that saving for a pension is seen as a luxury after paying the mortgage, utility and other bills.

A spokesman for the Hewitt consultancy said that awareness among pension savers about the reality of their true financial situation was very poor, and expressed surprise that few people were prepared to modify their behaviour once they discovered the extent of the gap between their expectations and the reality.

The Local Government Pension Scheme has 3.5 million members. The scheme administers pensions for local government employees across the country. It is a funded scheme, and is in the process of being valued. The news is not expected to be good.

Speaking to the NAPF conference in Warwickshire, Mr Mayer’s starting point was that whilst local government employees deserved a decent pension, they may have to contribute more to get it, claim less and claim later.

Mayer’s speech came days after the new government announced its intention to launch a review of public sector pensions, although its exact remit, make up and chairman have yet to be announced.

It was inevitable, Mayer claimed, that the conclusion of this forthcoming review would herald cut backs for public sector pensions. However, rather than sit back and passively await their fate, Mayer took the view that public sector employees and their representatives should engage with the consultation and be proactive in suggesting solutions for the pension problem. He felt that his own organisation should even be prepared to offer a cap on public expenditure to ensure the scheme’s long term viability.

Three years ago to hear such comments coming from a public sector pension spokesman would have been unthinkable. However, Mayer was at pains to convey to the NAPF (and the media who were eavesdropping) that he understood the gravity of the predicament, and that the Local Government Pension Scheme’s own survival was at stake.

One of the issues that is sure to be brought up is the possibility of a move away from final salary to career average pensions. After all, workers tend to retire at the peak of their earning power, and such a move would reduce pension liabilities overnight.

Somehow it seems unlikely that the local government employees at the coal face will be as keen to embrace changes to their retirement planning.

First, what is right for one investor may not be appropriate for somebody else. Accordingly, it is essential to go to a well respected QROPS adviser and ensure that they are aware of your personal retirement plans before they look around at the marketplace to see what is available.

For example, if you want to access some of your retirement pot in the next couple of years to pay off a mortgage, there is no point signing up to a scheme that will force you to annuitise before you need the lump sum.

Choosing a destination for your QROPS is about balancing the need for flexibility in a pension scheme with the tax implications. Given that you are probably looking at QROPS primarily as a tax mitigation exercise, it is essential that the numbers stack up from the point of view of tax efficiency.

Fortunately your QROPS does not have to be based in the same country as you. This makes that offshore jurisdictions are popular, as they typically treat non-residents well. Your QROPS adviser will also take into account the tax regime of the country that you will eventually live in, and give you an idea of how much, if any, tax you would end up paying for any combination of countries.

If you are currently drawing your pension in pounds to spend abroad, no doubt you are becoming weary of the effect of currency fluctuations eroding your pension pot. This is a problem that can be solved by a QROPS, as this is an ideal chance to “fix” you pension into a new currency. Of course, that choice of currency is a decision that is best made with professional advice.

If no “off the peg” QROPS appeals to you, it may be possible to create a bespoke QROPS around your individual needs. However, as with clothes, a tailored solution may be slightly more expensive!

It’s well known that nine out of ten final salary schemes are now closed to new members as employers pull in their belts. But new statistics from the ONS reveal the extent of the change.

The survey looked at workers with occupational pensions. So any fall in pension savings is significant enough, but is even more serious against the backdrop of the third of the working population who are making no provision for their retirement at all.

In 1997, almost half (46%) of the workforce with an occupational pension plan had a defined benefit (or final salary) scheme. Of those some 16% worked in the public sector.

By 2009, the ONS found that the percentage of workplace scheme members with a final salary arrangement had plummeted to 33%. What could explain this change?

Increased life expectancy means that the pension schemes’ projected liabilities have grown as they have to pay out for longer. However, these increased liabilities have not been matched by an increase in contributions or stock market performance. In fact, poor stock market performance means that rather than being seen as the hallmark of a caring employer, any company that operates a final salary scheme is likely to view it as a millstone around its neck.

Looking more closely at the figures, there is a marked distinction in how public and private sector employees have fared. Of that 33% figure of occupation schemes being final salary ones, now only 15% are from the private sector.

Given the new government’s pledge to launch a review into public sector pensions, it will be interesting to see how these figures are altered in another ten year’s time when the full effects of the cuts programme are felt.

Tied agents do not, by definition, have access to the whole of the market. Accordingly, whilst they may be able to recommend the best QROPS that their tied institution offers, this does not translate as being the best that is on the market.

Once you have established who to buy your QROPS from, the next thing to decide is which country it should be based in. The main driver behind this decision is often tax. After all, it is not worth taking yourself out of the UK taxman’s sights to have your pension taxed heavily by another nation.

Fortunately there are many offshore jurisdictions that keep their tax rates very low for non residents, so you have plenty of countries to choose from. Notwithstanding the wide variety of countries that offer QROPS including Malta, New Zealand and Australia, there are a couple of “old favourites” that feature time and time again at the top of QROPS advisers’ list of favourites.

The Isle of Man, Guernsey and Jersey are popular QROPS jurisdictions, not least because of their favourable tax regimes and mature investments communities. But given the long term nature of pension liabilities their political stability is also a comfort to pension savers.

It is tempting to infer that any pension scheme within a QROPS approved country is permitted, but each QROPS must have been approved by HMRC on its own merits. Accordingly, your QROPS adviser must check the credentials of every scheme they consider. Most HMRC approved schemes are on a list that is published on the HMRC website.

Some very exclusive schemes remain off-list, because they want to stay confidential. In this case, your QROPS adviser should get confirmation direct from HMRC about their status.

Following a triennial review, the scheme was announced to have a deficit of £1.3 billion as at 31 March 2009. According to the Pension Protection Fund, over two thirds of private sector final salary schemes were in deficit at that time. However, given actuarial changes in how the long term liabilities of pensions are calculated in October 2009, it is not unreasonable to suggest that the deficit may not in fact be as bad as that if it is judged under the revised rules.

Marks & Spencer have committed a funding package worth £800 million. This is comprised of cash payments of £36 million per year for the next three years. Thereafter, the company will pay the pension scheme £60 million per year for a further six years. It should be noted that these amounts are on top of the company’s current contributions.

M & S will also transfer some of its assets into the scheme to make up the £800 million. Some of the assets to be transferred are said to be shares in the company’s properties.

Of course, even if this funding package goes according to plan, there is still a £500 million shortfall to meet the deficit. This is no small amount to find, but the retailer is confident that it is possible to get the money from its existing investments.

Like 90% of final salary arrangements, the scheme is closed to new members and in fact has been since 2002. Its 123,000 members may take comfort from the fact that Marks & Spencer have woken up to the deficit problem and appear to be taking action. Of those 123,000, 20,000 are current employees.

Will investors be assured by the Marks & Spencer’s Finance Director Ian Dyson, who claims that the deal will not have a material impact on the group’s bottom line? The full impact remains to be seen.

Qualifying Recognised Overseas Pension Schemes are only available to members of UK pension schemes who are non-resident in the United Kingdom for tax purposes for at least 5 years. If a QROPS member returns within that period, they may face a tax bill and a penalty from the tax man.

QROPS members do not have to be UK citizens, and neither do they have to reside in the same country as their pension. So they can pretty much choose any of the thousand or so schemes that are approved by HMRC.

Given that the decision to transfer a UK pension into a QROPS is largely driven by tax, QROPS shoppers will be focussed on the tax consequences of the transfer then making their choice.

Whilst QROPS are available from the traditionally higher tax countries, there are also schemes available in offshore locations that are typically more favourable to non-residents.

The term “tax haven” is now seen as pejorative and so is best avoided. However, there is nothing unlawful about arranging your pension affairs in a manner that mitigates your tax bill, and many offshore jurisdictions permit this.

On the other hand, the choice of a QROPS jurisdiction is not just about tax. QROPS investors are also concerned with what their money will be invested in, and when they can get their hands on it. The final decision is typically about balancing your priorities. For example, New Zealand pension schemes may permit early access to lump sums, but a Guernsey QROPS may offer a more diverse range of potential underlying assets.

Finally, depending on the nature of your personal wealth, you may wish to take into account the inheritance tax consequences of each QROPS you consider. Your QROPS adviser should be able to point you towards overseas jurisdictions that permit the transfer of assets directly to beneficiaries, if this is an issue.

 Unions argued vociferously that their employee members had been betrayed by the decision. The proposal will be the subject of some forthcoming consultation, but it is difficult to see how employees’ representatives can come up with a proposal that would halt the closure.

Investors and market commentators on the other hand felt that the move was long overdue. After all, ninety percent of private sector final salary schemes are now closed. The schemes’ performance on the markets and the global economic crisis had combined to make them unaffordable. What had taken Aviva so long to catch up?

The Aviva scheme has a deficit of £3billion, so members will have been relieved to hear this morning that the insurer has pumped £365million into its coffers and come to an agreement about funding for the long term with its trustees. Throughout the process Aviva has been keen to stress that they are committed protect the scheme members contributions and get them the best and most affordable deal possible.

It would have been unpalatable to Aviva’s employees if no significant input had been made following the group’s announcement of a healthy rise in sales of long term investment products for the first quarter of this year. Notwithstanding the overall fall in sales of since last year, Aviva said that sales in Europe and the UK were now strong.

Despite significant exposure to the European debt crisis, Aviva remains positive about the future.

No doubt the insurer’s employees will be looking carefully at next quarter’s results to see whether they will prompt another shot in the arm for their pension fund.

The exact figure that MGM Advantage have come up with is £564,227, and assumes that a couple will live for 20 years following their retirement. With life expectancy hovering at around 80 years old for both genders and predicted to rise in the coming decades, the length of the average retirement could be 20 years or older.

The figures made a distinction between living in the South East and living in the North, where the sizes of pension pots needed were deemed to be £668,553 and £473,178 respectively. The distinction can be explained by house prices and by the cost of living in general. MGM Advantage did not give any information about whether older people were planning to move to cheaper areas to make their pension pot go further.  

This state pension figure for a couple in retirement is currently £10,155 per annum. This is clearly miles out from the £35,806 per year that MGM Advantage figures project for an annuity from their £564,227 figure.

Are the majority of savers anywhere near this figure? Of course not. In fact, Key Retirement Solutions’ recent report indicates that not only are investors’ savings way behind their targets, but the picture is far worse because many older people retire owing money.

The average debts of older people on retirement, they say, are close to £36,000 including credit cards, mortgages and loans. Commentators say that these debts are not being shifted because people approaching retirement are too busy coping with the expenses of living day to day to have anything spare to put aside for their retirement.

Age UK have expressed concern at the findings of both reports, and say that they underline the importance of encouraging people to save for their retirement.

The gap between public sector workers with their so-called gold plated pension schemes and those who have worked in the private sector is growing rapidly. It remains to be seen what the winners of the forthcoming election will do about it.

Some expats are happy to leave their private pension behind in the UK, assuming that it is best left alone. However, just because nearly two thirds of pension savers do not shop around for a better deal, it does not mean that they have got the scheme that it most appropriate for them!

If you are interested in the idea of not paying UK income tax on your pension while you live abroad, you need to pay a visit or pick up the phone to a QROPS adviser. By helping you move your pension into a HMRC approved overseas scheme, the best thing a QROPS adviser can do for you is save you from having to pay UK income tax.

Qualifying Recognised Overseas Pension Schemes may not be suitable for everyone, and the first step in getting one is to assess the whole of your financial circumstances against the background of your financial priorities and aspirations. Unless you have a gold plated final salary scheme in the UK or have started taking benefits from your existing scheme, your QROPS adviser should be able to find you a way of moving your pension abroad and saving a significant amount of tax.

The next step is shopping around. A QROPS must have been approved by HMRC to be able accept pension transfers without attracting a tax bill. Fortunately, there are over a thousand approved schemes spread around the world, so your QROPS can shop around on your behalf.

Of course, if your QROPS adviser is tied to a particular financial institution, he may not have the freedom to pick from the whole market. This is something to bear in mind when you select the firm that you will use.

