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Changes in UK legislation affecting QROPS, former QROPS, and delisted QROPS

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UK pension reforms became law on 6 April 2015.

There are still a number of unanswered questions regarding the impact of the UK changes on overseas pension schemes.  Not least of these are tax implications and expected changes following the temporary reversal of UK policy in respect of the extension of flexible benefits to overseas schemes.

We post updates on the above on a regular basis on our website – www.cgl.gg.

We outline below the current position for our Guernsey and Gibraltar products.

Whilst we do not offer Maltese products, our understanding of their position also follows.

Aurora International Pension Plan/Aurora Libertaï/Aurora Quantum/Aurora Quantum Lite – former QROPS (Guernsey)

  • Guernsey’s local tax legislation is being amended to offer flexibility;
  • Flexibility is expected to be available in the early summer;
  • Flexibility is expected to relate to the original source of funds;
  • Thus, UK source pension funds will receive UK pensions’ flexibilities;
  • Tax on flexible payments may fall due in the UK and/or a Member’s country of residence; specific tax advice is strongly recommended prior to any flexi access;
  • We await the outcome of HMRC’s decision on whether they will remove the temporary suspension for non-European Economic Area QROPS and delisted QROPS;
  • If you are interested in flexible access, it is likely that Guernsey will be the first jurisdiction to be able to offer such access. Whilst this is expected in the early summer 2015, Guernsey already has certain long standing pension flexibilities.
  • It may be necessary to consider each case on its own merits, but Guernsey can already offer flexibilities such as temporary annuities and loans.

Aurora Europa – QROPS (Gibraltar

  • There will be no changes to our Gibraltar Schemes at the current time or until such time as the  temporary reversal of policy in respect of the extension of flexible benefits to overseas schemes is lifted;
  • PCLS is still available up to 30%;
  • No Death Taxes continue to apply;
  • Withholding tax of 2.5% on income withdrawals;
  • Withdrawals continue to be available for Members over 55 years of age, at up to 150% of the prevailing GAD rate.

Malta

Whilst new changes to Maltese legislation have been enacted ,and such legislation will allow similar flexibility as most UK Defined Contribution Schemes and SIPPs, this will only take effect after existing Maltese Schemes are licensed and regulated under this new legislation. This will not be until late 2015.  The minimum age for access to pension income has been increased to age 55, as with all other QROPS jurisdictions, and Malta is also considering reducing the PCLS payments from their current level of 30% to 25%. Withholding tax on pension income payments is payable at 35% unless an effective DTA exists.

This information is provided for general information only.  Concept does not provide financial, legal nor tax advice, and nothing in this document should be construed as such. Concept  shall not be held responsible for any liability or loss arising directly or indirectly from any reliance placed upon the content of this document. Concept recommends that all individuals should seek their own appropriate advice.

 

Code of Good Practice released for Combating Pension Scams

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Code of Good Practice released for Combating Pension Scams, Concept Group in Guernsey provides support to the UK Industry Group who drafted the Code

The Code of Good Practice for Combating Pension Scams was released on 16th March, following calls from the pensions industry for guidance to help share good practice and to help reduce the risk of scams. An Industry Group in the UK, Chaired by Margaret Snowdon OBE, was formed to develop a Code of Good Practice for use by all in the industry.

Margaret Snowdon, Chairman of Pensions Administration Standards Association (PASA) and Chairman of the Industry Group, said “The Code is a milestone in setting the industry standard due diligence to follow when considering a transfer request. Trustees, providers and administrators want to help prevent scams that can lead to the loss of members’ benefits and have felt caught between the conflicting demands of regulation.  The Code, being based on principles supported by practical guidance should help everyone take reasonable action to protect members and themselves.”

Guernsey headquartered Concept Group has actively engaged over the past twelve months with the UK Industry Group, who wrote the Code of Good Practice for Combating Pension Scams, to provide some unique overseas expertise in regards to the combating pension scams.

Margaret Snowdon added “the fact that so many organisations, including those who advise on SIPPs, SSASs and QROPS willingly gave their help is very encouraging for member protection.  It is also good news that the various regulators welcome the Code and were helpful in the long process to get us to publication.”

