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					QROPS - Opportunity or talking point!

Chair: Peter Williams
Head of Industry Development, AEGON
Mike Morrison
Head of Pensions Development, AXA Winterthur Wealth Management
QROPS - Where are we now?

Mike Morrison
Head of Pensions Development, AXA Winterthur Wealth Management
One in five British pensioners
will retire overseas by 2050

“ Our research suggests that around 5.5 million British
  nationals live overseas permanently (equivalent to 9.2 per
  cent of the UK’s population). In addition, an estimated
  500,000 British people live abroad for part of the year,
  mainly through second-home ownership. This means that
  nearly one in ten British nationals lives part or all of the
  year abroad. It also means that there are more Britons
  living abroad than there are foreigners living in the UK.”

 IPPR 2006

“ There has been significant growth in the number of British
  emigrants who are retiring or taking early retirement
  abroad. The UK government is currently estimated to be
  paying more than £2 billion per annum in pension
  payments to more than one million UK state pensioners
  living overseas. It is also transferring several hundred
  million pounds per annum to help other EU states provide
  healthcare to UK pensioners living in Europe.”

 IPPR 2006
• The questionnaire asks whether the respondent would consider to move to
  another region or country after retirement. The differences between the UK
  and the rest of Europe are really big: whereas two thirds of REU people
  would not even consider the possibility, two thirds of the UK residents do
  consider it. To a big extent, UK citizens would consider moving to another
  EU country after retirement (32% of them, compared to just 10% in the rest
  of EU) -probably to warmer latitudes-. This is not to say that British
  pensioners will colonize Southern Europe, but it is quite interesting to note
  that this is quite an idiosyncratic type of British mobility.

Mobility in the UK from a comparative EU perspective

Enrique Fernández Macías 2006

• Pre A day it was possible to transfer abroad but complex
A Day – Finance Act 2004

• Compliant with
   – IORPS
   – Commission
   – ECJ
• Invention of ROPS and QROPS
Post A Day

To make a transfer overseas with no tax penalty or
sanction the receiving scheme must be a QROPS
• Is an overseas pension scheme (S.150 (7) FA2004)
• Is a recognised pension scheme (S.150 (8) FA 2004)
• Meets other conditions (S.169 FA 2004)

• Is an occupational scheme and regulated by the body
  regulating such schemes in the country where it is
  established, or
• It is not an occupational scheme and is regulated by the
  body regulating such schemes in the country , or
• No regulatory body exists and either the scheme is
  established in an EU State (or Norway, Iceland,
  Liechtenstein) or the scheme will designate the transfer
  to pay 70% as a pension for life with benefits only
  payable at NRA.

Scheme needs to meet Primary Conditions 1 and 2
and at least one of A and B
1. Open to residents of the country in which it is
2. Scheme is established in a country where there is a
   system of personal taxation where tax relief is available
•   A – registered /approved /recognised by country where
•   B-If no system then scheme is resident and restricts benefits
Qualifying if...

• Notifies HMRC that it is such a scheme and will provide
  whatever evidence they require
• Undertakes to tell HMRC if it ceases to be a ROPS
• Undertakes to comply with HNMRC information
• It has not been stripped of its QROPS status by HMRC

• Provided by Administrator to HMRC
• Members name/ address/ dob /NI Number
• Total amount of sums /monies/ assets transferred
• Date, name of the scheme and the country or territory
  under which it is established and is regulated
• For a “relevant member” the QROPS must report date
  amount and nature of payments made in respect of that
The Interesting Bit

• Under regulation 3(3) of SI 2006/208 a QROPS will not
  have to report to HMRC a payment (or a deemed
  payment) if the member is not tax resident in the UK
  when the payment is made and has neither been UK
  resident in that tax year nor in any of the previous five tax
  years. But a QROPS will need to check on the position
  when a payment is made as the member could have
  become UK resident again after a period of non-

• List on HMRC not exhaustive
• Amended for Australia
• US schemes?
• Do not assume – see the certificate !
An issue

Q. What are the IHT implications for an overseas transfer
   to a QROPS assuming a member remains UK

A.   The transfer would not of itself be a chargeable occasion for IHT purposes. As a
     QROPS is not a UK registered pension scheme the funds in it will be caught by
     paragraphs 57 and 58 of schedule 36 to FA 2004 (and the transitional relieving
     provisions will not apply). If the funds have a UK source they will be "relevant
     property" for the purposes of the IHT regime in Chapter III, Part III IHTA. This
     means, broadly speaking, that there will be IHT charges on the current value of
     the funds every 10 years and on any payments of capital out of the scheme. If the
     UK domiciled individual died whilst entitled to a pension from the QROPS there
     could be an IHT charge on the funds being held in the scheme to produce that
     pension income.

  Inheritance Tax (Qualifying Non-UK Pension Schemes)
                     Regulations 2008

• Provide for the definition of a qualifying non UK pension
  scheme to which certain inheritance tax charges will not apply
• Scheme must be tax recognised and satisfy certain regulatory
• If not recognised and outside EEA then must pay 70% as a
  pension income for life
Some Examples
Isle of Man

• In order to comply with UK and IoM tax and pensions
  legislation certain conditions must be met. The basis of
  law is founded upon the principle that “the ability to
  transfer pension funds and benefits makes it easier for
  employers to attract key personnel and for the Island to
  attract high net worth individuals”.