Once a scheme has been picked, the wheels can be set in motion. If your QROPS adviser is committed to making the process as hassle free as possible for his clients, you should be able to leave them to it. In the meantime you can simply wait for the money to be transferred.

When you sit down with your adviser to look at your assets, you may be surprised at how much that taxman would be entitled to if you were to die tomorrow. Neither prospect is an attractive thought, but at least you can take some action to mitigate your tax bill.

If you take into account the default position that, after you have annuitized your UK pension the taxman is likely to be your principle beneficiary, a QROPS is well worth a look.

Given that QROPS are available to accept the tax free transfers of UK pensions in over 100 countries, you have plenty of IHT regimes to choose from. Given that this complex issue is just one of the many things to bear in mind when choosing a QROPS, professional advice is essential here.

Some QROPS countries will permit you to arrange your affairs in such a way that your assets can be dealt out directly to your beneficiaries without paying any tax at all.

When you start to do some inheritance tax planning, make sure that you have not forgotten to make a new will, or to update an old one if necessary. It is a difficult and emotional task for any beneficiary to administer an estate, but it will be even more complicated if no will is in place to deal with assets that may be spread across the world.

Take a moment to make sure that the law in the new country where you have settled will allow you to dispose of your assets in the manner in which you intend for them to be distributed. For instance, some European countries do not recognise the concept of a trust, so your plans may need to be imaginatively rethought out if you intended to leave extended legacies on that basis.

Tax

Three quarters of those who choose a QROPS do so because of the tax implications. Since 2006, members of UK pension schemes who are going to live abroad for more than 5 years have had the option of transferring their funds into an overseas scheme that has been approved (but not recommended) by HMRC.

This means that the pension will be free from UK income tax. The foreign scheme will however be subject to its own jurisdiction’s tax regime. However, with careful planning a pension saver’s tax bill can be reduced considerably.

Choice

While it’s true that a QROPS shopper can only choose from those schemes that have been approved by HMRC, in real terms this means that there are over a thousand schemes in a diverse range of countries that an investor can access. Accordingly, you may find that you have the opportunity to choose not only a different type of pension structure, but also a different underlying asset class than might be available at home.

Annuity or not?

Most pension savers eventually want the security of an income for the rest of their days. But intending to spend your money in a certain way and being forced to do so are completely different things.

The UK system forces pension savers to buy an annuity by their 75^th birthday. If rates are poor at that time or the saver has a pressing need to apply the funds in a different manner, it is tough luck.

QROPS on the other hand vary in their treatment of income bearing products. Some QROPS host countries do not have a requirement that their pension savers buy an annuity at all; others may have a more generous age limit.

Inheritance

Finally, inheritance may be an important consideration in your pension plans. If you pass away after you have purchased an annuity, the taxman is likely to be your main beneficiary. Accordingly, QROPS savers look around for a regime that gives a more generous result to their intended beneficiaries.

Tax efficiency

You may give a sigh of relief to escape the UK taxman, as QROPS can be drawn without paying any UK income tax. However, given that the schemes will be taxed in their new jurisdictions, and any income or capital that you draw may be taxed in your new country of residence (if different), you need to be careful that you have not moved out of the frying pan into the fire.

Fortunately, low tax offshore regimes like Guernsey, Jersey and the Isle of Man offer QROPS, which gives you some opportunity for tax planning. Your QROPS adviser will weigh up your projected tax burden (if any) against likely benefits of proposed schemes.

Inheritance tax

Perhaps inheritance tax planning is often neglected because it involves contemplating one’s one demise. But it is worth casting aside any reluctance you have to think about this possibility to embrace the IHT planning possibilities that a QROPS offers. Once again your QROPS adviser will weigh the benefits offered by a particular scheme with any regulatory difficulties it may present.

Your money when (and how) you like it

QROPS can offer greater freedom than a UK scheme both for how your pension assets can be held, and how you can get to them. For instance, the thousand or so schemes that are offered worldwide offer a myriad of permitted underlying asset classes in their respective jurisdictions, which gives you more choice than limited range of options available in the UK.

When it comes to getting hold of your pension, a recent survey by Skandia International revealed investors’ frustration at the UK system’s requirement to buy an income bearing product by their 75^th birthday. The issue does not seem to be a resistance against annuities per se: rather the imperative to throw in one’s lot at a prescribed point in time. Looking around for a QROPS means that a pension saver can choose one in a jurisdiction that does not have such a strict timetable to prescribe how and when pensions are spent.

So what are the very basic facts that a member of a UK pension scheme needs to know about a QROPS?

Members of UK private pension schemes can transfer their pensions into a QROPS as long as it is one that has been individually approved by HMRC. That means that HMRC must have examined the particulars of a scheme, and decided that it is taxed and regulated as a pension in its own country.

However, it is a mistake to think that the HMRC endorses or recommends these schemes. They are merely arrangements that the HMRC deems as proper pensions. The consequences of choosing a scheme that is not approved by are severe, as the taxman assumes that you have selected a rogue scheme for tax evasion. Penalties of up to 55% of the value of the fund are at his disposal for this indiscretion.

QROPS are often sold on their tax advantages. Once a UK pension has been transferred to a QROPS, no UK tax is payable as long as the individual remains a resident for tax purposes outside of the UK for at least five years. Tax residency is a tricky area, and recent case law means that individuals need to take professional advice to avoid being caught in the taxman’s net.

Whilst the QROPS will be caught by the tax jurisdiction in which it finds its new home, this is not a problem if your QROPS adviser recommends a place with a favourable tax regime.

When people talk about tax, their focus is typically on income. But inheritance tax should also be part of your retirement planning, and QROPS can certainly help with this. Some QROPS countries permit the tax free distribution of assets directly to beneficiaries.

Finally, give that investors have so many schemes in so many countries to choose from, they may find that a QROPS can give more flexibility and choice of underlying assets than a UK scheme.

The state pension alone suffers from a number of defects, not least that there are blips in the system that allows unjust scenarios to arise. The system also relies on being topped up by a pension credit, which older people have to apply for. Many do not even know that such a top up is available to them, and even if they do, do not feel comfortable taking a so-called handout from the state.

Brits are bombarded with the message that they should start saving for their retirement as soon as possible, but when they look around at the options available it is easy to understand why less than half of the working population are making any kind of private provision. Poor performance in recent years has been compounded by a mass of red tape to add up to a system that is unattractive and overcomplicated to potential investors.

The government’s Pension Simplification initiative in 2006 failed to produce a system that inspired confidence among the British public. In fact, it could be argued that the most successful thing about the initiative was the introduction of QROPS (Qualifying Recognised Overseas Pension Schemes) which incentivises people to escape the UK.

QROPS allow members of UK pension schemes to transfer their pensions into foreign schemes, without paying UK income tax. Expats can also benefit from the ability to avoid inheritance tax, and take advantage of the flexibility that overseas schemes offer.

With overseas options being so tempting, whichever political party wins will need to have a significant overhaul of retirement savings in the UK to keep savers interested in staying there for their retirement.

Member of UK pension schemes have been able to transfer their pensions into a Qualifying Recognised Overseas Pension Scheme since 2006, when QROPS were introduced as part of the government’s pension simplification initiative. Compared to the high numbers of Brits emigrating every year, QROPS have had relatively low take up rate, due to the high fees that providers charged when the schemes were first introduced, and a lack of awareness among investors.

However, now fees are far more competitive (just £500 per annum for some QROPS), and Brits who are heading overseas are becoming more and more savvy about ways to cut their tax bill.

The Skandia survey asked advisers why their clients were considering QROPS, and tax efficiency came out top. This is not surprising, as paying at least 25% in UK income tax on your pension when you no longer live there is not a very attractive proposition. QROPS allow their investors to receive their pensions free from UK tax, as long as they live outside of Britain for at least 5 years following the transfer. Of course, they will be subject to tax where the QROPS is based, but many offshore low tax jurisdictions offer the schemes so their investors’ tax bills are minimal.

The second most popular reason to get a QROPS was wider investment choice. Offshore investment bonds, mutual funds, stocks and share and cash were the most popular underlying investments (in that order of preference). However, other asset classes are permitted and investors’ advisers can shop around for schemes that will accommodate their asset preferences.

The next factor that advisers cited for getting a QROPS is the ability to avoid the UK’s compulsory annuity rule. In the UK, pension scheme members must buy an income bearing product by their 75^th birthday – a rule that does not exist in all of the countries where QROPS are available.

Finally, the Skandia survey showed that QROPS investors had transferred their pensions as part of their inheritance tax planning. With the opportunity available to pass assets directly to beneficiaries on an investor’s death, it is possible to distribute a QROPS without paying IHT anywhere in the world.

A recent survey by Standard Life focussed on the 35 to 44 age group, and showed that the average pension pot of someone of that age with their own business is £24,500. That does not sound too bad, but considering that half of those people have a fund worth £3,500 or less, it seems that there is a lot of making up to do.

Compared to their employed counterparts, the difference is staggering: the average pension pot of the same age group of employed people is £73,000, with more than half having at least £20,000 put away for their retirement.

Standard Life point out that the difference in lifestyles will also translate into a greater discrepancy when you take into account the additional second state pension that the employed will receive on retirement. To build up a fund that would equal what an average 65 year old male would achieve, it is estimated that a self employed person needs an extra £30,000 worth of savings.

Senior pensions policy manager for Standard Life Andrew Tully speculated that the difference between the two groups is probably due to entrepreneurs prioritising the survival of their own businesses during the recession. This is completely understandable, but self-employed people do need to increase provisions for their own retirement.

The difference could also be down to inertia. Employees are typically automatically offered a pension scheme, and it is arguably more hassle to opt out of it than to stay in. For the self-employed, on the other hand, they need to go out and actively seek a pension opportunity.

Apart from these factors, there is also a fundamental difference between the two groups’ long term aspirations. Employees, claimed Tully, intend to retire on the income from their pensions, whereas the self-employed hope to sell their business and release capital to rely on.

The self-employed route is obviously more risky, as entrepreneurs cannot guarantee that anyone will want to buy their business when they want to retire, or if they do, that anyone will want to pay a price that will fund a comfortable retirement.

According to the CCCS, the movement in currencies has affected older people disproportionately badly – perhaps because they are not able (or understandably not willingly) to jump straight back into the labour market to put more into their pension pot.  This is certainly born out by the CCCS’ recent figures: 18% of the calls that they received last year were from expats who were over 60.

It is not just the fluctuation of currencies that could cause hardship when you expats hold their pension or savings in sterling. Transfer fees and bank exchange rates can also eat into an expat’s retirement savings. The costs of drawing a pension in sterling, then converting and transferring it into a local bank account can typically deplete a withdrawal amount by 2%. And when the funds reach their final destination, it is not unusual for the receiving bank to make a deduction too.

For UK private pensions, there is an option which can solve this problem, which is often overlooked by thousands of expats every year. Transferring your UK pension into a QROPS (Qualifying Recognised Overseas Pension Scheme) means that you can move your money (or other pension assets) into a government approved foreign scheme, and take advantage of the opportunity to “fix” it into the new currency.

Many QROPS providers offer the option of a number of different currencies for their pensions to be held in, and your QROPS adviser will be able to advise you about which one would be appropriate.

Aside from the potential currency advantages, there are other benefits to having a QROPS. Firstly, they are not liable to UK income tax, although schemes will be caught by the regime of the country that hosts them. Given that you do not have to be resident in the same country as your QROPS, this offers an opportunity for some tax planning.

As a member of a UK private pension scheme, you are obliged to buy an annuity by your 75^th birthday. Some people leave it until the 11^th hour, hoping that the markets will pick up and deliver a magical solution. Others will put the arrangements in place years before, to get the whole process out of the way.

Investors do not have to just accept the annuity rate their current scheme offers, yet only just over a third of people in this position shop around for a better deal. This is where the postcode lottery element comes into the equation. If you live in an area with a higher life expectancy like Surrey, you will receive a worse annuity rate than an inhabitant of an area with a lower projected life expectancy, like Glasgow. This may seem unfair, but it is based on a carefully constructed projection of how much you will cost the pension scheme in payments.

