Roger Berry FCCA, Managing Director of Concept Group Limited comments:
Pension administrators faced with dubious transfer requests have long had concerns for their members over pension liberation, but they now need to be mindful of an increasingly sophisticated environment involving scam investments, commission swindles and other dishonest behaviour.
This sophistication requires pension administrators to respond, in order to protect their members.
The release of the new code, with amongst other things – up to date guidance, case studies and checklists, is a centralised resource to assist pension administrators. We are delighted to have been one of the authors of the new updated code that provides helps to industry. Although the code is UK centric it has great relevance and contains good practice for offshore pension trustees and administrators to consider.
Version 2.0 of the Code is now available to download from the PSIG website.
Concept is delighted to have been nominated for thebestof Guernsey Best Business Awards 2018. We would really appreciate your votes and support!
To vote please click on the link below. Thank you!
Further to our previous news article on 1st October 2015 where we first discussed the options available for Guernsey pension members, this update discusses the pragmatics of Guernsey Flexible Access after 2 years of practice, and further in Guernsey legislation (pension regulation).
Which Guernsey pensions can have access?
The 2015 legislation provided for members of s.40 and s.157A pensions to consider their options for flexible access with respect to the legislation of the jurisdiction which sourced their pension funds.
So, if your pension originally accrued in Denmark, it would be the flexibilities of Danish pension legislation you would consider. If from the UK, the UK flexibilities would apply.
Thus pensions that are or were a QROPS, with UK source funds in them would have the option of flexible access drawdown.
Options for Guernsey Delisted QROPS
For delisted Guernsey QROPS, which are now OPS, this offers the ability to take partial or full access if the scheme of which you are a member, provide this service.
It should be noted that not all providers offer flexible access, and members should carefully consider their options and take appropriate advice because Guernsey delisted QROPS have grand fathered benefits by HMRC.
Frequent misleading facts and red herrings, 55% tax charges and IHT issues, the 70% rule
If you meet the criteria laid out under, you can avoid tax issues particularly the 55% tax on unauthorised payments. Due to changes in pension legislation in Guernsey, the IHT issue requires less mitigation, although you may still need to transfer to a separate pension plan to achieve flexible access.
The 70% rule is often also a red herring, Delisted QROPS lost ‘membership’ of QROPS status so they have no reporting and the undertakings given to HMRC such as the 70% rule, strictly speaking are not binding. The introduction of pension regulation at scheme level in Guernsey also assists.
This news release is provided for general purposes and does not constitute tax advice.
Concept shall not be held responsible for any liability or loss which may arise directly or indirectly from any reliance placed upon the on information contained in this document.
Although flexible access is paid out gross. Taxes may be due in the country of residence of the member. Taxes may be due the UK, although as a general rule, those non-resident of the UK for more than 5 UK tax years may be outside the application of certain UK tax charges and the unauthorised payment regime.
There are exceptions so tax advice should be taken. As a simple rule if you are aged 55 or over and you have been out of the UK more than 5 UK tax years, full or partial flexible access is worthy of consideration.
No Guernsey tax is deducted if you are not resident in Guernsey.
My Scheme doesn’t offer flexible access?
If the scheme you are in does not offer flexible access you may consider transfers to schemes which do.
It is possible to transfer from one Guernsey Delisted scheme to another and from other schemes in other jurisdictions, to a Guernsey plan.
What criteria do I need to meet to transfer?
Transfers from other schemes, including QROPS in other jurisdictions are possible. If you are under age 55, UK resident or have been UK resident in any of the last 5 full UK tax years, transfer may not be in your interest, or be acceptable to your existing scheme.
This is a very broad overview, other criteria exists, not least further changes introduced by the UK Finance Act 2017 which apply to transfers since March 2017.
Why would I consider a transfer to a Guernsey Scheme?
Members consider transfers for a variety of reasons, costs, service, tax benefits or stability of jurisdiction to name some.
Whilst other jurisdictions can pay flexible benefit, it may be that the jurisdiction in which the members reside does not benefit from tax agreements in place and thus significant taxes may arise.
As payment of benefits are generally made gross from Guernsey schemes there is often no need to consider tax agreements irrespective of where the members is living or will live. This is a significant benefit and a reason members frequently seek a transfer to Guernsey.
In addition, members of Guernsey schemes may prefer to have the certainty that whenever a member becomes resident, (assuming that is not Guernsey) benefits will be paid gross.
Guernsey pension legislation also offers in certain circumstances other flexibilities, including the possibility to invest in property and other non- standard assets and the ability to take loans from the scheme.
HM Revenue & Customs (“HMRC”) yesterday announced that a new overseas transfer charge of 25% will be implemented and will be effective for transfers requested on or after 9th March 2017 for transfers from a UK registered pension scheme to a Qualifying Recognised Overseas Pension Scheme (“QROPS”).
There will be a few exclusions from this charge in certain circumstances, as follows:
- If an individual transfers to a QROPS in the country in which they are resident (for example a South African resident could transfer to an SA QROPS);
- If both the individual and the QROPS are in a country in the EEA (for example a Spanish resident client could transfer to a Gibraltar QROPS);
- If an individual transfers to a QROPS which is an occupational pension scheme sponsored by their employer;
- If an individual transfers to an overseas public service pension scheme and is employed by one of the employer’s participating in the scheme;
- If an individual transfers to a QROPS established by an international organisation and the individual is employed by that international organisation.
This would seemingly mean that for all overseas transfers where an individual is resident in a non-EEA country, for example an individual who is resident in South Africa, Singapore, Hong Kong, Thailand, Malaysia etc. and is looking to transfer to a QROPS in Gibraltar, a request to transfer made after 9th March 2017 would be subject to a 25% overseas tax charge.
