Robert Burns BA (Hons), FCCA , Cert PFS

Director

Premier Pension Solutions SL

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By Robert Burns BA (Hons), FCCA , Cert PFS - Thu 11th Aug 2011

 

Tumbit Approved Partner

Over the last couple of years we and others have written numerous articles about the ability of non-UK residents in particular to transfer their UK pension rights to a Qualifying Recognised Overseas Pension Scheme (QROPS), and of the benefits of so doing. Over that period we have now arranged over 2,000 pension transfers.

The purpose of this short series of articles is to give you a brief overview of the main QROPS jurisdictions, how they work and which particular type of client or pension transfer they seem to suit best.

We must also not overlook the alternative of the UK based Self Invested Personal Pension Scheme. It would not be right to consider a SIPP as just being a poor relation to a QROPS as there are numerous instances where a SIPP solution is more appropriate, for example, where an individual has only just moved overseas and if there is a considerable degree of uncertainty as to whether or not they will remain overseas or move back to the United Kingdom.

In this article we will consider Guernsey as a jurisdiction for QROPS.

There is no doubt that Guernsey with its plethora of businesses well used to arranging offshore trusts gave itself a huge and early advantage in the overseas pension market by allowing non-Guernsey residents to participate in Guernsey pension arrangements. These are generally known as Retirement Annuity Trusts (RATs). Guernsey as a jurisdiction has marketed its QROPS offerings well, and in terms of the type of QROPS that is designed for the long term remains the market leader, warts and all. Guernsey QROPS prices have tumbled dramatically, halving over the last 6 months alone.

It is of course generally the case that until the individual who transfers to a QROPS has been outside the UK for five complete tax years that a QROPS offer little or no advantages as the benefit structures and certain taxation elements remain the same as they are for UK residents. It is only after that period of time that UK rules become more or less irrelevant and the QROPS operates more in line with the legislation associated with the jurisdiction holding the pension fund, in this case Guernsey.

However for Spanish residents there can be an immediate benefit:

Guernsey RATs are unusual in that when income is taken from one although it is drawn from the fund under Guernsey law it is regarded as being an ‘annuity’. There has been considerable success in people having the Spanish authorities accept this and therefore benefiting from the concessionary tax treatment in Spain associated with annuities.

Other benefits of a Guernsey QROPS:

The other key benefits associated with Guernsey QROPS for the long-term non-UK resident are:

1.) A lump sum from age 55 onwards of up to 30% of the fund - at least when legislation to this effect is finally implemented.

2.) For those under age 55 the ability to take a loan from the fund.

3.) Complete freedom from UK tax on death (UK tax is typically 55% of the fund).

Other Considerations

The ‘warts’ referred to above are associated with a lack of investor protection, and no financial ombudsman service to fall back on. It is also the case with Guernsey to look well beyond pricing, and to consider the flexibility and attitude of the provider if circumstances change on, for example, a return to the UK. Some providers, despite the recent introduction of a code of practice, can be less than helpful in relation to transfer out requests.

In our next article we will have a look at the Isle of Man as a QROPS jurisdiction.

For further information about QROPS and Pension Planning opportunities please contact us today via clicking the link Here and leaving a few basic details on the form at the foot of the page.