Ironically, this is one area where being an overweight smoker and having a sedentary lifestyle could be worth a few quid. As someone with a lower life expectancy, you would statistically have a shorter life expectancy and therefore be claiming your pension for fewer years. In this situation, pension schemes pay out higher annuities.

Being a woman will also mean that you get a worse annuity rate than your male contemporaries, as you are likely to live for longer than them.

What can you do about this? The danger with leaving an annuity purchase to the last minute is that you will be at the mercy of the markets at that time. However, the longer you leave it, the fewer years you will have left as an annuitant, and the better rate you can get.

But the simple answer is that you have to shop around to get the best deal, and make sure that you get a deal that suits your circumstances. If you are considering transferring your UK pension abroad into a QROPS, you will need to act quickly. Once you have bought an annuity in the UK, you will be stuck with it.

If your QROPS adviser comes from a large firm, they might have the bargaining power to negotiate a reduced fee for you. Or they might even have the advantage of being offered preferential rates on an exclusive basis by certain QROPS providers.

But there are more issues to consider than fees when you are looking at how much a QROPS will cost you. Your QROPS adviser should be able to give you an idea of the tax implications of a variety of schemes. For instance, if scheme A has very low fees but will be taxed highly, then it won’t be any “cheaper” in real terms than scheme B which has higher charges but is virtually tax free.

There are also currency fees and bank transfer costs to bear in mind. If you live overseas but keep your pension in the United Kingdom, you will have to pay currency conversion and bank transfer rates, and of course take the risk of currency fluctuations. The same also applies if your QROPS is overseas, but in a different country to where you live. Some QROPS providers offer some flexibility about how you hold your pension, so you might be able to arrange to hold it in currency that you usually spend.

Without wishing to be morbid, the “final” cost of a QROPS is its inheritance tax consequences for your beneficiaries. This is certainly worth taking into account when you are making your decision. Depending on what other provisions you have made for your family, you may wish to prioritise this as a factor when choosing where to buy a QROPS.

For example, the UK income tax free status of a QROPS is dependent on the investor being resident for tax purposes outside of the UK for at least five years following the transfer of their pension. If the investor returns to the UK to live within that time, they risk having to pay the tax that would have been due during their absence. There may also be a penalty to pay.

The rules on residence are far from crystal clear, so expats or would be expats should get their adviser’s opinion on whether their lifestyle is sufficiently detached from Britain to free them from the status of a UK taxpayer. Recent legal cases have meant that the issue is often blurred, and needs to be examined on a case by case basis.

Aside from deciding this important residence question, investors also need to tell their QROPS advisers about their current pension provisions, and their other savings. From this information your adviser will not only be able to glean your risk profile but also how your current UK scheme stacks up.

Sometimes a British defined benefits private scheme might be such an attractive deal that a QROPS may not be advisable. However, if you have a pension scheme in the private sector, most investors find that it is at least worth investigating QROPS as a possibility.

From your initial conversation, your QROPS adviser will get to know what your priorities are for retirement. For some, the focus will be providing a steady income in a particular currency. Others will want to access lump sums, so they do not want to be locked into an annuity. Whatever your plans, QROPS providers are located in countries all over the world, so there will be a QROPS out there to suit your needs.

The Pension Commission might be surprised at this survey, because it undermines the fundamental theory behind the automatic pension system. As the intellectual architects of NEST, the Pension Commission  decided to harness the inertia that surrounds pension savings (or the lack of them) in the UK. The theory goes that if you invite people to join a scheme they won’t bother, due to the hassle of filling in the forms and a natural unwillingness to receive less in their monthly pay packet. On the other hand, if you involve employees automatically they will supposedly stay in as members by default, and continue to allow deductions from their salary to be made.

The National Employee Savings Trust (NEST) will be introduced in 2012, when employers will begin automatically enrolling their employees into the scheme. The default employee contribution will be 4% of their salary, with employers putting in 3% and the government a further 1%. NEST will not be 100% rolled out until 2016. Given that proposals to form it were initially announced in 1998, critics claim that hundreds of thousands of savers will have missed out on the opportunity to begin saving for their retirement in an easy way.

The scheme has also come under fire when the charges were introduced. Whilst the annual management fee is only 0.3% – admittedly a fair price compared to privately run pension schemes on the market – it is the upfront charge of 2% on contributions to be levied to pay for the start up costs that has attracted criticism. The savers of today will end up paying for the savers of tomorrow, and it is feared that the levy itself will act as a deterrent to new members signing up. Perhaps if the government announced how long the levy would continue for, savers might be prepared to try the scheme. Presently however there is no information about this in the public domain.

In their recent report, called Early Access to Pension Saving, researcher James Lloyd warned the UK government not to let people get their hands on their pensions any sooner, because it would be too tempting to spend it all at once and have to rely on the state in retirement. This would add to the burden the private and public sector already find themselves under to provide for the millions who have no private provision.

The earliest age that you can access UK pension benefits is about to rise to 55 from 50, although there are some exceptions for ill health, and some “dangerous” industries. It has been argued that it would help people who are finding it tough to manage in the recession to be able to use their pension savings to repay mortgages and reduce their monthly outgoings. However, Lloyd points out that the people who would need to do this are those who are least likely to have a private pension fund. The SMF propose that instead of tinkering with pension rules, ISAs and other savings vehicles could be “sold” better by the government as a way of putting aside some cash for a rainy day.

The UK pension regime’s requirement to purchase an annuity by your 75^th birthday is also controversial in some circles. Some feel that there should not be an arbitrary age when savers should be forced to convert their pension assets into an income bearing product. The Tories have expressed an interest in scrapping this rule, should they win the next election.

If you are one of the hundreds of thousands of Brits who retire abroad every year, you have the opportunity to opt out of all this and choose to transfer your pension pot into a QROPS instead. The Qualifying Recognised Overseas Pension Scheme was introduced in 2006, and more than half a billion pounds’ worth of British pension assets have been transferred to foreign schemes since then. Most expats go for a QROPS to escape UK income tax on their withdrawals, but choosing one also gives them the chance to select a different pension regime elsewhere in the world, including countries that offer early access to lump sums and no annuity requirements.

Should you transfer?

The first step towards getting a QROPS is a review of your current UK scheme. So your adviser will be able to tell you not only whether a transfer to a QROPS is a good idea but also whether it is technically possible.

State pension entitlements cannot be transferred into a QROPS, but most private schemes will permit the move. If your scheme has already started paying benefits then its rules are unlikely to allow a transfer. Your adviser can help you on this point.

Once you have established that your UK pension scheme will allow the transfer, your QROPS adviser will assess the risk involved. For instance, if you have a defined benefits pension (like a final salary scheme), it may not be worth assuming the risk of not having a guarantee about how much you would have to live on in retirement. Older final salary schemes in particular can be very generous, and their benefits should not be given up lightly.

On the other hand if you do not have a defined benefits scheme, there is every chance that your QROPS adviser will be able to find a competitive deal out of the thousand or so schemes there are to choose from in the approved foreign marketplace.

The advantages of having the ability to choose from pension schemes in a number of jurisdictions means that you can shop around for a product that suits you.

What are the rules?

Once you have decided to transfer your pension, there are two main rules to watch out for.

First, the foreign scheme must be approved by HMRC. You cannot select any old overseas scheme: the HMRC must have ensured that it is taxed and regulated as a pension in its own country.  The consequences of going “off list” typically involved a huge penalty fee.

The next thing to bear in mind is the five year rule. A QROPS is only free from UK income tax if its owner stays tax resident outside of the UK for five years or more. Residence is decided by HMRC on where a taxpayer keeps their “centre of gravity”. This is a nebulous and confusing term, and investors must get professional advice about their specific circumstances to avoid penalties and tax bills.

For the first five years following the transfer of your pension, the taxman gets a report on your QROPS. If you return to the UK within that time, you risk having to pay the tax that would have been due during that time, plus a penalty. But as long as you remain outside of the UK for those initial five years, the HMRC reporting obligations melt away.

HMRC approves a foreign pension scheme as a QROPS if it is regulated and taxed as a pension in its own jurisdiction. Most of the approved QROPS are contained on a list that is published on the HMRC website and updated from time to time. There are some however that are not on the list, as their administrators and managers want to remain confidential.

HMRC do not just approve schemes that are taxed in the same way as UK private pensions. By looking around for a low tax jurisdiction, it is possible to find a home for your money that does not tax it at source, especially as your QROPS does not have to live in the same country as you!

If you are resident for tax purposes in different country to your QROPS’ jurisdiction, you may be liable for tax on the QROPS income there. However, these are all factors that are taken into account by your QROPS adviser when you are choosing a new home for your money.  Accordingly, with proper planning, it is possible to pay virtually no tax on your pension.

People often focus on income tax when thinking about their retirement, but it’s worth taking a moment to consider the inheritance tax implications of your pension planning. As with income tax, it is possible to find solutions that allow your pension to be passed on to your beneficiaries without paying inheritance tax.

Members of UK pension schemes

You don’t have to be a Brit to benefit from a QROPS. It’s a common misconception among foreign nationals who have worked in Britain and built up a private UK pension fund that once they leave the country their money is stuck there. However, as members of UK pension schemes, both UK nationals and people from outside of the UK should look into the option of getting a QROPS.

There are a couple of notable exceptions to this. If your scheme is already in payment, the rules of it may prohibit a transfer to another scheme. Alternatively, if your pension scheme is a defined benefit one, then transferring your pension into a QROPS means giving up the guarantee of a certain level of income and assuming the risk of what your retirement income might be. Depending on what your current scheme guarantees, it may not be worth assuming this risk. In any event, it is at least worth asking your QROPS adviser.

People who want to escape UK income tax

QROPS were designed to allow members of UK pension schemes to transfer their pension assets free from UK income tax. As long as the saver resides outside of the United Kingdom for five years or less, no UK income tax is payable. Careful judgement needs to be exercised when choosing a QROPS jurisdiction, because you will be liable to tax there. However, your QROPS adviser will be able to recommend a place that treats non-resident investors favourably.

People who want more flexibility

Finally, the tax advantages of QROPS are easily quantified, but there are other reasons for making the transfer. QROPS can allow investors more freedom to pick and choose the assets they wish to be the basis of their pension funds than UK schemes. They can also allow access to investors’ money sooner than UK pension schemes. It makes you wonder why the thousands of people who leave the UK permanently every year do not consider a QROPS.

QNUPS offer opportunities for inheritance tax planning as they are exempt from UK inheritance tax. By choosing a favourable jurisdiction, QNUPS can also be arranged so that the investor’s estate does not pay any inheritance or succession tax in the country where the scheme is based.

As you might expect, the rules that govern them are complicated, and as you might also expect, HMRC will be quick to swoop on anyone who falls foul of them.  But the new QNUPS rules could be useful to Brits who are planning to live abroad, and those who are already resident overseas.

Is a QNUPS the same as a QROPS?

All QROPS must meet the QNUPS rules, so will therefore fall in both categories. However, a QNUPS does not necessarily have to be a QROPS as their regulations are tighter and more restrictive. So all QROPS are all QNUPS, but some QNUPS are not QROPS.

What are the differences between the schemes?

Much is being made in the media about QNUPS offering a more confidential method of investing pension assets. This is because QNUPS countries do not have to have double taxation agreements with the UK, and do not have to make the same reports to HMRC about the scheme’s activities in the first five years as QROPS. However, the reality is that desirable QNUPS destinations are likely to have double taxation agreements (DTAs), or at least tax information exchange agreements (TIEAs) with the UK, so if the taxman really does want to know what your money has been up to, he will be able to find out.

Guernsey, New Zealand and Hong Kong have already declared themselves as QNUPS jurisdictions, with Malta, Gibraltar and the Isle of Man likely to follow suit.

