Malta

QROPS update 10th October 2011 Pension drawdown & QROPS and QNUPS

Submitted by qrops on Mon, 10/Oct/2011

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

 

A turbulent week for the pound ended with a rise against the dollar on Friday as traders booked

profits, after selling on Thursday following the Bank of England's announcement that there would be another round of quantitative easing, while better-than-expected U.S. jobs data also gave the pound a boost.

A build-up of short positions following the QE announcement had contributed to sterling bouncing back, but a lack of confidence over the state of the country’s economy kept investors cautious of actively buying the currency. Having previously hit a 14 month low of $1.5270 on Thursday, sterling was up over 1% on the day at $1.5640. Stronger than expected U.S. non-farm payrolls for September meant the pound rose above the $1.56 mark as the dollar came under heavy selling pressure.

There was a surprising lack of movement with the pound after it had been expected to drop

following Moody's rating downgrade of 12 UK banks. The limited reaction was because the

downgrades had not been as severe as some investors expected. “Cable is actually pretty well

supported in the near term. The market had become a little bit over-extended and we are seeing a correction taking place," said a FX strategist at Morgan Stanley.

The fragile state of Britain's economy was highlighted by the BoE's addition of 75 billion pounds to its 200 billion asset purchase programme as global growth slows, government spending cuts and consumers face high inflation and slow wage rises.

The pound also gained on the euro, and was up 0.6% to 1.1570, having previously been down at 1.1448 following the QE announcement. With no change in the rates from the European Central Bank on Thursday, the UK leads other developed countries in the latest round of injecting funds into the market while keeping rates historically low.

Analysts had suggested that they expect the euro to come under pressure, and remain at risk as market perception that policy makers have again failed to ease growing fears of a Greek default and are not taking the appropriate steps to prevent a contagion from the Greek debt crisis spreading to the euro zone banking system.

 

IN THE UK

  • After the Bank of England's unexpected QE increase the pound reached a 14 month low of $1.5270 on Thursday, but responded on Friday and was up over 1% to $1.5640
  • Bank of England policymaker Martin Weale said evidence shows that quantitative easing boosts the economy and there is no reason to believe that it feeds directly into inflation without supporting growth. 
  • Sterling ends the European session on Friday at pre QE levels against the euro hovering around €1.16
  • Moody's cut the credit rating of 12 British banks due to the likelihood of less state support in a future crisis.

 

ELSEWHERE

  • Fitch Ratings Agency downgraded both Spain and Italy. Fitch has downgraded Spain to 'AA-' from 'AA+', and the outlook for the Spanish Kingdom is negative. The agency also hit the Italian Republic which has been downgraded from 'AA-' to 'A+'.
  • The agency also said the sovereign debt crisis - which has seen financial markets drop severely on worries that some governments, particularly Greece, will be unable to repay all their borrowings - will take time to fix. The report, is blowing hopes Europe will be able to contain the crisis, sending euro to negative territory against major rivals in the short term, and advancing further falls for the days to come.
  • EUR/USD has risen and is holding in the 1.33 – 1.35 range.
  • Merkel and Sarkozy meet yesterday and say there will be a comprehensive package in place by the end of the month.
  • Following Fitch’s downgrade, Moody’s put Belgium under review for possible downgrade.
  • Dexia bank agrees to sell, joint funding of €90bn coming from France, Luxembourg and Belgium.

 

DATA TO LOOK OUT FOR (all times UK BST)

  • Columbus Day in the US today means there are no data releases from the US and markets are unlikely to be influenced by trading volumes.
  • It’s a quiet day in Europe also, Malta vote on EFSGF and Norwegian CPI inflation figures are released for NOK buyers and sellers.
  • This evening at 11.00pm RICS Housing Price Balance Data is released; the figure is expected to remain on par with last month’s disappointing -23 as the domestic property market still remains under pressure.

 

Current Spot Rates (9.00am)

10th October 2011

 

 

 

 

 

 

 

 

 

USD

EUR

AUD

CAD

CHF

DKK

NOK

HKD

SEK

ZAR

JPY

GBP

1.5627

1.1538

1.5816

1.6116

1.4294

8.5988

9.0158

12.1700

10.54

12.25

119.822

USD

 

1.3534

1.3603

1.3861

1.2294

7.3955

7.7542

10.47

9.07

10.54

103.055

EUR

0.9923

 

1.3708

1.3968

1.2389

7.4526

7.8140

10.55

9.14

10.62

103.850

 

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residence and Domicile - a brief overview

Submitted by qrops on Mon, 11/Jan/2010

Questions surrounding residence and domicile are a major consideration for anyone considering living abroad.