• A condition to be met is that the member must be
  deemed resident in the IoM for a transfer to be approved.
Isle of Man

To secure QROPS approval the following
conditions have been met:
• That the scheme is open to residents of IoM
• That the scheme is regulated
• That the scheme is registered with tax authorities
• That tax relief is provided in respect of contributions
• That most of the benefits paid are subject to tax
• That 70% of funds must provide an income for life
• That pension benefits can be paid no earlier than normal retirement
• That pensions in payment are taxed by the local tax authority
Isle of Man

• The UK/Isle of Man Double Taxation Agreement is to be
  amended and will allow pensions to be taxed in the
  country of receipt.
• Individuals resident in the Isle of Man in receipt of a
  pension from an UK scheme will be able to benefit from
  the lower rates of Manx taxation (ie. 10% standard and
  18% higher rate).
• Provisions of the 1955 arrangement between the two
  countries to be amended. Whereas previously pensions
  were taxed at the higher of the tax rates of the two
  countries they will in future be taxed in the country of

• ROSIIP (Regulated Overseas Self Invested
  International Pension) is a scheme specifically
  designed to enable non UK resident individuals, who
  have accrued pension benefits in the UK, to transfer
  these out once they have left the UK.
• In order to be in a position to receive transfers from UK
  Authorised Pension Schemes, ROSIIP needs to be
  registered as a QROPS (Qualifying Recognised
  Overseas Pension Scheme) with HMRC in the UK. Ref
  No: QROPS500497.
Singapore was removed from the list!
Removal from HMRC List
• a scheme may be removed from the website list in any of the following
• If a QROPS had asked to be removed from the website list but it was still a
  QROPS, a transfer made to it before removal would be an authorised
• If a scheme was eligible to be a QROPS when it applied and has had its
  status withdrawn because it failed to comply with the information
  requirements about transfer members, a transfer made to it before the
  withdrawal would be an authorised payment.
• If HMRC had discovered that a scheme's original notification that it was a
  recognised overseas pension scheme (ROPS) was inaccurate, a transfer
  made to that scheme from a UK registered pension scheme after 5 April
  2006 would be an unauthorised payment. In general, an unauthorised
  payment made in these circumstances would potentially be liable to tax by
  reference to the value of the sums and assets transferred. ( in reality will
  depend on circumstances)
Tax Consequences of removal from the List
• In the first two scenarios the normal QROPS charging rules would
  apply. Payments from the scheme would only give rise to a charge
  on the individual if they were unauthorised payments under FA 2004
  (and if the individual had been UK resident in the tax year of payment
  or in any of the previous five tax years). A transfer from the scheme
  to a UK registered pension scheme or to a QROPS would be an
  authorised payment so it would not give rise to an unauthorised
  payments charge.
• In the third scenario the normal QROPS rules would not apply. A
  transfer from the overseas scheme to a UK registered pension
  scheme or a QROPS would not give rise to a charge under FA

• Residence
• Ireland – property management company
• Restaurant reviewing!
• How easy is a bona fide company set up in Ireland ?

• Jersey
• Guernsey
• Ireland
• Cyprus
• Spain – abolishing wealth tax?
Key Issues

• Residence
• Domicile

• What happens after 5 years?
• Should be happy with the tax rules in the jurisdiction in
  which the QROPS is.

“ HMRC is monitoring those schemes registered as
  QROPS and transfers to QROPS closely and will take
  appropriate action against any abuse it finds. If a scheme
  is not a QROPS, transfers from UK registered schemes
  out of UK tax-relieved funds will not be recognised as
  transfers and will attract a tax charge.”

HMRC June 2008

• Aim is for those moving abroad
• Non UK resident and domiciled
• Not just to avoid 82% ASP tax charge!
Advising Clients

• In the past was easy
• Now may need to opt in to MiFID for “passporting”
• Increased capital adequacy
• More detailed Regulation

A Final Thought

The EU is all about
• The free movement of services
• The freedom of establishment;
• The free movement of persons
• The free movement of capital.
European Issues

• IORPS Directive – on the activities and supervision of
  institutions for occupational retirement provision
• Pensions Portability Directive
• The aim has been “harmonisation”

• Danner /Safir/ Skandia/Weilockx
• C-150/04 Commission v Denmark – re tax relief
• C-522/04 Commission v Belgium – re transferring pension
• HMRC can probably insist on
   – Knowing that a transfer is to a pension scheme
   – Limiting contributions
   – Taxing benefits

• but HMRC possibly cannot
   – control non-UK pension scheme investments
   – restrict transfers within EU
   – restrict contributions to EU schemes
   – require non-UK schemes to report
The Future
• Will QROPS be restricted to residents only?
• Next steps
• A European case?
Thank you for your time

Winterthur Life UK Limited is authorised and regulated by the Financial Services Authority.
Information regarding tax and practice is based on Winterthur Life’s understanding of current
legislation and HM Revenue & Customs policy/practice. Legislation may change in the future.

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Please note that past performance is not a guide to future performance. The value of units can fall
as well as rise and is not guaranteed. Investors may not get back the full amount invested.

The information contained in this presentation does not constitute advice.
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