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strategicwealth | limited


Introducing the Strategic Wealth Limited guide to international retirement solutions


sing our carefully selected network of expert advisers and product providers, we offer professional intermediaries the ability to help clients achieve their retirement objectives.

Totally independent of all providers and fully licensed and regulated to provide financial advice, you can rest assured that our professional network of advisers can provide the right solution for you and your client.

With regulated advisers operating in the United Kingdom and the European Union, we bring together a range of global retirement solutions that are tailored to the individual client’s requirements.

This guide is aimed at professional advisers and is not to be construed as advice. The content of this guide is meant for informational purposes only and is correct as of January 2013.



What is a QROPS?


QROPS (Qualifying Recognised Overseas Pension Scheme) is an HMRC recognised international pension scheme. According to the latest list of recognised schemes published by HMRC, there are currently around 2500 QROPS in over 35 different countries worldwide.

occupational pensions, QROPS provide UK expat clients with the ability to transfer their benefits to a jurisdiction that is more in line with their circumstances and objectives. Although it is possible for a UK resident to transfer a pension to a QROPS, a number of the benefits wouldn’t apply and it may not be in the client’s best interest to do so.

The vast majority of these schemes are occupational schemes and are only open to employees. Knowing which scheme and more importantly, which jurisdiction is right for the client, is paramount.

In many ways a QROPS works in a similar way to a Self Invested Personal Pension (SIPP). Whilst there have been several schemes trying to exploit loopholes to extract as much benefit as possible from a pension, more often than not these fall foul with HMRC and are removed from the recognised list of schemes. In extreme cases the jurisdiction as a whole can be removed, not just the individual schemes.

Although it has been possible to transfer a pension out of the UK to an occupational scheme for some time, the modern legislation was totally revamped and made available to personal pension schemes following A Day in April 2006. Since then there have been a number of developments and changes to the QROPS landscape. Designed specifically for UK personal and

Who is eligible for a QROPS?


he vast majority of clients will be eligible for a QROPS. However, only certain pension schemes can be transferred in and there is little benefit to be gained by making further personal contributions as there may be no tax relief available. It’s not possible to transfer an occupational pension that is in payment, and in some cases it may not be possible to transfer an occupational pension that isn’t in payment, if the member has passed the scheme retirement age. It isn’t possible to transfer a state pension to a QROPS. There isn’t any hard and fast rule regarding the minimum or maximum transfer limits to a QROPS, however the suitability of a transfer is determined by a number of factors. As a general rule, due to the charges applicable to a QROPS and the annual tax allowances in the UK, transfers under £30,000 may not be viable.


Annual allowance limits apply on transfers from UK schemes, these are reviewed regularly and in the latest budget announcement the limit for 2014/15 is set to decrease to £1.25m, currently £1.5m. Any transfers in excess of this limit may be subject to an additional tax charge unless the client has secure protection.


What is the 5 Year Rule?


his is a question asked by many advisers and in the past there have been differing opinions and interpretations. The latest changes to QROPS transfer rules from HMRC in April 2012 brought clarification to the rule and the ongoing reporting requirements. The 5 year rule is a term that is applied to the length of time the member has been resident outside of the UK. It is measured in tax years and not calendar years, so if a member departs the UK half way through a tax year, the clock only starts ticking from the start of the following tax year. The rule is particularly important as it determines the basis on what benefits can be achieved through a QROPS. During the first 5 years, benefits mirror those available in the UK: benefits post 55, 25% Pension

Commencement Lump Sum (PCLS) and income in line with UK Government Actuarial Department (GAD) limits and up to 55% tax on any remaining fund on death of the member. After being a non resident of the UK for 5 full tax years, in some cases it’s possible to start taking benefits from 50, claim up to 30% PCLS (if no lump sum has previously been taken) draw up to 120% of UK GAD and incur no UK tax on death. Previously the 5 year rule also applied to the reporting requirements for the QROPS Trustees. However, since April 2012, the reporting requirements have changed and Trustees are now required to report certain transactions to HMRC for up to 10 years from the date of transfer from the UK to a QROPS.