Domicile can often be overlooked as a complex aspect but there are guidelines and could be important with regard to inheritance tax. Someone moving abroad to eliminate or reduce inheritance tax it is a vital factor. 

It can be important to lose UK domicile in order to avoid UK inheritance tax on overseas assets. It is also an important consideration in general law and will impact on succession law.

There are two main types of UK domicile:

  • A domicile of origin which is given to you at birth and based on your parents domicile.
  • A domicile of choice where you can choose a new domicile 

If you were born in the UK to UK parents and wish to move outside the scope of inheritance tax then you will need to establish an overseas domicile of choice to hold your assets overseas. 

If you are planning to leave the UK in order to avoid inheritance tax, you need to look at this completely separately to leaving the UK in order to avoid capital gains tax or income tax. 

The difference is that you will only need to lose your UK resident status in order to avoid income tax and capital gains tax, however, in order to avoid inheritance tax, you will also need to lose your UK domicile status. The scope of domicile is much wider than the scope of residence as it does not only involve losing your residence status, but it also involves severing all ties with the UK and showing a clear intention to live in the country of your new residence permanently.

There are two aspects to establishing an overseas domicile:

  • There is a requirement to have residence in a particular country.
  • You need to have an intention to live there permanently or indefinitely. 

Keeping your UK domicile means that you are still within the scope of UK inheritance tax on your overseas assets, meaning that, after UK reliefs have been offset, any cash in offshore accounts or overseas properties are consolidated with your UK assets, which include your house, car, investments etc. and are will still be subject to UK inheritance tax. 

Losing your UK domicile means that you will only be liable for inheritance tax on your UK estate, meaning that any overseas properties, investments or any other overseas assets will not be liable for UK inheritance tax. 

You can also actually extend the benefit of only being taxed on your UK estate by using an offshore company to hold your UK assets. This would then also take those UK assets held by the offshore company out of the scope of UK inheritance tax. 

The reason for this is that you will no longer be classed as owning UK assets, but instead you will be classed as owning shares in an offshore company. Shares in any offshore company would be outside the scope of inheritance tax for you if you have lost your UK domicile status. 

There are clear benefits to losing your UK domicile status, but often it is unclear how to actually lose that status. 

One requirement is to establish an overseas residence. This essentially means that you will need to establish a home overseas. This does not necessarily just mean your tax residence, but would need to actually include your main residence. 

If you have multiple homes in different countries then your position is less clear and you would need to look for the ‘sole’ or ‘main’ residence. 

If you do have more than one overseas home, then clearly establishing one as your favourite and which is your real home is advisable. 

It should be noted that once you have lost your actual UK domicile, you are deemed UK domiciliary for 3 years after you leave the UK. This means that within the first 3 years of leaving the UK you would still be within the scope of UK inheritance tax and therefore the best that you can hope for is to be outside the scope of UK inheritance tax on your overseas estate after a 3 year period from leaving the UK. 

This actually assumes that you would lose your UK domicile when you leave the UK, so it would be very important to establish your residence and intention firmly overseas. If you were to regularly visit the UK for example, this would cast doubt over your intention to live overseas and is therefore not advisable. 

There are many countries that do not have any form of inheritance or estate taxations. Countries with no inheritance estate tax are Australia, Canada, China, India, Mexico, Russia and Sweden. If you are looking for a country with low taxes generally then the ones to look for are generally Channel Islands, Cyprus, Gibraltar, Malta and The Isle of Man.

Features of QROPS

Security of Plan provider

 The Pension Plans are provided by UK Financial Services Authority authorised and regulated Merchant Banks, Insurance companies and Trustee companies via their offshore centres, Typically The Channel Islands and The Isle of Man where the consumer protection is as good as or better than the UK, providing added peace of mind for continuity of service, product and accountability.
  

Transfers from existing UK Personal Pensions  

 

 The Plan is specially designed to take transfers in from other providers allowing you to consolidate your retirement or saving funds/assets into a tax efficient structure.

The scheme is accepted as a Qualifying Recognised Overseas Pension Scheme (QROPS) by Her Majesty’s Revenue and Customs (HMRC) and can receive transfers from UK Personal Pensions via a UK authorised and suitably regulated Independent Financial Advisory Firm.

No need to purchase an Insurance Company Annuity

On the death of the Member the residual value of their Plan passes to their Beneficiaries, unlike a traditional insurance annuity where any remaining assets become the property of the annuity issuer.

