Offshore Your Pension Pot, Reduce Tax
What is it about GREAT Britain – everyone wants to be successful, successful people are looked up to, but they are envied too and when they clearly have made a mint from their success they are often disliked and hounded and made to feel like outcasts. What a marvellous country…so glad there are no restrictions on leaving it!
Why the tirade? Well, it seems that the rise in the numbers of Brits retiring abroad has in part led to the government making it easier to offshore a pension pot and avoid tax in the UK. At the moment it is mainly those with substantial pension pots who are investing their retirement savings offshore, and so they are being tarred with the ‘you’re successful, we hate you’ GREAT British brush. But with a massive rise in the numbers of pensioners likely to be moving abroad by 2050, soon far more Brits could be hounded in their retirement!
If you’re facing retirement, you have a healthy pension pot and you’re thinking about moving abroad to enjoy better weather, better culture, a more supportive government and less crime perhaps, we couldn’t be happier for you. And what’s more, we have some good news for you too. The British government introduced a brand new type of pension back in 2006 and it is tax advantageous and attractive to many who are thinking of living abroad in retirement.
Before we go any further we have to just mention that this site does not give financial advice, any information contained herein is for information purposes only, to determine what you should do with your pension pot or for any other fiscal queries you may have, seek qualified financial advice!
Okay, so, this new pension is called a QROPS which stands for qualifying recognised overseas pension scheme and in a nutshell, for those who are retiring abroad it can mean that they escape taxation altogether depending on how they make used of the QROPS and where they retire to.
What is upsetting some mealy mouthed types in the UK is that those who have invested into pensions in the UK will have received tax relief on their contributions – well now that some are able to offshore their pension and abide by the qualification rules for the scheme before taking their entire pension income and/or lump sum tax free, there are some such as Lord Oakeshott, Liberal Democrat Treasury spokesman who is allegedly actively complaining that this is just ‘so unfair’ to the rest of us stuck behind in the UK and having to pay into HMRC’s pot. To find out more about how you could benefit, a great site that is definitely worth reading, and make sure you download their free guide is www.qropsguide.com
HMRC are being quite good about it all though, all they want to ensure is that QROPS set up abroad are qualifying and abide by the government’s qualification rules. So, we would say to the moaning minnies who dislike others’ successes and triumphs, who complain when others put in more effort, work harder, save harder and seek better financial advice and find loopholes or advantages to exploit, that the option is actually potentially open to them too! If you can’t beat them, join them!
British Expat? Is it possible you could ever return to the UK?
There is now an offshore savings and investment structure that can have massive benefits for any British Expatriate that could possibly be returning to blighty. Lets say you live in Dubai, or Germany or Saudi, wherever? You can now plan for your return with a fully UK approved vehicle that will allow you to take 5% per year as a tax free income for 20 years. What’s more, by planning NOW, any un-used years can be rolled forward. So say you structure correctly now, and return to England in 5 years time, that’s a huge 25% tax free income to be carried forward. And if your retiring, this structure means that should you ever need long term care in the UK, this particular type of savings vehicle cannot be touched by the government. Many, many people already in the UK are now using this as a great way to protect their assets, and any that were expatriates wish they had known about it years ago. You need to have savings or investments of at least 50,000 GBP to qualify, there is no upper limit. If there is any chance you could return to the UK, you should use our ‘Offshore Investment Designer’ service right now to find out how you could benefit.
Saving for a comfortable retirement!
One of the most fundamental issues for an expatriate to think about when deciding on his/her financial planning is to make sure that they are preparing for their retirement. Many expatriates do not get ahead in the retirement race as they are scared of it encroaching on to their standard of living today. With careful planning it is easy to get ahead without hindering your current lifestyle. Don’t think that tomorrow will never come as it comes soon enough and there are so many options open to you. Remember that as an expatriate you can benefit from tax advantages and often defer any tax liability; your capital grows faster.
It is often hard when imagining your retirement to get away from the thought of the pleasure of not having to work anymore and sipping cocktails in the sun, or a beer on the golf course. This dream is great but there is also the serious side of retirement: the planning to pay for its enjoyment. Careful planning can avoid a financial disaster and a miserable retirement.
Rule 1. Don’t panic. No matter what your financial situation is right now, there are plans and solutions available to you to help you do the very best for your retirement. Your expatriate status can give you a significant financial leg up the pension ladder. You will not only feel much better about your future financial security, you will also have set yourself head and shoulders above your peers back home in terms of getting money in place for a comfortable retirement.
Rule 2. Plan. Be realistic – what do you need - £30,000 a year? £50,000? £200,000? A lump sum of £250,000 – it is your financial situation. No one is going to give you something for nothing, and so to ‘earn’ the payout you require you are going to have to save and plan for your retirement. Now, how many paydays have you got until you retire? How many days have you got to save towards your pension? Well, if you’re 40 and you want to retire at 60 you’ve got just 240 pay days...what if you’re 50? Do the math’s. Oh, and did we forget to mention inflation…? Scary stuff isn’t it! Nonetheless, don’t give yourself sleepless nights as by saving and investing regular amounts, however small, you can make a difference and avoid financial disaster. For those of you already retired, by carefully investing a lump sum you can maximise your income potential. There are so many more retirement savings options available to you as an expat that give you tax benefits, financial benefits and flexibility benefits. An onshore UK pension plan may force you into buying an annuity but a carefully and appropriately chosen offshore pension equivalent can let you take an income without ever having to buy an annuity. Take a closer look at what is available to you by using our investment designer. If you already retired, have not bought an annuity and intend to be an expatriate for at least 5 years, there is great news.