QNUPS can allow members to access benefits at the age of 55 or later, but the regulations suggest that members must take an income or buy an income bearing product at the age of 75. Accordingly you might have more flexibility about when you can access your money with a QROPS, although of course professional advice is essential on this point, as all schemes are different.

Perhaps the most welcome news about QNUPS is that they offer a wider range of asset classes compared to QROPS. Do you fancy having some art, wine or residential property in your retirement fund? Some QNUPS permit these investments.

Being only a few months old, QNUPS are very new and it remains to be seen how well the scheme is received by expats.

The rules on non-residence are not crystal clear following the recent Gaines-Cooper court case. Before this decision it was widely accepted (including, people thought, by the Inland Revenue) that as long as an individual was not in the United Kingdom for more than 90 days per year, that they were “safe” from being considered resident there for tax purposes.

However, since the Gaines-Cooper case, there is no hard and fast rule. Instead, the taxman can look at where your “centre of gravity” is, which in Mr Gaines-Cooper’s case meant where his children were educated and where he owned property that was still available for him to occupy.

The consequences of the Gaines-Cooper case for the QROPS investor mean that it is always worth getting professional advice about your situation. Given that there is no clear guidance, every individual’s situation has to be assessed on a case by case basis, as being sucked back into UK residency can be very expensive indeed.

Being a non-resident for five years actually means five whole financial years following the transfer of your UK pension. So if you leave the country on Valentine’s day and transfer your pension into a QROPS at the same time, your five year period will start at the beginning of the next financial year.

The consequences of getting the five year rule wrong are serious, including being forced to pay a penalty of up to 55% of the value of your pension fund. This figure is comprised of an outright penalty that HMRC can impose (for perceived evasion – they don’t care that you got the dates wrong) and the tax that would have been due on the pension itself. 

The moral of the story is simple: seek professional advice to make sure that you do not fall foul of the five year non-residence rules.

Jobseeker’s Allowance is currently capable of being claimed online, and this method of dealing with the pubic has been so efficient both in time and money that the government have decided to roll out a similar computer model to the pension service. A pilot scheme has been successful, with users claiming that it is quicker and simpler to get access to their pension funds and tax credits online.

Taking applications for pensions and other benefits online is expected to save the Department for Work & Pensions around £550m. This is a general trend as HMRC actively encourages taxpayers to file forms and make payments online rather than using traditional paper methods, although they do stress that applicants can receive statements through the post.

British taxpayers have long been able to get a state pension forecast online, but the evidence suggests that private pension scheme members are way ahead when it comes to using the internet to look for and manage their investments.

A few UK pension schemes accept direct investment from individuals themselves, but QROPS are so complicated that most providers insist that new members are referred through a QROPS adviser. Accordingly, when you are looking for a QROPS on the internet, this explains why you are more likely to find QROPS advisers than the providers themselves.

However, once the QROPS has been set up, depending on the level of control over your fund that you have asked for some scheme managers will permit you to switch the focus of your investments between different asset classes and check the balances using a secure online portal.   

Researching, obtaining and managing QROPS online is the most convenient way, given that the investor and indeed the QROPS provider could be located anywhere in the world.

Cost of the move itself

Everyone’s seen the television programmes about moving to the sun, but it’s important to have a realistic idea about how much the cost of a property, property taxes, shipping fees and new furniture will come to.

Your pension

When you have established yourself abroad, what will you live on? The amount of your state pension entitlement depends on which country you choose as a retirement destination. In some countries, your pension will be frozen at the same level as it is when you leave the UK, and will not rise in relation to earnings or inflation. Australia and Canada are among such countries as they have not made a reciprocal agreements on this matter with the UK. For European Union member states on the other hand this is not an issue.

Have you thought about how you will access your private pension? Tax and currency fluctuations can take their toll on your pension pot, so it is worth taking professional advice about how these factors can be mitigated.

For many expats, a QROPS might be the answer. Qualifying Recognised Overseas Pension Schemes are foreign schemes that have been approved by HMRC for the tax free transfer of British pension assets. Although the foreign schemes have not been endorsed by HMRC, they have been recognised as being officially taxed and regulated as pensions in their own countries.

Transferring your pension into a QROPS can solve the currency dilemma, as you can “fix” your money into the new currency.

From a tax perspective, you will not have to pay UK income tax on your pension, but you will be subject to the tax regime of the jurisdiction that hosts your new scheme. This can of course be mitigated by choosing a favourable regime. Your adviser should be able to help you here.

Aside from the tax and currency advantages of getting a QROPS, there could be other benefits. Other countries can have regulations that permit a more flexible pensions investment regime, and may allow your pension assets to be distributed to your beneficiaries on your death without any inheritance tax.

Given that you do not have to select a QROPS that is based where you intend to live, you can effectively choose from all of the thousand or so QROPS on the list. Those schemes are found in over 100 different countries, run by hundreds of providers who themselves have many different styles and outlooks. So from the point of view that as a QROPS customer you have a wide range of schemes to choose from, there is flexibility in how you invest your money.

Those QROPS destinations each have their own rules about how pension assets can be invested, so you could find yourself with much more choice than a UK private pension scheme member about what your pension’s underlying assets can be.

But it is the flexibility that you can have in withdrawing your money out that attracts most QROPS members. Many UK based investors resent being dictated to about how and when to manage and spend their own money.

The Tories have promised to abolish the rule that pension scheme members must buy an income bearing product by the time that they are 75, but who knows whether that promise will come to fruition if they win the election? The current rule supposedly exists to make sure that savers do not blow all their money at once and become a burden on the state. But this requirement tries to apply a one-size-fits all solution to every pensioner, which is bound to fail. The rule does not factor in that people may need to pay off a mortgage or settle other debts with that money, which would be a more immediate priority as they approached their 75^th birthday.

Some QROPS jurisdictions do not have a compulsory annuity requirement at any age – their governments trust investors to be sensible with their money.

Some will also permit more lump sum withdrawals than the UK system will allow, meaning that you would be able to access your funds to help family out or buy a new property, for example.

The group which represents 1,200 private pension schemes has come forward with its own plans for rescuing the UK private pension industry.

The NAPF have launched a full scale review on how pensions are run and managed in the UK. Their proposals run from structural and regulatory changes to raising the state retirement age to 70 by 2046. Raising the state pension age has gone down like a lead balloon in Europe, but Joanne Segars, NAPF Chief Executive believes that this would be palatable to the British public if they thought that they would have a decent standard of living when they eventually did retire.

Perhaps surprisingly, the NAPF proposals also address the state pension system, and champion the introduction of a “Foundation Pension”, which would be a hybrid of the current basic and second state allowances and would guarantee pensioners an income of £8,000 per annum, without the means testing and pension credit system that is currently employed.

For workplace pension schemes, the NAPF proposes “Super Trusts” where many employers club together to administer and manage pensions together. Not only would this bring about economies of scale, say the NAPF, but it would also mean that individuals would have access to better quality pension schemes.

The NAPF also believes that the regulation of pensions is currently too fragmented, and recommends the creation of a single, super regulator that would take on the work of both the FSA and the Pensions Regulator, to provide an overview and avoid duplication.

Reactions to “Fit for the Future” are still coming forward, but many commentators have welcomed the NAPF’s suggestions. Their aim to take the politics out of pensions hints at the industry’s frustration at the short sightedness of many government proposals. By looking a long way into the future, claim the NAPF, the industry can replace the panic that society feels about an aging population and pension deficits.

Of course, having good ideas is one thing; getting the government to listen and implement them is another. No matter who is in government, it seems that the only way to secure a comfortable retirement is to plan and save for one yourself.

With one stroke a Budget or Treasury announcement can reconfigure government policy, which means that what was good advice yesterday is out of date today.

Whether it is an important decision from a tax tribunal, a foreign budget or simply general movement in the markets, the up to date knowledge of your QROPS adviser and his ability to act on such news will determine the fate of your investments.

That’s why it’s essential to choose someone to help you with your investments who has their finger on the pulse of what is going on.

But having a handle on relevant current affairs is not he only factor to giving good QROPS advice. Imagine going into a sweet shop and being told that you can only choose from the front row of jars, notwithstanding that your favourites are on the middle shelf. Scale that up to imagine the deals you might miss out on if you bought a QROPS from a tied adviser, who is only allowed to recommend their own bank’s products.

An independent adviser, on the other hand, has hundreds of schemes to choose from on your behalf. Not only will you be able to deal with whichever financial institution you want, but you can also choose which country you want it to be in (assuming that it’s one that HMRC has approved).

When it comes to QROPS advisers, bigger is better. A larger firm may have the bargaining power to negotiate significant discounts on management charges, or even be offered exclusive deals for their clients. A bigger firm will typically offer a fuller service, with a choice of advisers to assist you wherever you move across the world.

Then there’s the issue of fees. Some QROPS advisers charge fees by the hour, whilst others will receive a commission from the QROPS providers they promote. Whichever method yours adopts, make sure that you understand how much, if anything, you have to pay.

Finally, QROPS advisers should give a good service. If they don’t call when expected or explain things clearly, they are not the right firm for you.

In the private sphere, seven final salary schemes were rescued yesterday by the government’s so called lifeboat scheme, as failed occupational pension schemes from a variety of industries including manufacturing and automotive services had to be saved.

There are fears that the Pension Protection Fund will be overwhelmed by demand, as by its own projections it expects to offer shelter to a further 357 company schemes in the next two years. The latest figures have led to widespread concerns over whether the PPF will be able to cope with this demand, and whether the fund will have to increase the levy imposed on the 7,000 or so final salary schemes out there that are still solvent.

The problems caused by simple fact that we are an aging population are compounded by the near certainty that many more private firms are likely to become insolvent before the recession is over.

Among the pension schemes themselves there is an appetite for an industry shake up, to address this looming crisis sooner rather than later. The National Association of Pension Funds is calling for a reform of pension accounting standards, so that funds can reflect the long term nature of the investments and the institutions that make them.

The National Audit Office has been looking at public sector pensions, and recently warned that the amounts paid out in the next 50 years could triple. Not only is this because people are living longer, but also because the schemes are based on a proportion or workers’ final salaries – and despite recent pay freezes and cuts, public sector workers’ salaries have risen. 

The Treasury are looking at ways to bridge this gap, but the fact remains that the next couple of generations will have to make higher contributions, and the payments will also come from their taxes.

Given the constant bad news stories that seem to appear in the media every day about British pensions, it is hardly surprising that interest in QROPS is growing. With tax hikes predicted no matter who wins the forthcoming general election, retirement in an overseas destination looks more and more tempting. QROPS investors can choose from over one thousand different schemes in countries that are placed all around the world. A diverse range of structures is available, from hundreds of providers who are keen to attract and retain your business. Perhaps they might bring the baby boomer generation of retirees some good news about their pensions, for a change.

The importance of making full National Insurance Contributions was highlighted last week when 80 year old Brit Mr John Kearney was granted an unusual extension of time to make up missing amounts.

Mr Kearney, a former colonial policeman who served abroad in the Kenyan police force was missing only £152, but that tiny shortfall had a significant impact on his retirement income. The missing amount related to the time that he was working abroad, and he had assumed that he did not need to make any contributions. Now living in Worthing, West Sussex, he was keen to make the payment, but had been told by HMRC official that it was too late.

Not to be defeated by the taxman for honestly assuming that his country of birth would look after him in his old age, Mr Kearney took his case all the way up to the Court of Appeal. Without any legal representation, Kearney was granted a 45 year extension to make the voluntary contribution.

Lady Justice Arden held that Mr Kearney could be forgiven for not realising that he had the right to make voluntary contributions, because he had other things, including dealing with “serious insurrection” on his mind. Perhaps Lady Justice Arden would not have been so forgiving had he been sitting on a beach in the sun for all those years, as she made clear that ignorance of the NICS rules was not usually a defence for claiming an extension to make contributions.

The case is a warning to British expats that they should check the status of their state pensions from time to time, and contact HMRC to find out what, if any payments must be made.