The Code has been widely welcomed by organisations such as the Association of Member Directed Pension Schemes, the Department for Work and Pensions, the Financial Conduct Authority, HM Revenue & Customs, the Pensions Advisory Service and the UK Pensions Regulator.

The Code of Good Practice can be viewed here: http://www.combatingpensionscams.org.uk/

Roger Berry, Managing Director of the Concept Group, commented “from the moment we heard about the planned development of a Code of Good Practice for combating pension liberation and other scams, we were extremely supportive and wanted to assist where we could. Priding ourselves on prudence and caution, we are always proactive in efforts to prevent such pension scams. We made contact with Margaret Snowdon, Chairman of the Industry Group, and offered our assistance in the review process, to provide some expert insight from an overseas provider of bona fide non-UK pension arrangements. This was gratefully accepted and over the course of the past twelve months, we have provided input into various drafts of the Code and we also fully support the principles of the Code.”

Roger Berry added that “to be included as one of the organisations involved in the development of this Code is something we are extremely proud of, when you see the calibre of organisations involved and the widespread support from relevant industry organisations. We were delighted to be consulted in the development stages and will continue our close association with the Industry Group.  We hope it will also help to demonstrate our continued effort and stance towards combating pension scams, both in the UK and internationally. ”

New statutory instrument on QROPS

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SI2015/673 released on 13th March 2015

In December 2014 HMRC released a draft statutory instrument that varied the conditions for listing as a QROPS.  That draft has now become a real statute  SI 673 of 2015.

It has changed somewhat from the draft.

The SI is released without the “70% rule”  amendment.  This originally was to be removed and a new provision inserted out making a requirement for a manager of the scheme to be regulated by a body where the scheme is established which regulates the management or provision of services by such schemes. The explanatory memorandum states that the “70% rule” remains in place temporarily, so that the legislation to replace the 70% rule can be targeted more precisely to ensure that the principles behind allowing transfer to be made free of UK tax can continue to operate as Parliament intended.

There is no description of any timescales for any further changes.

The changes that make it mandatory to have a minimum pension age (currently age 55) are made as proposed.

An extract from the actual explanatory memorandum is as under:

“This instrument was published on 19 December 2014 for a four-week technical consultation in line with the Tax Policy Framework. There were 20 responses, most of which were minor and technical in nature. As a result of the consultation the changes to the information requirements have been shortened and the “70% rule” (which requires 70% of funds that have received UK tax relief, either in connection with contributions or as a result of a tax-free transfer, to be designated to provide the individual with an income for life) remains in place temporarily. This is so that, in the light of subsequent events, the legislation to replace the 70% rule can be targeted more precisely to ensure that the principles behind allowing transfer to be made free of UK tax can continue to operate as Parliament intended.”

Overall – this does leave QROPS somewhat in limbo pending the changes which are due but apparently need to be more precisely targeted.  As things stand QROPS will generally not have pension access flexibility until the changes occur.  There is also no news on how the IHT provisions will be amended, if at all, once the proposed changes to the 70% rule are made.  All in all, not entirely helpful.  Hopefully, the wait for the more “targeted” changes will not be too long.

Guernsey to enable transfers with fully flexible QROPS

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Guernsey QROPS will benefit from full flexibility following a legislative change that will enable policyholders locked into schemes on the island to transfer funds into other jurisdictions.

The crown dependency’s deputy treasury minister, Jan Kuttelwascher, said its treasury and resources department intends to propose an amendment to income tax law allowing inward transfers to a Qualifying Recognised Overseas Pension Scheme (QROPS) the same flexibility as the jurisdiction from which the funds originate.

The will ensure Guernsey’s compatibility with the full QROPS flexibility announced by the UK’s HM Revenue & Customs in December last year.

“Such a change would enable members in a Guernsey pension scheme that has QROPS status access to the same pension flexibility offered by the UK, and would extend both to transfers already made and to future transfers into a Guernsey personal pension scheme,” said Kuttelwascher.