Estimated that 75% of savers could net 20% more income if they knew where to look
A new report from a leading expat publisher suggests that we are just not receiving the best deals on our savings accounts. For those of you looking to get the very best offshore bank rates for your money, there are some great rates out there if you know where to look. What most expatriates are not aware of, and what most banks don’t want you to know, is that most of the leading banks, offshore and onshore, have TWO ways to increase the amount they hold on deposit, and can therefore lend others or invest for a profit.
No. 1 – Advertising
The first is through advertising. Each bank when they need more deposits advertises an attractive rate of interest. You apply; prove who you are and send a certified copy of your passport and proof of address. Yet, you will often find at the end of the fixed term that your bank rate is no longer as attractive as it was initially when comparing to the rest of the market. These terms can be as little as three months and all you have to do is read the small print to realize what the banks are doing by offering you interest above or rollover your deposit beyond that of other banks. It just means you are likely to invest with them but it doesn’t mean that their bank is the best place for your money. When you become aware of what has gone on, what do you do? You withdraw your money and start looking for the next home for it. All the while this means that your hard earned cash is not earning interest. You then need to go through the whole process again – proving who you are where you are and where the money came from and this means certified documents again. These headaches often lead to many of us not bothering to change the bank provider. What is more, when you live in Europe, you come under the remit of the EUSD and are being subjected to an automatic exchange of information or a withholding tax deducted at source.
No. 2 – Offer Institutional Rates to pension funds and large investors, or groups
The second option is to offer institutional bank rates to large financial advisers, and their clients, life assurance companies and pension funds etc. These will often be much higher than what you may see advertised because the advertising does not need to be paid for. If you seek comprehensive and professional advice you could benefit from these sorts of rates. A good adviser may also be able to structure a totally confidential holding vehicle for you so that there is no deduction of tax, or at the very least tax deferral. Consequently, you can legally avoid the exchange of information required by the EUSD or the 20% deduction of your gross interest. By using such a vehicle, you can switch deposit rates with only a faxed instruction and avoid the administration of proving who you are every time you wish to change the deposits to more attractive rates i.e. please release my deposit from bank A at 6.5% and place with bank B at 7.2%. This is then done immediately for you. Another benefit is that through such a structure, you can diversify your bank deposits through various banks or building societies so that you do not hold all your eggs in one basket and expose yourself to any 1 bank being a victim of the credit crunch.
EU Savings Tax Update & Solutions
Automatic exchange of information is of course the ultimate objective of the Directive, but a number of the nations have instead adopted a policy of automatically withholding tax from the customer’s gross interest earned. The level of tax withheld on a customer’s account initially started at 15% in 2005, but was quickly
raised to 20% in the summer of July 2008. We should all be aware however that it doesn’t stop there; by 2011 the tax automatically withheld will have risen to a shocking 35% unless you plan in advance.
Who is Affected and How?
If you reside in an EU country and you have a fixed interest bearing bank account, saving or investment in another of the above list of nations it is highly likely that you will be affected by the EU Savings Tax Directive. This either means an automatic exchange of information or that you are losing at least 20% of your gross interest annually in order to keep your financial matters confidential.
The good news in all of this is that there are effective and legitimate solutions and structures available to the majority of expatriates whose nest egg and savings are being affected by the European Savings Tax Directive. Some of the solutions that you may be able to explore include special types of portfolio bonds or other investment wrapper type vehicles which can protect your personal privacy and protect the performance of your savings & investments as well.
Every individual’s circumstances are unique and you may or may not be eligible to structure your investments so as to avoid the automatic exchange of information or lose 20% of your gross interest in order to keep your funds confidential. It is essential for you to get a personalised review of your situation. It is no good thinking that a vehicle that your friend has would be suitable for you. Expatriates should always seek tailored analysis of their situation. The ‘Offshore Investment Designer’ will point you in the direction of the best solutions for you.
Qrops – Everything You Need to Know About Moving Your UK Pension Offshore
Anyone with a UK pension scheme who now lives overseas as an expatriate, or is planning to leave the UK can now transfer their existing pension provisions into a QROPS (Qualifying Recognised Overseas Pensions Scheme). The financial benefits are massive if planned correctly! By planning in advance you can improve the investment growth, flexibility and future financial security of your pension starting from today. What’s more, in a QROPS you won’t have to purchase an annuity, you can take a lump sum upon transfer and you can leave your un-spent pension to your beneficiaries in its entirety.
Compiled by industry experts with over 20 years experience, a great website is www.qropsguide.com Their aim is to help you achieve your financial goals by getting more out of YOUR UK Pension. There is also a free guide available that we found very precise & informative. Our Investment Designer service will advise you as to the best jurisdiction you should use.
Abbey Financial Solutions Access Spanish Compliant Portfolio Bond
Abbey Financial Solutions, one of the world’s largest expatriate investment advisers in the world and a member of Inter Alliance World-net advisers can now offer a totally compliant Spanish Portfolio Bond for clients resident in Spain. This offshore investment through Dublin, in the EU has massive benefits for Spanish expatriate residents. It has been approved by the Spanish Hacienda and can reduce the standard rate of income tax on savings income from 18% down to below 6%, by only taxing the growth element and not the capital. They are able to provide a similar vehicle fully approved and regulated in Cyprus for expatriates.
Page 1 of 1 pages