5 Benefits of a QROPS


here have been a lot of misconceptions about the benefits of a QROPS. Some misleading information infers that up to 100% of the fund can be taken as a lump sum or that all benefits are tax free or that all investments are permissible. However, incorrect information like this can lead to unauthorised payment charges of up to 55% being levied on the client’s pension fund and there have been several cases since 2006 to prove that HMRC do mean business. If used in accordance with the spirit of the rules, QROPS can be a great way to help your clients achieve their retirement objectives. The greatest benefits are achievable once your client is outside the 5 year rule.

Benefits include: Greater flexibility on how and when benefits can be taken – in some cases retirement benefits can be taken from age 50, and up to 30% Pension Commencement Lump Sum can be taken. Income limits can be greater than UK limits, up to 120% of GAD. FLEXIBLE INVESTMENT OPTIONS In addition to mainstream investments such as unit trusts, portfolio bonds, investment platforms and discretionary fund managers, a QROPS can also invest in international property and other approved assets. LOANS FROM THE SCHEME In certain jurisdictions up to 50% of the fund can be used to provide a commercial loan to an unconnected party. Interest on the loan is paid back into your pension fund and rates are typically 4% per year, although you can select a higher rate if you wish.


GREATER TAX EFFICIENCY Using a range of international investments, benefits within a QROPS can grow with no UK tax deducted. As a non resident of the UK no UK income tax is deducted at source. By carefully selecting the jurisdiction for the pension, maximum advantage can be taken of the Double Taxation Treaties available. Malta has treaties in place with over 60 countries worldwide. Gibraltar has a marginal income tax rate of 2.5%. Income from a New Zealand based scheme is taxed at 0%. The best jurisdiction for your client isn’t simply a case of opting for the country with the lowest headline tax rate on pension income, as a range of other factors need to be taken into consideration. MAXIMISING BENEFITS TO BENEFICIARIES Under current UK pension legislation, retirement benefits are subject to up to 55% tax on death. However, it is possible for benefits from a QROPS to be paid out with no UK tax deducted, therefore passing on more of the fund to a member’s beneficiaries. Certain conditions apply and rules can vary depending on each jurisdiction. FIXED PRICING Many UK pension schemes, including Stakeholder pensions, have a percentage based charging structure, typically around 1% of the value of the fund per year. The QROPS providers we use have fixed initial and annual fees, which could offer a significant saving to your clients as the costs are not linked to the value of the fund.

6 QROPS and the USA


ue to the additional complexities involved with dealing with the USA from a pension, investment and taxation perspective, many advisers and providers shy away from dealing with any clients resident in, or connected to, the United States of America. However, due to the Double Taxation Treaty between the USA and Malta, there is a solution available to clients with UK pensions that have emigrated to the USA, or US nationals resident outside the UK, looking for a solution for their deferred UK pensions. Schemes must meet certain conditions and there are additional reporting requirements due to the Foreign Account Tax Compliance Act (FATCA), however most features are similar to a regular QROPS and the funds can be invested

Comparing a QROPS to a UK Pension Scheme


here are many advantages in having a QROPS, especially if your client is outside the 5 Year Rule and has no intention of returning to the UK. However, a QROPS isn’t always right for everyone and there have been several examples where a QROPS has been recommended to a client as a one size fits all solution. We will compare a QROPS to a UK based Self Invested Personal Pension (SIPP) as that is the closest alternative available in the UK pension market.

in the same way. Due to the multi currency options available from a QROPS, clients can have some or all of their funds in US Dollars, if they wish, and avoid any currency exchange rate risk. There is a limited number of providers offering these solutions and not all advisers have the relevant permissions or Professional Indemnity cover in place to advise US clients. Due to the additional complexities and specialist nature of advice in this area, many advisers opt to outsource the advice to a suitably qualified and authorised adviser. Strategic Wealth Limited have vast experience in advising clients in this area and can help you and your clients with any US connections with their QROPS options.