You can get a forecast of your state pension entitlement on the HMRC website, which is well worth doing to make sure that you get the state pension you deserve.

For example, if you plan to emigrate, there are important tax issues to take into account. Unless you transfer your pension pot into a Qualifying Recognised Overseas Pension Scheme (QROPS), you will continue to pay UK income tax on your money. But apart from being a tax planning move, choosing a QROPS could offer the opportunity to explore issues about what kind of performance you expect from your pension plan. It may be that there is a better deal to be had elsewhere in the world, and a QROPS adviser could help you find it.

As people approach retirement, they are often in the position of losing their parents and being left sums of money. Depending on your circumstances and the size of the inheritance, you could consider making some enhanced contributions to your pension, after taking the appropriate advice. Being left money yourself can trigger some thoughts about your own inheritance tax planning, which is something that a QROPS could assist you with if you intend to be outside of the United Kingdom.

Perhaps you are approaching a “milestone” birthday. From a UK pension perspective, the significant milestone is the age of 75, by which time you are forced to purchase an income bearing product. Assuming that your scheme will permit a transfer, changing schemes before that age could be your last chance to tweak your pension arrangements.

Then there is the general movement of the markets. UK politicians may be keen to highlight the global nature of the recession, but its effects are being felt to differing extents all over the world. If you are planning to become an expat or have already left the UK, choosing a QROPS gives you the power to select a pension scheme in a jurisdiction that could perhaps be faring better than the UK’s economy.

Finally, on a positive note, what about marriage? Acquiring a new spouse can mean that your investment priorities change. The UK’s system of not passing the full value of annuity residues on to spouses when the scheme member passes away attracts considerable criticism. Looking for a QROPS, on the other hand means that you can make fairer provisions for your new husband or wife.

It seems from the reactions of pension commentators that they are either sighing with relief that there is no new regime to learn, or disappointed that Mr Darling has missed an opportunity to help savers prepare for their retirement.

Higher earners were hoping that the previously announced restrictions on tax relief on their pension contributions would be scrapped or at least ameliorated. But they were disappointed, as the plans seem set to continue in their original form.

So obsessed is Mr Darling with the rich bearing the brunt of the recession that he seems to have overlooked the chance to make pension saving easier for workers of all ages and incomes.

Instead of introducing changes, the Chancellor promised that he would think about making changes, in the form of a review of the default retirement age (which was common knowledge, given that Harriet Harman announced this some months ago).

He also promised to launch a consultation on couples combing their pensions to purchase joint annuities. This is a reaction to the unfair situation that exists at the moment where a tiny amount of a deceased person’s annuity can be passed to a surviving spouse.

Mr Darling will also be open to discussing the ability of those with more modest pension pots to take them as cash sums. However, the lack of commitment demonstrated on these issues does seem a bit like telling a child “we’ll see” when you both know that the real answer is “no”.

It is perhaps surprising that the government did not abolish the requirement for pension savers to purchase an annuity at the age of 75, which is what the Conservative party has said it would do, should it win the election. On the other hand, whilst this is an issue that people feel strongly about, it is hardly going to be the deciding issue in how they vote.

The real changes will no doubt come after the election, when we will see whether the future looks easier or harder for UK pensions.

Deciding to emigrate is a huge step, and expats have enough on their plate finding accommodation and adjusting to their new way of life. But those who put off thinking about their retirement could be paying out thousands of pounds in unnecessary tax.

Money and fees

Overseas investments can be portrayed as the realm of the rich, but this is not at all the case. Qualifying Recognised Overseas Pension Schemes are worth a look for people with large and small pension pots. Few schemes have minimum entry levels, although some advisers would say that due to the administrative costs of setting up a QROPS it is not viable to transfer your UK fund into one if the value of it is less than £30,000.

The fees payable for QROPS are often a matter of negotiation, and sometimes can be as low as £500 per annum.

Of course, there are some people whose pension may not be suitable for transfer. QROPS are only available for private pensions. Unfortunately, tempting as it may be, you cannot decide to relieve the UK government of the task of managing your state entitlement. If your private pension is already in payment, your scheme is unlikely to permit a transfer. And if you are a US citizen, your country may not allow it.

The number of cases where a QROPS cannot offer a better return than a UK pension must be shrinking, as this is only usually the case for final salary schemes. Given that final salary schemes are slamming their doors in the face of new members all the time, the expats of the future with regular UK private pensions will find that QROPS are worth considering.

Complex rules?

All pension regulations are complicated, whether they relate to domestic or foreign schemes. In any event, deciphering the rules is what your adviser is for. As long as you intend to be outside of the UK for at least 5 years, your adviser should be able to suggest a few QROPS that meet your needs.

Good health came a close second to that, with 69% of those asked claiming that being in good shape is necessary for a good retirement. The survey was held among people aged between 18 and 64 years old, and it would be interesting to see a breakdown of whether older respondents prioritised health more than the young, and whether one’s priorities change the faster your last pay day approaches.

Despite knowing what they thought made a happy retirement, there was little evidence that the respondents to the NAPF’s survey thought that they were going to get it. Only 34% of them believed that the pension arrangements they already have in place will be adequate to keep them in the manner to which they would like to become accustomed.

However, it is perhaps surprising that as many as 34% felt so optimistic. Given that the majority of savers nationwide have inadequate pension savings, either the researchers managed to select those who had private pensions or the respondents had their heads in the sand about what the state pension system would be able to provide for them.

Surprisingly, there was a gender disparity in outlooks towards people’s current pensions, with only 21% of women believing that the plans they had in place would provide the kind of financial security that would make for a comfortable retirement.

As a measure of our nation’s wanderlust, 48%of those surveyed felt that that the freedom and ability (and presumably the funds) to travel was central to how they viewed themselves enjoying their golden years. Retiring abroad is a growing trend, and if this is in people’s minds, no doubt overseas investments will form part of more and more savers’ retirement plans.

Perhaps the most telling statistic was related to how savers would spend their time once retired. There was evidence that some would miss interacting with their colleagues and having a secure income from a job. However, a significant minority (19%) would also miss going to work as a way of getting peace and quiet away from their husband or wife.

This week it’s been reported that government and industry officials in Guernsey are joining together to write their own code of conduct about selling and regulating QROPS. According to the key players, not only do the QROPS providers want to offer and run high quality products, but the move is also likely to raise confident in investors’ perception of what the finance industry in Guernsey is like.

To get HMRC’s approval as a QROPS, a scheme must be taxed and regulated as a pension in its own country. However, there is a wide variety in the degree of regulation that goes on in QROPS destinations. On one hand, those countries who interfere most with pensions risk appearing unattractive to QROPS investors who are probably looking forward to escaping the nanny like approach of the UK system. On the other hand, if a country is too lax, it runs the risk of being perceived as offering limited protection to investors, and promoting or allowing practices that are not above board.

Investors also find themselves faced with the decision between a young financial centre like Malta which was only approved this year for QROPS, and older, established investment communities like the Channel Islands. Will the newer entrants to the market offer innovative schemes? Has the arrival of new competition contributed to Guernsey’s desire for a new code of conduct?

When choosing a QROPS, straying from the HMRC’s list is not an option – you risk a fine of up to 55% of the value of your fund if you transfer your money into a scheme that has not been approved.

Taking this into account, professional advice is not just desirable, but essential. Your QROPS adviser should have a wide understanding of many jurisdictions so that they can advise on a decent range of schemes for you to choose from. And if this doesn’t sound difficult enough, you need an adviser who is up to date with the latest changes that foreign regulators bring in. It only takes a Budget or treasury announcement in your QROPS destination to change the fate of your pension, and your adviser should be able to inform you about it, and make provisions for a response.

The 0.3% annual charge has been widely received as a fair deal for the three million savers who are expected to enrol in the scheme when it is phased in between 2012 and 2016. However, the 2% levy makes it seem prohibitively expensive, not least when it is compared to the private occupational schemes that those targeted by the NEST will consider as an alternative. The government has indicated that the 2% levy is a temporary measure but has not clarified how many years it would continue.

The National Association of Pension Funds has expressed concern that those who are nearing retirement and only want to use a scheme for a short amount of time will be put off using NEST, because they will effectively be paying for the setting up of a system for future generations of savers to benefit from.

Even if you have no intention of joining NEST, the DWP’s announcement should make you think about the charges your own pension scheme levies on your pension pot. Can you even remember what your pension is costing you without digging out the paperwork? Pension charges can come in all shapes and sizes, with initial fees, annual fees, and possible charges for transfers of assets in and out of you fund. But what can you do about these charges?

Shopping around is a good way of making sure that you are getting the best deal out there. But whilst we are used to shopping around for smaller, less important purchases, it does not seem to be a British pension buying habit.

If you are an expat looking abroad, the market for QROPS (Qualifying Recognised Overseas Pension Schemes) has become more and more competitive every year that the scheme has been in existence, so providers have been forced to drive down their fees. Some even offer QROPS at an annual fee of just £500.

But another pension buying habit that Brits should adopt is haggling. If your QROPS adviser is a large firm with lots of bargaining power, they should be able to do this effectively on your behalf, shaving hundreds per year off your pension charges.

Debt-laden Greece has been forced to make some changes. Labour minister Andreas Loverdos intends to tweak the system significantly, so that the men and women will on average retire at 63 by 2015 – an age that still sounds early compared to the British 65. Of course, it is easy enough to pass the legislation: making sure that these workers still have job when the time comes is a different matter entirely.

Spain also faces some serious questions about how it will provide for its elderly. Despite the long recession that the Spanish have endured, there have been few large scale protests during the Socialist party’s six years in power – until it announced plans to raise the retirement age from 65 to 67. The country’s largest unions have staged protests in all the major cities to express their dissatisfaction with the plans. The changes have been compounded by amendments to the country’s strict labour market rules, which will seek to make it easier (and therefore more attractive) for employers to hire and fire people. With unemployment close to 20 percent, the issue cannot be ignored any longer.

In the Netherlands, feelings also run high on the subject. Just before Christmas, over 20,000 workers protested in the streets of Rotterdam, as the Dutch government had decided to raise the state retirement age from 65 to 57 by 2025. The measures would be brought in gradually, with the pensionable age rising to 66 in 2020 and 67 in 2025. Defending these measures, the Dutch Prime Minister Jan Peter Balkenende explained that there were currently four people working per pensioner, but this ratio would soon become two to one. However, in an attempt to appease his critics, Balkenende announced concessions that would allow workers to elect to retire sooner on a reduced pension, and special measures for those who had served many years in jobs that required “heavy work”.

Despite these changes, if you are a Brit who is seeking to relocate your pension to another country and retire abroad, it is the age at which you can access your private pension rather than the state retirement age that is relevant. Given that QROPS are private schemes, investors should be able to access their funds earlier than the default state retirement age.

It is perhaps surprising that as many as one in three of the 1,248 full and part time employees who were confident that their pension would give them enough to live on.

However, the message that people need to increase their contributions to secure a more comfortable retirement seems to be getting through, with nearly 1 in 5 of those who currently pays into a scheme planning to increase their payments this year. Compared to last year’s figure of 6%, this is a marked change. Perhaps this can be explained by the increasing publicity about the poverty that older people can face.

When people’s saving habits are look at in the context of the current pension rules, the results are surprising. For example, a quarter of the people surveyed said that they would feel more confident in pensions if there was a guarantee that their savings would not run out before they die. However, this does exist, in the form of an annuity. Current UK regulations insist that pension scheme members purchase an income bearing product before the age of 75. The rationale behind this requirement is supposedly to ensure that fewer pensioners spend their funds too early, and have something left to live on.

The requirement is often perceived as being unpopular, as it acts as a fetter on individuals’ freedom to determine their own financial future. But the NAPF commented in response to the survey that the compulsory annuity requirement is in fact giving people what they want. If that is the case, will the Conservatives rethink their plans to scrap the requirement if they win the next election?