The Plan typically falls outside of your estate

On a Member’s death their Plan’s assets can typically pass to their Beneficiaries without going through probate or being aggregated with their estate.

Flexibility for future generations

Even after the Member’s death, you have the following options:

  1. To continue or start providing an income to the Member’s spouse or dependants;
  2. To segment the fund to provide different types of benefit for the Member’s various chosen Beneficiaries;
  3. To transfer the proceeds into a new Plan for the benefit of a Named Beneficiary;
  4. To retain the Plan (hold in trust) for distribution at a pre-defined date or future event;
  5. To wind up and pass the proceeds of the Plan directly into the Member’s estate for distribution from there; and/or
  6. To wind up and pass the proceeds of the Plan directly to the Member’s chosen Beneficiaries

The Plan does not form part of your personal assets when established 

 

Assets are held under a Pension trust as are all Pension funds. This provides the protection of assets from unreasonable claims.

Future Planning Estate and Succession Planning Benefits

 

The assets whilst in the Plan are free of income tax, capital gains tax, wealth tax (where applicable), donations tax (where applicable), and can be passed onto successors free of any tax (e.g. Inheritance tax (IHT)) and need not be taxable until the successor takes benefit. The actual benefits to a Member will always depend on their personal circumstances.

A carefully tailored range of investment strategies

You have a suite of investment strategies available for investment. These enable you to marry your risk and return profile to an optimised portfolio matching your personal requirements now and in the future (free switching between strategies).

Discretionary investment management utilising a multi asset, multi style, multi manager investment methodology

The Member has exposure to a full spectrum of assets from equities to property and bonds as well as commodities and alternative investments, together with the knowledge that some of the world’s most sought after investment specialists are managing your Plan’s assets.

Cash deposits to compliment investment strategies

You can place contributions into a base rate tracker deposit account in Sterling, Euro or US Dollars to meet liquidity requirements or a very low risk investment profile. A Member can split their contribution between an investment strategy (strategies range from very cautious to growth orientated) and cash, in a currency of their choice (Sterling, Euro or US Dollars).

Convenient switching of strategies within your Plan

 

A Plan that adapts to the Member’s changing life circumstances is key. Remember, switching between investment strategies may be necessary in the future.

Savings are tax efficient

Income and capital gains arising from the investments held within the Plan, or benefits paid by the Plan, are not subject to UK tax. This means that the Member’s Plan provides a very efficient tax free environment in which your contributions can grow (some withholding tax on dividends cannot be reclaimed).

Another benefit is that assets in the Plan are outside the scope of the EU Savings Tax Directive.

In addition, tax authorities internationally, including Spain and Portugal, treat Retirement Schemes, and annuity income derived from them, favourably with typically only the income element of annuity payments attracting income tax. This can provide further benefits and may allow scope for financial planning. In most cases this reduces significantly the amount of income tax on income.

Annuity income and capital payments

The QROPS plan should provide a regular income option by way of annuity that can underpin budgeting or personal cash flow requirements. Alternatively, lump sum capital payments are an excellent way for Members to access cash and can assist in a myriad of scenarios from paying off a mortgage to purchasing a major asset. In certain instances lump sums can even be received tax free (may be deemed as return of capital).

Adapting to your life

The “Retirement Option” is distinctive in so far as it has the ability to adapt to meet the different requirements of pension legislation in many countries from around the world. This means that the Member’s Plan won’t become obsolete should you move between jurisdictions, and you won’t face the hassle of moving assets between providers in order to ensure that their savings remain tax efficient.

A neutrally located Plan

The Plan is domiciled in The Channel Islands or The Isle of Man, which means the Member’s Plan is held in a very favourable jurisdiction both from a political and tax perspective. This status protects the assets of their Plan should they live in or move to a country that imposes restrictions on the flow of assets across its borders, is politically unstable or has unattractive social or fiscal policies.
Also you will not be subject to future changes in UK Personal Pension legislation.

Other jurisdictions include Gibraltar, Malta, Luxembourg and more distant shores of Hong Kong, Australia and New Zealand

Convenient Reporting Online access

 

Many plans have the member on line access so you can view the different elements of your Plan, whenever you like, to keep informed about its progress. All online.

Annual valuations

 

Members will receive at least bi-annual valuations of both the cash and investment element of your Plan. 

Two fee structures: either fixed or percentage based

The plans fee structures are transparent and offer you a choice between several fee options, which lets you and Gerard associates Ltd select a fee which is most appropriate to your circumstances.

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