Annual Cost



Funds Available







Commercial/ Secured only

Yes - unconnected parties only



Shares International Property Loans

Multi Currency PCLS Max Income

Max 25%

Max 30%

100% GAD*

120% GAD

UK Income Tax



UK Tax on Death



* Changing to 120% following Dec 2012 Pre-Budget report. Effective date to be confirmed

The charges for a UK SIPP are typically lower than the average QROPS and the majority of investment options for an average client can be achieved via a UK SIPP. Deciding on when to put an expat client into a UK SIPP or into a QROPS is a decision for an experienced QROPS adviser. The ongoing costs of a QROPS compared to the tax benefits on income, offset by any unused UK allowance for a UK SIPP or Double Taxation Treaties for a QROPS and the tax liabilities on death levied on UK pensions, are just a few of the things an adviser needs to consider.

7 QROPS Jurisdictional Comparisons


here are currently around 2500 registered QROPS schemes on the approved list from a wide range of countries. Not all of these can accept transfers into their scheme as they are set up by employers exclusively for their employees. Of the jurisdictions available, we can limit our research to the commonly accepted countries open for business, these include: GUERNSEY


Previously a very popular location for QROPS as income was taxed at 0% and the island offered a safe and secure base with favourable taxation terms. HMRC felt that certain tax benefits were being exploited and removed over 310 schemes in April 2012. There are a few schemes remaining, however these may not be accepting new clients at this time.

One of the more recent newcomers to the QROPS arena and with the added benefit of being a member of the EU, Malta has a wide number of Double Taxation Agreements, coupled with a sound financial services framework, good corporate governance and solid regulation. VAT is not applicable in Malta. Withholding tax of up to 35% is levied on countries that either have no DTA or a limited/remittance based agreement. Up to 30% pension commencement lump sum can be taken from age 50, subject to being non UK resident for a minimum of five full tax years. Self investment management is not permitted, so you will need to have an approved investment manager appointed to your pensions.

ISLE OF MAN Also a popular jurisdiction since QROPS legislation was introduced in 2006. A history of pension business, along with an independent pension regulator saw the Isle of Man flourish as a provider of pensions to expats. However, pension income is taxed at 20% for non residents with no annual allowance. The Isle of Man has a number of Tax Information Exchange Agreements (TIEs) however, very few Double Taxation Agreements (DTAs), meaning that tax paid in the island may not be deductable in your country of residence and you will be taxed again. In addition to this, VAT is also applicable in the island, the current rate is 20%. NEW ZEALAND Again, another popular jurisdiction for QROPS transfers since 2006, however the rule changes from HMRC in April 2012 saw a massive change to the landscape in NZ for pension providers. These changes were mainly brought about as a number of schemes were allowing for 100% commutation which was not within the spirit of HMRC’s rules which insist on 70% of the fund being retained to provide the member with an income for life in retirement. Several providers have complied with the new changes and a revised QROPS proposition is now on offer. Investment is restricted to Portfolio Investment Entities (PIE) funds, which are currently few in number.


GIBRALTAR Another recent addition to the HMRC list of recognised jurisdictions. Various legislative issues saw a number of providers voluntarily remove themselves from the recognised list of schemes in 2010, however, since June 2012 the Gibraltar legislation has been amended and is now fully compatible with HMRC rules. Up to 30% pension commencement lump sum can be taken from age 55. Income is taxed at a marginal rate of 2.5% and declared as income in your country of residence. No VAT is applicable. There are a wide range of investments available and self investment management is permitted.


Providing Investment advice to QROPS Trustees

MALTA The MFSA has confirmed that in order to provide investment advice to Malta retirement schemes, advisers should be authorised to conduct investment business in Malta. Standard Operating Condition 5.1.1 of Part B of the Directives for Occupational Retirement Schemes, Retirement Funds and Related Parties under the Special Funds (Regulation) Act, 2002 states that an Asset (or Investment) Manager to a pension scheme shall be either of the following: (a) A company operating in Malta and in possession of an appropriate ISA licence – or in the case of a Retirement Scheme Asset Manager – a company authorised to carry on long-term business under the Insurance Business Act, 1998, in class VII – ‘pension fund management’ or (b) In the case of a company operating outside Malta, a company which is established in

another EU Member State and duly authorised to carry out portfolio investment management in accordance with the Directives 85/611/EEC (UCITS), 93/22/EEC (MiFID), 2000/12/EC (Credit Institutions) or 2002/83/EC (Life Assurance). Basically, to comply with this legislation, a firm must be directly regulated in Malta, or authorised under MiFID to passport into Malta. By definition, any advisers that are outside of the scope of MiFID or not directly authorised in Malta, can not give investment advice to retirement benefit schemes. Strategic Wealth Limited through its partners can offer MiFID Passporting permissions to provide investment advice to Malta retirement schemes and can support other IFAs and other professional introducers by way of a formal introducer arrangement. This can be done on a fee or commission basis and shares with the professional introducer.

