Offshore Expat Pensions

  • A) Definition: Not UK Based

    Through out their career, expats in general live in a number of countries. Which each tend to have their own legal, tax and product regime regarding workplace pension plans. 

    In case expats are planning to retire abroad, it is understandable to look into the possibility of an international and offshore pension plan. The thought being that it might be good to prevent all those national regulations and to collect all claims in one international offshore pension plan.

    The offshore pension fund industry was developed in the 70′s when UK-based financial institutions established non-domestic fund management providers for expatriated investors. 

    These Offshore funds and Pension Plans are specifically domiciled outside of the UK. They are therefore regulated by the authorities in the country where they are located. Established offshore investment centres such as the Isle of Man, Malta or Gibraltar with their independent legal, political and regulatory framework, offer many providers and options.

  • B) Possible Advantages

    •    For expats with UK pension claims, QROPS/QNUPS might lead to tax benefits;
    •    In case it is possible to have all and optimal investments at very low total costs, that would be a relevant factor to take into account besides other issues.

  • C) Possible Disadvantages

    •    Complex factual, legal, tax, investment situations which make it not directly transparent what is the best option;
    •    The costs tend to be (too?) high and not always transparant;
    •    The local regime might change in the future which can have a negative impact;
    •    Their might be (substantial) negative currency aspects.
     

  • D) Caution Advisable

    International Offshore Expat Pension Plans might in the end be interesting. But as the (international) tax and investment issues tend to be complex, it is advisable to obtain qualified advice about whether or not to acquire them. We advise our clients not to go that way if it is not 100% clear that this would be their best option.

    In this regard we caution you as we hear from clients that certain consultancy firms try to persuade clients to opt for these plans in order to make money themselves. Instead of placing the client’s interest central as the correct advisor will always do.
     

  • E) News April 2020

    Check the UK 2020 recognised overseas pension schemes notification list

    Find schemes that have told HMRC they meet the conditions to be a recognised overseas pension scheme

    This list contains pension schemes that have told HMRC that they meet the conditions to be a ROPS and have asked to be included on the list.

    An updated list of ROPS notifications is published on the first and 15th day of each month. If this date falls on a weekend or UK public holiday the list will be published on the next working day.

    Sometimes the list is updated at short notice to temporarily remove schemes while reviews are carried out, for example where fraudulent activity is suspected.

    The requirements to be a ROPS changed from 6 April 2017. You’ll need to check that the scheme you’re transferring to on or after that date meets the new requirements.

    HMRC cannot guarantee these are ROPS or that any transfers to them will be free of UK tax. It’s your responsibility to find out if you have to pay tax on any transfer of pension savings.

    HMRC will usually pursue any UK tax charges (and interest for late payment) arising from transfers to overseas entities that do not meet the ROPS requirements even when they appear on this list.

    This includes where the ROPS requirements have changed and where taxpayers are overseas. HMRC will also charge penalties in appropriate cases. Find out about the changes for ROPS requirements.

    Tax relief is given on pensions to encourage saving to provide benefits in later life. Accessing benefits (directly or indirectly) before the age of 55 will result in a liability to UK tax charges in all but the most exceptional circumstances.

     

    Expats: Beware of QROPS Pension Consultancy

    Expats are often actively contacted by financial organizations that advise them to switch to QROPS. They provide a long but standard report 'for free' which states that 'there are tax benefits and it is great for your investments'.

    When checked by an expert, these benefits very often do not exist.

    I will be frank. I seriously dislike such an approach and contempt for the financial interest of private clients and families. Amazing that the financial supervisory agencies are not yet on to them like a hawk.

    If I would work there.....

     

    UK EXPAT PENSIONS: GUERNSEY ON BLACK LIST

    As of January 1st Guernsey and The Isle of Man have been placed on the Dutch Black List re tax evation. 

    In practice some advisers mentioned in QROPS perspective that Guernsey might be interesting. If you focus on the sole interest of the client, Guernsey was often already not that interesting. 

    Best Advice re UK Pensions and QROPS: Make it simple, gather all facts, focus only on client interest and then decide!