Expats who retire abroad and transfer their UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS) can often escape this requirement. Some countries that host QROPS have regulations that do not insist that members buy an annuity. Other QROPS host countries do have similar rules to the UK on this point, so given that QROPS members do not have to live in the same country as their QROPS, they benefit from the choice of a compulsory annuity jurisdiction or not.

HMRC approved Malta generally as an appropriate QROPS destination late last year, after the Maltese financial services industry and the government had led a campaign of lobbying to get accepted. It seems that their patience and persistence has paid off.

There is no sign of any Maltese pensions appearing on HMRC’s list of approved schemes, nor is there any evidence that any schemes are under consideration. But this must surely be the next step in preparing them for the receipt of UK pension monies. Official approval for every scheme is necessary for a pension to become a QROPS – merely existing in an approved country is not enough. Foreign pension schemes are approved if they are regulated as pensions in their own country, and if they are recognised for tax purposes there. Fortunately there is no requirement for tax rates to be anything like those in the UK, so QROPS members often benefit from much lower taxation of their pensions. The consequences of transferring your UK pension to an unauthorised scheme do not bear thinking about, with a possible charge to the treasury of up to 55%.

Commentators and investors alike have been watching developments with interest, as Malta sets itself up to be a force to be reckoned with in the QROPS world. Traditionally investors have preferred long established, mature investment communities, but in the light of the current financial crisis, perhaps the younger schemes might have draw investors away. Malta has housed offices of international banks for a while, but it has stepped up its efforts to compete in its own right as an emerging financial centre. Will Malta bring a new wave of optimism to QROPS?

Maltese officials believe that a strong regulatory system coupled with the reassuring membership of the European Union means that investors who have never looked at Malta before might now deem it worth a second glance. Given that the country is a member of the eurozone, it may prove attractive to those who have retired in Europe and want to receive their pension income in the same currency in which it will be spent.

The first step in getting a QROPS is a simple appointment with an adviser, who will want to know some basic information about your financial circumstances. The adviser will want to know approximately what the balance is of your current UK pension scheme, and may look at the scheme’s rules and regulations. If your scheme is already in payment, a QROPS transfer (or in fact, any other kind of transfer) may not be permitted. However, if you have not drawn any benefits from your scheme, a QROPS transfer is usually an option.

Your adviser will give you an honest assessment of the possibility of moving your money into a QROPS. If your UK scheme is a safe, final salary one, you might not be able to better that abroad. On the other hand, for most regular private schemes, a QROPS might look like a pretty good deal.

If you have been frustrated by the restrictions that the UK regulatory system puts on pensions, you will find looking for a QROPS is a bit like being let loose in a sweet shop. With no tax or low tax solutions, freedom from compulsory annuities and the abilities to pick and choose the assets your fund will hold, you might be spoilt for choice.

You QROPS adviser should guide you through this decision making process, recommending a selection of schemes for you to choose from. Now is the time to ask as many questions as you can think of. What happens if you move countries again? How much will the fees be? As with all financial decisions, choosing a QROPS need not and should not be done in a hurry. Most importantly of all, you need to be confident that you will be living outside the UK for at least 5 years to be certain that HMRC will no longer have a claim on your pension fund.

But if your resolve to emigrate permanently holds firm, there is no reason why your fund cannot be transferred within a matter of weeks. The speed at which the transfer happens depends largely on the efficiency of your current UK pension scheme. If they have their records in order, your money should be moved within a couple of months.

Even if you are lucky enough to have a job in the UK, the government seems to be nibbling away at the benefits of saving using a pension. With tax reliefs to be reduced for very high earners and tax rises a certainty whoever wins the election, it’s not surprising that Brits are leaving the UK at the rate of nearly 500,000 a year.

So what fate can these Brits expect in retirement abroad? As long as an expat remains overseas for at least 5 years, he can choose to transfer his UK pension fund into a QROPS. The Qualifying Recognised Overseas Pension Scheme was introduced in 2006, and permits the tax free transfer of a UK pension into an approved foreign scheme.

Not only does a QROPS offer the opportunity to escape the pesky UK taxman, but there are other advantages to moving your money abroad.

Many UK pension savers complain that they are not ready to buy an annuity at their 75^th birthday, which is compulsory in Britain. Perhaps they never intend to purchase an income bearing product at all. By shopping around for a QROPS in a country with no annuity requirement, you can have total control over your pension for as long as you like.

Of course, the QROPS member does have to comply with the tax rules of whichever country hosts their scheme. But QROPS advisers take this into account when recommending where to put your money. The QROPS market is competitive and UK expats are delighted to find that some countries are keeping non-resident tax rates low – in some cases miniscule – to attract their investments. How nice to feel that one is being made welcome rather than being driven away by adverse tax policies!

A QROPS cannot be used for state pensions, and may not suit every private scheme member. If you have already taken benefits from your scheme, you may find that its rules do not permit a transfer. But if you are one of the half a million people heading off for warmer climes this year, a QROPS could be worth considering.

Many of the UK scheme’s deadlines are looming quickly, as pension trustees usually need at least 30 days’ notice of a member’s intention to take early retirement. Commentators are concerned that the deadlines have not been widely publicised – and that millions of people will miss out on the chance to get their hands on their money early. If you miss the deadline, you will have to wait until your 55^th birthday instead.

The exact form a drawdown can take depends on the rules of your scheme. Professional advice is a must to decipher these rules, so book an appointment today as you need to know your options as soon as possible.

Those who are undecided about what to do are in a difficult position. Uncertainty in the economy means that it is difficult to predict what will happen in the next five years. If left alone, will your pension pot grow, shrink, or stay the same? The rising cost of living must be tempting some baby boomers to delay their retirement for a couple more years.

But the decision is more than a financial one. Perhaps you have spent your working life looking forward to retiring at 50. Or maybe you had planned to drop down to part time while taking some of your benefits. Given that people in their 50s find it difficult to job hunt thanks to engrained ageism in the workplace, many people in the affected age bracket might decide to stay put in their current jobs and continue working until their pension funds become accessible again in a few years’ time.

The forthcoming changes to the state retirement age have been well publicised – gradually rising from 65 through stepped changes to 68 in 2046. However, global accountancy firm PricewaterhouseCoopers has called for the rise to be accelerated in a recent report. Further, they have even recommended that the retirement age be increased to 70 by 2046. They claim that these changes would save future governments £9 billion per year.

At least there is a positive side to working for longer. A recent report has suggested that there are health benefits involved in working beyond the age of 65.

On A-day in April 2006, the government brought into force changes ushered in by its Pension Simplification Initiative. The changes affected contributions, withdrawals, lifetime allowances and the age at which you can withdraw benefits, which is soon to become 55. In fact, no part of British pensions was left untouched. The rules on SIPPS were relaxed, and – the saviour of British expats spread all over the world – QROPS were introduced.

Since then the Pensions Act 2007 overhauled the state pension to become fairer for women and carers. The Pensions Act 2008 set out the framework for the Personal Account (later rebranded as the NEST scheme) which encourages private contributions and will be introduced in 2012. It remains to be seen whether this will make a difference to people’s lives, but the one thing we can be certain of is that, by the time the scheme’s participants come to retire, the scheme will have been tweaked and amended many more times.

HMRC constantly reviews the list of “approved” schemes that meet its requirements, with schemes dropping on and off as their circumstances change. Sometimes a whole country can be excluded, as Singapore discovered to its cost a couple of years ago.

Changes to QROPS can come from anywhere in the world. However, unlike the UK resident who is stuck with whatever amendments the UK government introduces, expats can just transfer their assets to a better scheme somewhere more attractive.

For instance, the Isle of Man recently abolished the personal allowance for non-residents and upped its tax rates. So the non-resident money invested there (including QROPS) is tipped to go elsewhere. The ability to make a transfer depends on the contents of the rules of your particular scheme. But assuming that this is possible (and affordable), a QROPS member can shop around the world’s marketplace for a better deal.

The changing nature of pensions, and especially foreign pensions, highlights the need for an adviser who not only knows their stuff, but keeps up to date with what is going on in the pension world. The QROPS adviser not only has to keep an eye on foreign budgets, but also on foreign rules and regulations.

• Cut your tax bill

If you leave your pension behind in the UK, you will continue to be subject to UK income tax. On the other hand getting a QROPS is a good way of cutting your tax bill. Some countries that host QROPS do not tax non-residents. However, you may have to pay tax on withdrawals that you make from your pension in your new home country. Either way, your QROPS adviser can take this opportunity to select a jurisdiction that treats pensions more kindly than the UK system.  

• Give you peace of mind

The money you have saved fro retirement is primarily to live off, although you might have other plans for it. But under the UK system, once you have purchased an annuity the taxman is entitled to most of the remainder when you pass away. Some QROPS on the other hand allow your assets to be lawfully distributed to your beneficiaries without attracting any inheritance tax at all. Choosing a QROPS in a country with more sensible attitude to inheritance and taxes will give you peace of mind, knowing that your loved ones will benefit from your hard work and prudent investment decisions when you have died.

• Give you certainty

The fluctuation of foreign currencies means that your retirement budget can go up and down, seemingly at the whim of world events. With a UK pension, not only will you have to pay for expensive exchange rate charges, you will also have to pay for bank transfer fees as the money is transferred into your foreign account. QROPS can be held in a number of different currencies. If you can find one that is held in the same currency as the place where you live, there is no exchange rate to worry about.

• Give you freedom

Choosing a QROPS gives you the freedom to break away from some of the unpopular elements of the UK system, like compulsory annuities by the age of 75 and restrictions on the assets that pension schemes hold.

But do you ever check up on your adviser’s regulated status? The FSA have recently issued a warning about a sharp increase in overseas fraudsters who imitate bona fide regulated firms, selling bogus shares and scamming millions out of British expats and UK citizens alike.

These thieves are not your common garden crook. Rather, they are sophisticated fraudsters who have considered every detail of their malevolent operation. By cloning the websites of legitimate firms, the fraudsters trick investors into assuming that they are who they say they are. Only tiny changes are made to telephone and email details, so when the unsuspecting investor contacts the bogus adviser, they reach the fraudster instead of the regulated broker or adviser.

According to the FSA, the most common type of scam is the “boiler room” scam, where salespeople telephone investors out of the blue and pressure them to buy shares that turn out to be worthless. Although the FSA states that such share fraud costs the UK £200million a year, it is apparently something that often goes unreported: the police estimate that only 10% of people who have been affected contact the authorities. Perhaps victims are embarrassed about admitting that they were taken in, as there is a stigma attached to being targeted by a conman.

So what can investors do if they smell a rat? The FSA warn that anyone who contacts you out of the blue and offers to sell you shares is suspicious, and should be reported to them. This seems a little over cautious, but presumably any legitimate firm has nothing to fear.   You can also check that the telephone number and address details that you have been given on the internet correspond with the genuine broker’s details that are registered on the FSA website.

Regarding the advice that you actually receive, a genuine adviser should be happy to answer as many questions as you like about the shares or products on offer. And it seems that the old adage stands firm: if something appears too good to be true, it probably is.

This is a common misconception which, after a little research, turns out to be untrue. In fact, with the steps expats can take to protect your savings from UK income tax, overseas investments are well worth a look.

Qualifying Recognised Overseas Pension Schemes are foreign pension schemes that the UK government has officially sanctioned to receive UK pensions free from tax. HMRC keeps a list of pension schemes that have met its standards of being regulated and taxed as a pension in its own country.   However, this does not mean that the schemes are recommended by the taxman.

Contrary to popular belief, you do not need millions to make a pension transfer to an overseas scheme worthwhile. Some schemes give a minimum transfer value of the pensions that they will accept. Others accept funds of any value, but QROPS professionals may advise that a transfer may not be worthwhile from the point of view of fees and taxes unless your fund is worth more than £30,000.

When QROPS first started in 2006, the fees providers charged were high. Perhaps they felt that expats were so glad to be escaping UK tax that they could charge pretty much anything. Now, however, the market is much more competitive, and some QROPS are available for £500 per year. If your QROPS adviser is from a large firm of IFAs with considerable bargaining power, he might be able to negotiate further discounts from the rates providers offer.