9 What is a QNUPS?


ften confused with a QROPS, some other misconceptions of a QNUPS is that it is the big brother of a QROPS, however whereas a QROPS could always meet the definition of a QNUPS, the same can not be said the other way around. For an overseas pension scheme to meet the criteria of a Qualifying Non-UK Pension Scheme (QNUPS) and be exempt from UK inheritance tax it must satisfy certain regulations (SI2010/0051), which state that a scheme must: a. Be an overseas international pension scheme set up by an international organisation as defined by the UK International Organisations Act 1968, Section 1(a), or b. Meet the requirements of an Overseas Pension Scheme (OPS), which states that the scheme must be open to local residents and regulated as a pension, or established in another Member State of the European Union, Norway, Iceland or Liechtenstein

The scheme must reserve at least 70% of the member’s fund to provide an income for life in retirement, which can be from age 55, or in some cases earlier due to serious ill health. Currently there are no HMRC reporting requirements for Trustees, however local reporting may be required in accordance with the jurisdictional rules. Whilst there is an abundance of QROPS registered schemes, the availability of QNUPS registered schemes is fairly limited in comparison, however given the nature of a QNUPS the levels of contributions and variety of assets transferred in, tend to be significantly greater than a QROPS. As a result of this the fees for a QNUPS are often higher than a QROPS but with careful tax planning and investment flexibility this can be an excellent opportunity for Mid to High Net Worth clients.

c. The scheme must be recognised for tax purposes in the jurisdiction it is established and benefits at retirement must be subject to taxation

What can be contributed to a QNUPS?


hilst it is possible to transfer a UK pension into a QNUPS, this is not advisable as it would be considered to be an unauthorised transfer and will attract an Unauthorised Payment Charge (UPC) of up to 55% of the assets transferred in. However it is possible to transfer non UK tax relieved pensions into a QNUPS, provided they meet the requirements of the receiving scheme. Non pension assets, such as cash, property or other personal assets can be transferred inspecie to the pension scheme. Once transferred in, these are treated as a contribution and are immediately out of the member’s estate. Care must be taken not to be seen to be abusing this arrangement and using it solely as a means of avoiding inheritance tax, rather than as a legitimate retirement planning vehicle. It is possible for the QNUPS to receive regular contributions from nonUK resident employees and employers, however, it is unlikely that these contributions will attract tax relief. There are no specific limits on the amount that can be contributed


to a QNUPS, however the transactions into the scheme must be in accordance with the member’s standard of living. So if a member transfers a significant amount of their assets to a QNUPS at a late stage in their life, this could be seen as an avoidance measure, rather than as genuine retirement planning. In a similar example, if a member has serious ill health and is terminally ill and decides to transfer a vast portion of their assets to a QNUPS, the motives for this would be open to challenge as the member will know that their life expectancy into retirement is short and the level of contribution is significantly higher than required in order to match the current standard of living. In these cases although the transfers could proceed into the scheme, they could (and may well be) subject to inheritance tax on death. Strategic Wealth recommend that an actuarial calculation is provided as this will confirm the contribution is acceptable.


International Annuities


he term annuity typically refers to the income for life a member of an insurance based pension scheme will receive when they retire. Historically these have been considered by many clients to be poor value, as there is no return of fund on death and survivors benefits can be costly as the member will have to forfeit a portion of their income each year in order to make a provision for a spouse’s benefit. International Annuities, sometimes called Open, Deferred or Variable Annuities are different and combine the advantages of drawdown and the benefits of an annuity all in one. Like drawdown, the capital remains invested throughout retirement. Whist capital erosion is inevitable, this can be largely offset by positive investment performance. Income is flexible and reviewed every three years, so unlike most annuities, the rate at the point of retirement does not determine the income you will receive for life. However, like drawdown, the rate can be increased or decreased, depending on the value of the fund and current long term gilt rates. Unlike drawdown the rate of income is not linked to the Government Actuarial Department (GAD) rates. Whilst GAD rates are low this can be viewed as a strong advantage. Instead, rates are determined by comparing the average of three annuity rates available in the UK. The member can then select a minimum rate of 50% of the average rate, or up to 120%. For example, a client aged 60 has £250,000 in their retirement fund, they could take drawdown at £12,000 per year, or (based on current rates, draw income from the annuity as much as £17,800 per year. Obviously the more income one takes, the faster the fund value will depreciate.

