manager

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).

IN THE UK 

·         The outstanding event of the day was a unanimous move by the central banks of the US, the UK, Switzerland, Japan, Canada and the ECB agreeing to reduce the interest rate on dollar liquidity swap lines by 50 basis points, immediately after the announcement, sterling moved higher towards a fresh weekly high of $1.5775 against the US dollar.

·         UK policy makers are becoming increasingly cautious regarding the economy as Chancellor George Osbourne insisted that current austerity measured kept the UK ahead of the curve compared to others facing threats from the Eurozone crisis.

·         Speculation mounted that the BoE will resort to a £100-150Bn extension of its asset purchase plan as Quantitative Easing is still the weapon of choice in the face of increasing likelihood of undershooting the 2% target for inflation. 

ELSEWHERE

·         The risks posed by the Eurozone crisis were epitomised by the first ever negative yield for German one year bonds, reaching a low of -0.07% as invested settled for the lesser of innumerable evils.

·         Rumours also surfaced suggesting that the ECB monetary policy meeting on December 8 could see a cut in the current 1.25% interest rates.

·         The Fed claimed the move to reduce rates on dollar swaps would “Ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”

·         The MSCI All-Country World Index climbed 3.1% by mid afternoon and of the 24 major commodities, only natural gas suffered a decline as markets reacted to the announcement on liquidity. All 16 currencies most traded against the Dollar also posted gains. The indication that central banks are willing to working together may bring some longevity to the resulting risk rally even if the effects were sudden.

·         After initially weakening as Eurofin conceded their bailout fund had been wide of the mark, the euro strengthened 1.1% against the US dollar to close the European session at $1.3465, having peaked at $1.3533 which marked the biggest intraday jump since lenders agreed a 50% write-down of Greek debt.

·         The biggest winners against the US Dollar were the Australian Dollar, which grew 2.7% to $1.0272 and the Brazilian Real, which grew 2.2% to B$1.8078. Canada’s dollar extended gains after data showed the nation’s economy grew at an annualized 3.5% in the third quarter beating the forecasted 3% and overall, the Loonie strengthened to a high of c$1.0187.

·         Early in the day S&P had cut debt ratings on lenders from BoA to Goldman Sachs to UBS but data on US business activity and employment and housing markets topped estimates.

·         The ADP Employer Services report showed companies added 206k, expected at 130k, workers in November bolstering optimism in the labour market.

·         The Chicago Purchasing Managers Index, business activity expanded at fastest pace for 7 months signalling a continuation of the factory-led expansion.

·         Pending home sales were also up, 10.4% in October, recording their biggest gain for 12 months and 5 times the forecast.

·         China contributed to risk appetite as the People’s Bank cut the reserve requirement ratio for banks by 0.5% in order to spur growth. The move shows a reversal in policy which will augment the capital by some Rmb400bn ($63bn). 

DATA TO LOOK OUT FOR (all times GMT)

·         11:30 The BoE Financial Stability Report will indicate how confident the central bank is regarding the stability of the  financial system as it stands and assess the risks it faces.

·         13:30 US Unemployment Claims are expected to number 390k. This indicator of newly unemployed is highly correlated to consumer spending and is therefore of great interest to many market participants.

·         15:00 After the Chicago index read positively yesterday, the ISM Purchase Manager’s Index, also from the States, is expected to follow suit with 

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.

Qualifying Recognised Overseas Pension Schemes (QROPS)

HMRC Update:

HMRC issue updates to Pensions via the Registered Pension Schemes Manual ( RPSM ). There are normally vast amounts of technical detail but careful review usually throws up some interesting developments:

QROPS and Taxable Property

RPSM13102180  and  RPSM14101070  

The Taxable Asset Transfer Fund attributes payments to a relevant transfer fund. In this case the amount transferred from a UK registered Pension to a QROPS.

The taxable property unauthorised payment charge is not a member payment charge under schedule 34 of the Finance Act 2004. It applies regardless of whether or not a transfer member has been non UK resident for more than five tax years. Nor is there any time limit on the requirement that the manager of a QROPS reports to HMRC any payments that are referable to a transfer member´s taxable asset transfer fund.