So far, so good. With low fees and low minimum transfer values, a QROPS seems open to most people. But what about the fees that advisers charge? Some QROPS advisers charge for their advice by the hour. Others take commission from QROPS providers, so their service is free to their customers.

There are so many other benefits to QROPS that it is at least worth consulting an adviser for an assessment of your circumstances to see if there is a scheme out there that would suit you. For flexible access to your fund, low tax or tax free withdrawals and an opportunity for some effective inheritance tax planning, a QROPS is worthwhile for most investors, regardless of their budget.

Ask not what you can do for the taxman, but what the taxman can do for you!

First, if you are planning your retirement at home or overseas, you can get a state pension forecast to work out how much your state pension will yield. A link to the appropriate department is available at www.directgov.uk. A forecast is not available if you are less than four months away from retirement, but most other people should be able to get some useful information out of the site.  Simply type in your details and let the system do the work. The online calculator will want to know about how many years you have worked abroad, your National Insurance number, whether you are married or have a civil partner, and how many years you have worked in the UK. The online service is only available to people who live in the UK, and provides an estimate rather than a guaranteed figure. However, it is a useful tool in planning for your retirement.

How else can the government help you with your pensions planning? Perhaps you have lost track of a pension scheme that you were a member of at some point during your career. This is easy enough to do when people move jobs so often. No matter how small you suspect the value of the fund may be, it is your hard earned money so you might as well track it down. The Pension Tracing Service can assist you with this task. Whether the scheme that you have lost is a personal or an occupational one, they will look for your missing pension. Just give them details of your National Insurance number and as much information about the personal scheme or your former employer as you can remember. Then the government can do the detective work on your behalf.

But increasing life expectancy is a double edged sword. Whilst we can fit more in to a longer life, we also have to find a way to fund it. Retirement ages are rising, with people trying to stay at work for as long as possible to pay their way. Someone is their sixties in 2010 still has a lot to give the workplace. Yet very few people will want to be working in their seventies and eighties.

Whilst life expectancy is projected to plateau between 2020 and 2040, the truth is that scientists have no idea how much longer we will live. Who knows what pharmaceutical breakthroughs are around the corner? This leaves economists with the unenviable task of working out how to fund the next generations’ retirements.

The government’s response to rising life expectancy has been to raise the state retirement age gradually. By 2024 it will be 66 to men and women, by 67 years old by 2034, and by 2044 it will be 68. This is one of the ways the state plans to address the issues raised by providing for an elderly population.

The private sector has had to be more innovative. Most defined benefits schemes are closed to new members. There are already widespread deficits in such schemes due to poor performance of the markets. But the added factor of members’ increasing longevity has compounded the extent of these deficits.

This has led leading employers to seek insurance to address this risk. BMW recently did a deal with Abbey Life to cover this problem. The car maker has a pension scheme for some 60,000 employees and (both current and retired) which has liabilities worth around £3billion. By specifically insuring the risk of its workers being expected to live longer, BMW say that this deal enhances the security of its employees’ pensions, and is the fruit of some considerable research and investment.

This is the largest longevity insurance deal that Abbey Life has completed, but their spokespeople expect more similar transactions to come to light in 2010 as pension trustees get to grips with this problem.

Guernsey QROPS committee revealed the island had approached HM Revenue and Customs about revamping pension rules to pre-empt a possible inquiry.

The island’s QROPS providers fear questions might be on the way from the tax man that could jeopardise confidence in Guernsey’s status as a QROPS provider.

The providers have asked the Guernsey government to increase the trivial commutation of pensions to £30,000 from the current £25,000 and raising the starting level for a new QROPS from 25% to 30% of the transfer fund.

Guernsey QROPS committee has made a comment online clarifying these are proposed amendments to Guernsey’s pension rules and that although they have support within the government, discussions about making them law are ongoing.

Other commentators feel that Guernsey QROPS committee is over stating views that Guernsey pension providers wish to see implemented but are not yet in place.

Making the right QROPS decision involves complex tax and legal issues, made even more complicated by the tax residence of the scheme member and their personal financial circumstances and objectives.

QROPS.net can put you in contact with the leading QROPS firms who have many years experience in undertaking successful QROPS transfers to Guernsey and many other jurisdictions. For anyone contemplating a QROPS transfer, our experts are on hand to give tailored, professional advice.

The 72 year old moved to the Seychelles in the 1970s, purchasing a mansion with the millions that he made from his businesses in the music and medical industries. But whilst he “fell in love” with the place, he still kept significant ties with the UK.

Those ties seem to have been his downfall. Gaines-Cooper thought he was playing by the rules by spending less than 91 days per year in the UK. However, he kept a house in Henley-on-Thames, where he kept his valuable collection of paintings and guns. His son had been educated at an English school, and his second wife had lived for some time on their Henley estate. These factors were among the reasons the judges gave for their decision that Gaines-Cooper was liable to pay tax in the UK.

So if the 91 day rule no longer applies, how can you tell if a UK citizen is considered resident for tax purposes? The Court of Appeal based their decision on the principle that the UK was Gaines-Cooper’s “centre of gravity of his life and interests”. This nebulous concept will send a chill down the spines of non-residents everywhere. After all, no two situations are the same, and

Her Majesty’s Revenue and Customs, on the other hand, was pleased with the decision. Their spokesman stressed the importance the Revenue attaches to being able to collect tax retrospectively:

“It is also useful that the Court of Appeal has acknowledged that HMRC can increase compliance activity in an area so that it can ensure it catches those who may have previously not paid tax that is due.”

As if this was not scary enough, the taxman added a further warning:

“HMRC are committed to ensure that all those who are resident in the UK pay the tax that is due and this judgment will aid that effort.”

Clearly this judgment will affect everyone who considers himself to be a non-resident. This includes people who have transferred their UK fund into a Qualifying Recognised Overseas Scheme, in an attempt to stop paying UK income tax whilst living abroad.

The case underlines the importance of getting good QROPS advice before you leave the UK. The consequences of a HMRC decision to claim back tax can be horrendous. Mr Gaines-Cooper faces a bill in the region of £30million for liabilities stretching back as far as 1993.

And the real irony here? According to Grant Thornton’s tax director Mike Warburton, Gaines-Cooper’s parents were both tax inspectors.

One issue that can sometimes be overlooked is what will happen when you pass away. A morbid thought perhaps, and not something that you may wish to dwell on. But even worse than considering your own demise is imagining the thought of your dependents being poorly provided for. Without making proper arrangements, your funds might not be distributed in the manner that you intend, and even worse, the taxman could be your biggest beneficiary.

In the UK, the default position is particularly unsatisfactory. Did you know that once you have purchased an annuity (which we all have to before we are 75 years old), the taxman gets most of your residue? And with the IHT threshold being the price of a modest family home, more and more families are finding that their loved one’s estate falls into the inheritance tax band.

This should be a major factor to consider, if you are undecided about whether to transfer your UK fund into a QROPS. Depending on the country that you choose to host your new scheme, it is possible to arrange your affairs so that your pension assets can be distributed directly to your beneficiaries, without paying tax in any jurisdiction. There is nothing underhand about this – a competent adviser will be able to assist you to plan your pensions in an IHT free way that is lawful. And when you sit down with a financial adviser to discuss your pension and inheritance tax, do not neglect the rest of your assets in your planning.

Finally, wherever you live, it’s prudent to make a will. This ensures that your assets are shared out among the people you have chosen. When you are living overseas, it’s important to consult a local lawyer to ensure that your wishes can in fact be legally carried out. In France in particular there are restrictions on how property can be dealt with in a probate situation. Aside from actually distributing the assets, a will makes the task of administering your estate much easier for those who are left behind, as information about your investments will be contained in one place.

Among the countries that have been approved to host QROPS, there are a few “favourites” that appear time and time again in the list of most popular host countries. Low tax regimes, coupled with mature, well regulated investment communities are an ideal combination.

However, from a non resident’s perspective it’s often easy to forget that the country that hosts your QROPS is interested in your money too. And in today’s challenging economic climate, governments of QROPS host countries can come under political pressure to raise taxes from your pension fund for the benefit of the people who live there. 

This is exactly what has happened on the Isle of Man. Historically celebrated as a low tax haven for non residents, the Isle of Man’sTreasury Minister Allan Bell MHK presented a budget to the Tynwald recently that has disappointed overseas investors. Among other measures, the personal allowance for income tax that used to be afforded to non residents has been withdrawn. The basic rate of income tax has remained the same, but the higher rate has increased from 18% to 20%. Given that the budget was introduced as the first step in a series of actions he felt necessary to shore up the island’s economy, some fear that this is the thin end of the wedge.

When you purchase a QROPS, the focus of your advisers is usually on the current situation. Transferring your fund into a certain country can be presented as a “once and for all” decision. But this is not necessarily the case. Depending on the rules of the scheme you have joined, it may be possible to transfer your money or assets to a fund in a jurisdiction that is more favourable.

Non resident investors in Guernsey, for example, still benefit from very favourable tax treatment. Accordingly, it could be worth seeking advice about transferring your fund to a scheme hosted by this Channel Island. QROPS.net can put you in contact with an adviser who specialises in Guernsey QROPS, and therefore could mitigate the effects of the Isle of Man budget. There is never any guarantee that a country will not change its tax rules. However, a good adviser will have their finger on the pulse, and be able to direct you about the steps to take to move your fund, if necessary.

The survey showed that men have an average pension of £19,593 per annum, compared to the women’s figure of £12,169. These figures include income from both private and state pensions.

The difference of an enormous £7,424 per year is attributed to the fact that women traditionally take time out of their careers for caring responsibilities, meaning that they miss out on valuable years of pension contributions.

Speaking about the survey, Prudential’s director of pensions and annuities Karin Brown was not surprised at the results.

“The reason women appear to get less in their pensions than men is embedded in years of history and, to a certain extent, because some women take a career break to have children which has an impact.”

Although it is widely known that women can buy back missing years of National Insurance contributions and claim home responsibilities protection for their state pensions, these measures do not seem to have closed the gap. The historical difference in retirement ages for the genders has also been a factor. With women retiring at 60 and men at 65, women have missed out on an extra 5 years of earnings to contribute to their pension pots.  The gap between their future pension incomes may close as the default retirement age is evened out.

The Prudential surveyed 6073 adults aged over 45 in the UK. 32% of respondents over the age of 55 said that they were delaying the age at which they intended to retire because of the falling value of their investments. Many believed that they were not going to be able to retire completely at all.

The message from Prudential’s Ms Brown is clear. Whether you are a man or a woman, the sooner you start saving for retirement, the better.

“Although many working people may not be able to remedy this situation at a late stage in their working lives, younger people do have a chance to start building a decent pension pot. Prudential believes people should, ideally, start saving for their retirement as early as their twenties or early thirties instead of putting off pension savings until later in life.”

Aside from gender, the survey also revealed a regional difference in retirement incomes. There was a variation of £5,000 per annum between the best off older people in the South East, and those who lived in the South West.

The firm expects to start accepting pension transfers from the UK in April.

“It appears that common sense has prevailed, and we are pleased to see that this issue appears to have been resolved,” said London & Colonial product development manager Adam Wrench.

Although HM Revenue and Customs nor Gibraltar authorities have confirmed the row is over, Wrench indicated “reliable market sources” say a settlement has been thrashed out.

Wrench said his firm is just waiting for the official announcement to open the doors to client pension transfers.

This announcement will involve a law change in Gibraltar scrapping a 0% tax rate for anyone over 60, to bring Gibraltar pension rules in line with those required by HMRC to initiate QROPS transfers.

QROPS Adviser revealed agreement was close in January 2010.

Gibraltar already has QROPS status but self-imposed a ban on taking pension transfer last year pending discussions to ensure the country’s pension rules lined up with HMRC regulations.

HMRC wrote to the Gibraltar pension trustees in September asking for clarification on pension rules, inferring they did not meet QROPS status qualification.