For anyone who has already made a request to transfer from a UK registered pension scheme to a QROPS, assuming that the UK scheme administrator has received a “substantive request to transfer” before the 9th March 2017, the 25% overseas transfer charge should not apply.
Any requests that are received by a UK scheme administrator on or after the 9th March 2017, or where the request has been received prior to the 9th March 2017 but is considered a casual enquiry and not a substantive request to transfer, this would also seemingly be subject to the 25% overseas transfer charge.
In circumstances where the overseas transfer charge is applicable, the 25% tax charge will be deducted by the UK pension scheme administrator before the transfer is made.
Further to the above, there are some further rules around the aforementioned exclusions which could mean that an individual would become subject to the overseas transfer charge post transfer if their relevant circumstances change and it is considered to be within the “relevant period” and also for the potential return of tax paid under the overseas transfer charge if their relevant circumstances change and it is considered to be within the “relevant period”. The relevant period is 5 complete and consecutive UK tax years of the date the transfer takes place.
Therefore, for transfer requests after 9th March 2017 some individuals who are excluded from the overseas transfer charge at the time of their transfer from a UK registered pension scheme to a QROPS, may become subject to the 25% tax charge at a later date, for example should they move from a country within the EEA (assuming their QROPS was also within a country within the EEA) to another which is not within the EEA.
Similarly, for someone who is subject to the 25% overseas transfer charge, they may actually be entitled to reclaim this amount at a later date should their circumstances change so that the overseas transfer charges are no longer applicable, for example should they move to a country within the EEA (if their QROPS was also within a country within the EEA), or should they become resident in the country in which their QROPS is based.
For those individuals who have already transferred their UK pension benefits to a QROPS before 9th March 2017, they will not be subject to the overseas transfer charge, including if they subsequently transfer from their existing QROPS (or former QROPS) into another QROPS (or former QROPS) at a later date.
What are we doing?
In light of this announcement, Concept Trustees (Gibraltar) Limited will be making arrangements to contact all relevant UK registered pension scheme administrators in the coming days on behalf of prospective members to determine whether a substantive request to transfer has been received before the 9th March 2017.
For those prospective members where it becomes apparent that a substantive request to transfer has been received prior to 9th March 2017, it is expected that the transfer should be able to proceed and will not be subject to the 25% overseas transfer charge.
We appreciate that during this period there will undoubtedly be a degree of uncertainty for some prospective members until such time as we can ascertain from the various UK pension scheme administrators whether they have received a substantive request to transfer, however please rest assured that we will endeavour to resolve these uncertainties as swiftly and efficiently as possible, before being able to revert to business partners, intermediaries and prospective clients to determine the most appropriate course of action.
Regular updates and communication will be maintained with all affected business partners, intermediaries and prospective clients to ensure that everyone understands the position, as it becomes known to us.
We would be grateful for your patience during what will be an extremely busy time for us.
Should you have any general questions around the revised rules on transfers to QROPS and particularly the overseas transfer charge, please do not hesitate to contact Sean Gillease, Sales & Marketing Manager on +44 (0) 1481 740599.
The European Union (EU) referendum has now concluded and the outcome is that the United Kingdom (UK) will leave the EU, albeit the actual process to leave the EU is likely to take a number of years.
For existing clients and prospective clients of Concept Group, there is seemingly very little impact as a result of the decision.
For existing members of our Guernsey delisted QROPS
There will seemingly be no impact as a result of the UK leaving the EU.
For existing members of our Gibraltar QROPS
There will seemingly be no impact as a result of the UK leaving the EU.
For prospective/future members of our Gibraltar QROPS
There is no immediate impact as a result of the UK’s intention to leave the EU and anyone considering a transfer to our Gibraltar QROPS, can still do so safe in the knowledge that any transfer will be an authorised transfer.
To reassure anyone who is considering transferring to a QROPS, the ability remains unchanged to complete transfers from a UK registered pension scheme to a QROPS and with the same associated benefits as before the UK’s EU referendum.
If you have any questions on this matter, please speak with your Financial Adviser in the first instance.
We are often asked by advisers and clients – how long will a transfer from a UK registered pension scheme to a QROPS take?
Unfortunately, the answer is always the same – it is impossible to say. The time it will take depends on a number of things, such as: the processes of the UK pension scheme provider, whether the funds will be transferred in cash or in-specie, the number of pension schemes the client has to transfer and finally, all documentation being received in an acceptable manner – such as due diligence being certified correctly etc.
From our experience a transfer from a UK registered pension scheme to a QROPS can take anywhere from 2 weeks to 6 months to complete.
The best way for clients and their advisers to keep the time taken for a transfer to a minimum is to ensure that everything being provided is complete and valid. In an effort to assist and streamline this process, Concept offers advisers the opportunity to scan their client applications in for a pre-check, which is designed to identify any outstanding items prior to the original documents being posted to us.
A UK registered scheme provider is likely to have its own internal processes to follow when a request from a member is received to transfer to a QROPS, but under HMRC requirements the registered pension scheme should carry out reasonable due diligence checks in relation to the transfer and must check the published ROPS list and should be able to demonstrate that such a check was carried out no more than one day before the transfer was made.
Following our involvement in the development of the Code of Good Practice for Combating Pension Scams, we’ve been able to further streamline our processes and dealings to ensure that a UK registered scheme provider has everything they require readily available to determine the bona fide of our scheme. This included the creation of a Scheme Validity Information Sheet which is sent to transferring UK registered scheme providers, detailing all of the required information, references and approvals which they need to ensure the validity of the scheme they will be transferring to.
Further information in respect of the transfer-out process from a UK registered pension scheme to a QROPS can be found on the HMRC website here.