HMRC on October 27^th 2009 updated the Pension scheme manual to confirm that residential property is a taxable property asset along with the usual, fine art, antiques, fine wine, boats, cars etc.

These tangible moveable assets if purchased within a QROPS will be subject to the taxable property unauthorised payment charge:

Tax charges on taxable property

If a QROPS invests in taxable property, as well as there being an unauthorised payment charge on the member of 40% of the property’s value, the scheme administrator will be liable to a scheme sanction charge of 15%.

Any income from the taxable property would be taxed at 40% and any capital gains earned as a result of the disposal of such assets would also be taxed at 40%. If the income from the property was less than 10% (e.g. as with ground rents) then the tax would be based on 10% of the property’s value.  

QROPS

 The underlying investments within a QROPS must be carefully considered. The impact of how investments are held and who controls them can lead to liabilities from HMRC and from your new country of residence.

A QROPS is not simply a domicile for the Trust or vehicle holding your QROPS fund. The underlying assets should be offshore to avoid UK Tax.

RPSM14101020  confirms that QROPS status does not confer on an overseas scheme the tax exemptions to which a registered pension scheme is entitled.

In particular, it does not affect the scheme´s liability to UK tax on any income it has from UK property. And if a QROPS invests in a UK-based unauthorised unit trust any gains accruing to that unit trust remain chargeable if the overseas scheme is exempt from capital gains tax or corporation tax on such gains only by reason of its residence.

Further consideration should be given to how your residence affects the QROPS. Whilst self investment is commonly available countries that do not recognise Trusts may seek to tax you on an arising basis, arguing that it is you the individual controlling the investment decisions and should pay tax annually on the fund as well as the income. Discuss these issues with you adviser carefully and as with any UK authorised and regulated firm – get it confirmed in writing.

This article has been provided by Gerard Associates Ltd.

For more information contact:

Gary Barlow    Tel: +44 (0) 1884 250118

Email: gary.barlow@gerardassociates.co.uk

www.gerardassociates.co.uk

QROPS (Qualifying Recognised Overseas Pension Schemes) HMRC Update:

HMRC issue updates to Pensions via the Registered Pension Schemes Manual ( RPSM ). There are normally vast amounts of technical detail but careful review usually throws up some interesting developments:

QROPS and taxable property

RPSM13102180  and  RPSM14101070  

The Taxable Asset Transfer Fund attributes payments to a relevant transfer fund. In this case the amount transferred from a UK registered Pension to a QROPS. The taxable property unauthorised payment charge is not a member payment charge under schedule 34 of the Finance Act 2004 it applies regardless of whether or not a transfer member has been non-resident for more than five tax years. Nor is there any time limit on the requirement that the manager of a QROPS reports to HMRC any payments that are referable to a transfer member´s taxable asset transfer fund.

QROPS

 The underlying investments within a QROPS must be carefully considered. The impact of how investments are held and who controls them can lead to liabilities from HMRC and from your new country of residence.

A QROPS is not simply a domicile for the Trust or vehicle holding your QROPS fund. The underlying assets should be offshore to avoid UK Tax

RPSM14101020  confirms that QROPS status does not confer on an overseas scheme the tax exemptions to which a registered pension scheme is entitled.

In particular, it does not affect the scheme´s liability to UK tax on any income it has from UK property. And if a QROPS invests in a UK-based unauthorised unit trust any gains accruing to that unit trust remain chargeable if the overseas scheme is exempt from capital gains tax or corporation tax on such gains only by reason of its residence.

Further consideration should be given to how your residence affects the QROPS. Whilst self investment is commonly available countries that do not recognise Trusts may seek to tax you on an arising basis, arguing that it is you the individual controlling the investment decisions and should pay tax annually on the fund as well as the income. Discuss these issues with you adviser carefully and as with any UK authorised and regulated firm – get it confirmed in writing.