Stephen Ainsworth, president of Guernsey’s Association of Pension Providers, said the news will remove Guernsey policyholders’ fears that they would not be granted full flexibility because of the restriction on transfers to QROPS with more flexible payment arrangements.

“We learned last December that pension flexibility would be available to QROPS, and now Guernsey has confirmed that local rules will be relaxed to enable this flexibility to be applied to QROPS transfers to Guernsey schemes in the same way as it will be applied in the UK,” he said.

He added that if a policyholder did still want to transfer to a QROPS scheme in another jurisdiction, “they should now be able to do so”. Read more

 

 

Queries regarding Guernsey flexibility and transfers out

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Concept is very much aware that there is currently considerable speculation and in parts some misinformation in the marketplace concerning flexible access to pensions, the UK changes taking effect in April 2015, the taxation of such flexibility and the ability to transfer out of Guernsey schemes in the future.

Unfortunately, legislative announcements from the UK do not include any guidance on how pensions flexibility will be taxed for overseas schemes post April 2015.  We also are unaware what flexibility overseas schemes will actually offer.  We are aware that in Gibraltar and Malta legislative changes have occurred to allow QROP scheme providers to reflect UK flexibility but as yet no providers have announced what flexibility they will offer, using what process or at what cost.

In Guernsey, providers have been in discussions with local Government as to what changes will provide the best options for members of Guernsey schemes. Some form of flexibility is expected and it is highly unlikely that any form of general restriction would be imposed by Guernsey authorities on transfers out, contrary to some misinformation being circulated by competitor schemes in other jurisdictions.

Concept change of address

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Please note that following our temporary relocation, we are now permanently based at the below address:

First Floor
Cambridge House
Le Truchot
St Peter Port
Guernsey
GY1 1WD

The office will be closed today (Friday 6th February) for the move back.

UK Pension changes

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As you may be aware there were a number of announcements regarding pension flexibility within the recent UK Budget Announcement 2014, and HMRC acknowledged that several of these will have a knock on impact into the overseas market. Whilst those changes are substantially now in Law, the overseas elements are detailed in draft instruments released just prior to Christmas.

From April 2015 changes to UK registered pension schemes will permit an individual full access to their pension fund once they reach the age of 55, on the basis that all funds received (following the withdrawal of their pension commencement lump sum which will remain free of UK tax, subject to lifetime allowances) will be subject to UK income tax. HMRC has by way of draft statutory instrument indicated that any QROPS jurisdiction could permit similar flexibilities as the rule requiring that 70% of the pension fund value is used to provide the member with an income for life (in the draft instruments) is being removed.  We await the detail from various QROPS jurisdictions, including Guernsey and Gibraltar, on if and how flexibility may be offered.

Our current schemes in Guernsey are approved under the Income Tax (Guernsey) Law (s.157A), while our Gibraltarian schemes are approved under the Income Tax Act 2010 (s.14A) in Gibraltar, with all of the schemes being governed by way of multi-member trust deeds. Thus a change in UK legislation is not the only factor that needs to be taken into consideration.  There are ongoing discussions in Guernsey and Gibraltar and we will of course keep members and their advisers updated as things develop.

Skandia International change of name to Old Mutual International

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Skandia International have changed their name to Old Mutual International as of Monday 22 December 2014.

The companies that are part of Skandia International will also change name and the new name will be applied across everything that is currently branded with the Skandia International name.

Old Mutual International have published a FAQ document providing full details of this change, which can be viewed here.

For further information on this change, please visit Old Mutual International’s website http://www.oldmutualinternational.com/en/europe/consumer/

Aurora Europa Lite – NOW AVAILABLE!

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Concept is delighted to announce that following the successful launch of its Gibraltar QROPS products last month, it has now added a further “Lite” product to the suite.

Written under a master pensions trust, the product is aimed at UK pension transfer(s) totalling between £25,000 and £100,000 (subject to any investment product minimum.)

Building on its streamlined administration processes, the product will allow investment with a range of pre-approved investment custodians, and has a clear transparent fee structure.

Full details are available to Financial Advisers in the IFA Login area of this website, or directly from Concept.