death. However, as a distinct advantage to drawdown, the assets inside the annuity are outside of the estate of the member and may not be subject to UK inheritance tax. Investments are flexible, members can appoint a discretionary investment manager, or invest in a range of insurance company portfolio bonds, property, company shares, corporate bonds, unit trusts and a whole lot more. The annuities are available in a range of currencies and the currencies can be altered at any time. It is possible to have one annuity but hold several currencies, particularly important if a member doesn’t want to expose all of their pension to one currency. Unlike drawdown, the annuity can be set up on a joint life basis, which can be beneficial to members that wish to make adequate provision to support their spouse’s lifestyle following their demise. Charges are similar to drawdown, but unlike a traditional annuity, the charges are explicit. No one really knows what a traditional annuity costs, as the fees are all built in and there is a mortality subsidy. There is no cross subsidy for international annuities as the insurance company does not retain the fund on death. The tax treatment of annuity income can be more beneficial to the member compared to drawdown income. Several countries, in particular Spain and Portugal, will tax 100% of drawdown income, however, only a small fraction of annuity income is subject to tax and the balance is considered to be a return of capital. Rates and allowances vary significantly from one country to another and it is important that members seek local tax advice when they decide on their retirement income options.

Just like drawdown, any remaining assets can be passed on to the nominated beneficiaries on

11 What is an International Pension?


he majority of advisers focus on either QROPS or QNUPS, however there is another type of pension that has been in existence for a long time and is specifically designed for non-UK resident, internationally mobile clients. Offered from several jurisdictions, such as Jersey, Guernsey, Isle of Man and Gibraltar, International Pensions are unlike UK pensions as there are much fewer restrictions. There is a much wider range of investment options and benefits can be taken at any time and in a single lump sum.

can be paid out tax free at maturity. Contributions can be single or regular and can be from employers too. It isn’t possible to transfer UK personal pensions, or QROPS plans into an international pension as the schemes are not compatible. Each jurisdiction will have a piece of legislation that applies to International Pension Schemes and with it, will offer individual advantages and benefits. The Isle of Man has Section 50B, Guernsey has 40EE and Gibraltar has Section 615. All of these schemes are aimed at non-residents of the host jurisdiction.

There is no tax relief available for contributions to these schemes, however the fund will grow free of local tax and the benefits

Benefits of an International Pension


chemes are available in any major currency and the member can select their preferred retirement age at the outset. However, they can also liquidate the fund in full before reaching the selected retirement date. So why might someone use an international pension? Often internationally mobile expats will be working in several jurisdictions throughout their career. Each country may not have a pension system that they can contribute to and there may be no state pension entitlements. As non UK residents they can’t contribute to a UK personal pension and wont be building up any UK state pension, so it is important that they make their own retirement provision. Rather than start a pension in each country they live and work in, they can use one pension fund based in a suitable jurisdiction, throughout their working life. Contributions may increase, decrease or stop for periods of time, however this is how the schemes are designed in order to afford maximum flexibility to the member.


The member can invest in almost anything they like, within reason. So residential, commercial property is fine, stocks, shares, bonds, unit trusts, investment trusts, mutual funds, fine art, fine wine, antiques, classic cars, currencies, and precious metals, are all acceptable assets within most schemes. At retirement these assets can be sold to provide the member with cash benefits, or assigned back to the member for their own use. If the member never reaches retirement, all the assets can be donated to their beneficiaries. On death there is no local tax on the fund, however the position of death duty will vary from country to country and will depend on their domicile. In most cases, if used correctly, there is no UK tax liability on death. International pensions can work in tandem with other solutions, such as a QNUPS or an International Annuity.