Both sides disagreed over the 0% tax rate, but Gibraltar backed down to avoid losing QROPS status.

“After a lot of frustration last year, with the inevitable missed business opportunities, it would appear we have some good news at last,” said Wrench.

Gibraltar is expected to attract a high level of QROPS business due to close historical ties with the UK, English as a first language and a reputation as a stable and trustworthy offshore financial centre.

QROPS Adviser will have access to the London & Colonial scheme when it opens, along with 1,400 or so other QROPS pensions worldwide.  Formal details of the Gibraltar QROPS have not been revealed, but are expected soon to allow transfer preparations to start.

Qualifying Recognised Overseas Pension Schemes are available throughout the world, including in nearby countries like Ireland, the Channel Islands and the Isle of Man. The list of the countries which host QROPS as approved on the HMRC’s website is so long that it reads like a list of the United Nations. And you don’t have to live in the same country as your pension. So if the world is your oyster, where do you start?

The main driver behind the decision to transfer your UK fund into a QROPS is usually tax. But it’s not just the tax regime that will host your QROPS that is important. You also have to consider how your tax situation will be treated in your country of residence.

But this is not just a linear choice to be made about tax options alone. The other issues at play include how flexible the QROPS destination lets investors be about the way pensions are managed. For example, Guernsey is famous for letting investors choose from a wide range of assets for their pension pots. 

You also need to take into account how well regulated your QROPS jurisdiction is, and the competitiveness and abilities of the investment community your QROPS provider is part of. These are all issues that have to be weighed against each other. Perhaps selecting a holiday is easier after all.

Fortunately, investors are not alone in deciding where to place their QROPS. There is a lot of information on the internet about choosing QROPS locations, but an adviser with international reach is essential to ensure that you get the best advice about every possible option. Likewise, an independent adviser with access to every product in every country on the list is the only way to ensure that you find the most competitive QROPS.

Just as there are hot holiday spots, there are also trends in the QROPS market. For example, Malta has recently been approved as a QROPS destination, and hopes to enjoy an influx of pension funds into newly set up schemes.

And some locations fall out of favour. Singapore was knocked off the list of approved QROPS hosting countries by HMRC in 2008 because there was a prevalence of misselling cases by unscrupulous and unregulated advisers.  The favourite QROPS destination for 2010 has yet to emerge.

QROPS pensions come as self managed, collaborative or full managed packages allowing the scheme member to take a hands on approach of their investments.

Just how much how much control to take is up to the investor and needs careful consideration and discussion with the financial firm arranging a QROPS transfer as not all QROPS providers allow self managed options.

The benefit of a Self Managed QROPS is that the member has complete control over their investments and can invest themselves, or with the help of an adviser. If set up correctly, Self Managed QROPS solution can avoid the need to continuously go to the QROPS trustees to action the dealings. A Self Managed QROPS can be the most efficient QROPS solution available if correctly constructed. Contact QROPS.net for more information.

Self managed does not necessarily mean taking sole control – the collaborative factor allows delegating agreed management authority to the provider. Two factors are called in to play with self managing a QROPS –

Attitude to risk

Risk to one investor falls well within acceptable caution to another. A QROPS opens up the opportunity to invest in more markets than the limited choices offered by a UK pension scheme, which allows more chances to make gains but also increases the likelihood of stacking up losses.

For a self managed QROPS, any investor must take on responsibility for recognising and accepting risk when making decisions.

Investment strategy

Self managed QROPS offer such a wide choice of investments and management options that selecting the right QROPS scheme at the start that matches the scheme member’s financial aims for the fund is crucial.

Like any other investment choice, the global array of almost 1,500 QROPS schemes has to be narrowed down to the right scheme for the investor.

Some QROPS providers have across-the-board investment expertise and some have more narrow specialisation.

Experienced investors with the time and skills to self manage a QROPS can choose from a host of investments like:

• Stocks and shares from markets around the world
• Government or corporate bonds from established or emerging markets
• Pooled funds like OIECs, unit trusts, exchange traded funds and hedge funds, to name but a few collective schemes that QROPS providers are pleased to take in to their schemes.
• Commercial property – but discuss this with a QROPS provider if the property is a hotel or involves any residential use
• Bank or building society accounts in any currency

Some QROPS advisors will also put together tailored investments in a specialist sector, providing the details do not clash with QROPS legislation.

Other factors that affect the QROPS  investments are personal circumstances like the age, residence and nationality of the QROPS transferee.

Picking a self managed QROPS is a job for a specialised financial planner.

If you do not know where to go but need a financial planner who is strictly regulated and has a track record of successful QROPS transfers, contact QROPS.net for a recommendation.

The scheme administrator of a registered pension scheme must report to HMRC any transfer from their scheme to a qualifying recognised overseas pension scheme using the online Event Report. See RPSM12301110 for further guidance on the Event Report. The details to be provided on this APSS 300 form are set out in The Registered Pension Schemes (Provision of Information) Regulations 2006 (SI 2006/567).

Qualifying recognised overseas pension scheme

As explained in RPSM14101050, under section 169 the scheme manager of a recognised overseas pension scheme must have undertaken to comply with the information requirements imposed under regulation 3 of The Pension Schemes (Information Requirements – Qualifying Overseas Schemes, Qualifying Overseas Schemes and Corresponding Relief) Regulations 2006 (SI 2006/208) if the scheme is to be a qualifying recognised overseas pension scheme.

One of those information requirements is that the scheme manager notifies HMRC when they make a payment, or are treated under certain provisions as making a payment, in respect of a relevant member. However, the scheme manager does not have to notify HMRC if the relevant member is a person to whom the member payment provisions do not apply under paragraph 2 of Schedule 34 (RPSM13102120). The member payment provisions do not apply unless the member:

is resident in the UK when the payment is made (or treated as made), or although not resident in the UK at that time, has been resident in the UK earlier in the tax year in which the payment is made (or treated as made) or in any of the five tax years immediately preceding that tax year.

A payment includes a transfer from the scheme. The provisions under which a scheme manager is treated as making a payment are sections 172 to 174A, paragraph 2A of Schedule 28 and paragraph 3A of Schedule 29. Guidance on those deemed payments is provided in RPSM09100170.

A payment to a transfer member has to be notified to HMRC regardless of whether or not they have been non-resident for more than five tax years if it is deemed to have been made from their taxable asset transfer fund (see RPSM13102180).

A relevant member is one in respect of whom there is a relevant transfer fund within the meaning of The Pension Schemes (Application of UK Provisions to Relevant non-UK Schemes) Regulations 2006 [SI 2006/207]. Broadly speaking, a member will have a relevant transfer fund within the scheme if they have transferred sums or assets into it that relate to UK tax-relieved contributions. That includes transfers from registered pension schemes and certain transfers from non-UK schemes that are not registered pension schemes. Further details are provided at RPSM13102170.

The manager of a qualifying recognised overseas pension scheme that receives a transfer from another overseas pension scheme will need to check whether or not the transferring member has a UK tax-relieved fund (see RPSM13102150) or a relevant transfer fund in the transferring scheme in order to establish if HMRC will have to be provided with information about payments made in respect of the individual. It would be reasonable for the scheme manager to ask the individual to declare whether or not the transferred funds include any amounts that have received UK tax relief or have originated in a UK registered pension scheme. If the answer is “yes” then more detailed questions would need to be posed to establish if the individual will have a relevant transfer fund in the receiving scheme.

The scheme manager must provide HMRC with the following information:

• the name and address of the relevant member, and
• the date, amount and nature of the payment.

Where a non-pension payment such as a lump sum or a transfer is made, the scheme manager must provide the information to HMRC by 31 January following the end of the tax year in which each payment is made. Where a pension payment is made, the scheme manager must provide the information by 31 January following the end of the tax year in which the first payment is made, but it is only necessary to do this in respect of the first such payment to any individual.

Exceptionally, HMRC may require the information to be provided within 30 days of the issue of a notice to the scheme. That can happen if HMRC has reasonable grounds for believing that the scheme has failed, or may fail, to comply with any of the information requirements and that such failure is likely to have led, or to lead, to serious prejudice to the proper assessment or collection of tax.

Many QROPS consultants argue that anyone who is a QROPS scheme member can use their pension fund to buy residential property – and that the scheme rules allow them to live there permanently, or give rights to use the home for holidays if it is not their main residence.

HMRC guidance is unequivocal about this – the scheme member is not allowed direct or indirect use of taxable property held by a pension scheme.

This potential minefield for investing QROPS funds shows the importance of dealing with an independent financial firm that is regulated in the UK.

Under the taxable property rules:

Direct use is living in a home paid for by funds from a QROPS pension.

Indirect use is when the scheme member borrows money from a QROPS pension to spend on a home for him or herself.

Taxable property also covers more assets other than a home – for instance holiday homes, timeshares, classic cars, boats, yachts, art, antiques, aircraft, helicopters and fine wines would all fall under the same category.

Some financial firms point out that HM Revenue and Customs guidance for inspectors does not have any force in law, but the penalties for failing to comply with the in-house manuals can result in hefty fines and surcharges.

Flouting taxable property guidance can lead to an unauthorised payment charge of 40% of the asset value plus a 15% surcharge, while the scheme administrator also face a 40% surcharge as well.

The scheme administrator may also be liable to a capital gains tax charge on disposal of the asset as well.

The scheme administrator is also obliged to inform HMRC that an unauthorised payment has taken place, including the details of the person receiving the benefit and their address.

Many advisers suggest a work-round is that a QROPS scheme member should wait five years to invest in residential property to avoid the QROPS reporting requirement.

If you have a QROPS scheme or are considering transferring a UK pension fund to a QROPS, then QROPS.net can put you in touch with an independent financial firm who have successfully completed hundreds of overseas pension transfers.

Taking out tax free cash and trying to include forbidden investments in a QROPS pension fund are the two main areas of conflict.

QROPS providers have to certify their scheme terms and conditions meet QROPS rules drawn up by HM Revenue and Customs.

This self-certification of compliance means the scheme is posted on the monthly QROPS list on the HMRC web site.

If a QROPS scheme is not listed, UK pension fund managers are not allowed to initiate any transfer.

The penalties for breaking the rules are harsh. The transferring fund and the QROPS investor face a 40% tax charge plus up to a further 15% of the fund value in fines for any breach.

These penalties are also imposed for unauthorised withdrawals like taking too much tax free cash or using the QROPS as a vehicle for forbidden investments.

Taking tax free cash from a QROPS

The tax free cash QROPS rules are simple – only 25% of the total fund value can be taken as tax free cash when the QROPS investor has reached normal retirement age.

Some variance is available – some QROPS schemes and jurisdictions might allow a bigger tax free cash withdrawal under certain circumstances, but the general rule is 25% is all that is allowed.

Some QROPS providers and advisers have tried workarounds to gain more than a 25% tax free lump sum, like collapsing the underlying trust framework of a QROPS or transferring the funds on to another destination once they are in a QROPS, but HM Revenue and Customs has a policy of tightening up on QROPS schemes felt to be lax on applying the rules.

Residential property and QROPS

QROPS offshore pensions give a huge range of investment options in comparison to standard UK pension funds. QROPS also come in managed or self managed packages.

One of the main rules about investment is the QROPS scheme cannot directly or indirectly put money in to an asset that benefits the pension scheme member.

This includes residential property and luxuries like yachts, aircraft, helicopters, antiques and wine.

HMRC keeps track of QROPS fund compliance with the rules by requiring QROPS providers to report any unauthorised withdrawals that occur within the first five tax years of the date the offshore was started.

The best way of ensuring a QROPS pension transfer stays within the rules is taking advice from a regulated and experienced financial firm. QROPS.net can help locate the right adviser for anyone contemplating a QROPS transfer, just contact us to start the process.

Many employees rely on special contributions from their employers in the form of bonuses to boost their pension pots, but these payments and general contributions have dropped 9% or £4 billion in just 12 months.

The figures show employees need to take action to fund their own