12 Case Studies



eremy is 62 and has lived in Portugal since he left the UK in 2002, he has uncrystallised benefits within a UK pension scheme of around £450,000.00. He is married and has three grown up children. He would prefer not to buy an annuity from his UK pension provider as he is concerned about currency fluctuations, current low annuity rates and making provision for his family following his death. He would like access to his lump sum now with a view to drawing income when he reaches 65 and has approached us for advice. Under the terms of the Double Taxation Agreement and the HMRC QROPS rules, Jeremy could transfer his pension to a Malta based pension scheme and immediately draw up to 30% of his fund as a Pension Commencement Lump Sum (PCLS). As he has been non resident of the UK for more than 5 full tax years he is able to claim 30% PCLS compared to 25% under UK rules. When Jeremy turns 65 he could use the funds in his pension to buy an international lifestyle annuity with some or all of the funds. This could be used to provide an income for him and his wife. Annuity income is taxed more favourably than drawdown income, as only 35% of the income is taxable and 65% is treated as a return of capital. Following Jeremy’s death his wife could continue to receive the income and any remaining funds could be passed on to their children following her death.



uncan is 55, divorced with three teenage children. He has decided to sell his used car business in the UK for £2.6m and move abroad. He has no retirement provision and having previously enjoyed an income of around £170,000 per year from his company, he is concerned that he will have to fund his lifestyle in retirement. Apart from the proceeds of the sale, he also has around £1.5m in property and other assets. He doesn’t require any income at this stage, however he would like to start drawing income from age 60, he is also thinking of starting another business and would like advice.

Duncan could maximise the unused allowance from the last three years and contribute £150,000 to a UK pension. Duncan could place £1m into a QNUPS and invest the funds for his retirement. These funds represent less than 25% of his total assets and as he has no other pension provision the contribution is in keeping with his current and future standard of living. He can draw the income at 60 or earlier if he needs to. Making this contribution will reduce the value of his estate for Inheritance Tax purposes. He will have sufficient capital left in order to maintain his lifestyle and to fund a new business should he wish. Later Duncan could also consider using some more of his funds to purchase an international annuity. This would provide him with an income and the funds could continue to be invested. Any remaining funds from the annuity could be passed to his beneficiaries following his death.



ophie is 33 and is working as part of a crew on a luxury mega yacht and earns £60,000 per year tax free. Her employment tends to be seasonal and her employer does not offer a company pension scheme. As she is not planning on retiring for at least 30 years, she is not sure where she will retire or where she will be working between now and then. She feels that she can comfortably afford to contribute 20% of her salary towards her retirement and has approached us for advice. As an internationally mobile worker, Sophie would benefit from making contributions to an international pension scheme. Her £2000 per month contribution can be invested for her retirement and she can stop and start payments whenever she needs to. Contributions can be increased or decreased in line with her budget and she can use the pension scheme in most countries around the world to receive non-tax relieved funds. If her employer decides that they would like to contribute, then this can be accommodated too. Benefits at retirement can be paid in stages or in a lump sum, in any major currency.

About Strategic Wealth Limited


ounded in Gibraltar by Stephen Whittam, an experienced UK and offshore regulated IFA, Strategic Wealth Limited (SWL) was formed in 2012 to assist private clients and financial advisers with a broad range of offshore products, structures and solutions. Since then it has become apparent that SWL can also help UK based advisers remain independent post the Retail Distribution Review (RDR) by offering a range of services such as:


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e look to build long term professional relationships based on mutual trust. Steve Burdett heads our team of skilled, trained and motivated staff. We subscribe to a can-do philosophy, resulting in repeat and referred business from our private clients and professional intermediaries. We place significant importance on the fact that we are 100% independent and offer truly whole of market advice from a broad range of providers in multiple jurisdictions.


Fully licensed, regulated and insured, you can rest assured that you and your clients will receive an unparalleled, fully compliant service that we believe is second to none. To find out more about SWL and how we can help you and your clients get the best service and advice possible, visit our website www. or give Steve Whittam or Steve Burdett a call: +350 20065370

Guide to International Pensions  

Introducing the Strategic Wealth Limited guide to international retirement solutions: Using our carefully selected network of expert advise...