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Strategic Wealth Newsletter

Introducing the first

Strategic Wealth Newsletter

in this issue :

Advisers turn to the Rock for support post RDR Which of your clients might be interested in investing offshore?

At-a-glance, Malta’s Double Taxation Agreements


Welcome to the first ever

Strategic Wealth Newsletter Remaining independent in a post-RDR world is a challenge that many IFA firms are facing. This is made more difficult by having the requirement to advise on the whole spectrum of products, including offshore solutions such as QROPS, QNUPS, offshore bonds, trusts and international annuities.


pril 2012 saw massive changes to the overseas pension landscape with over 310 providers wiped off the HMRC recognised list of Qualifying Recognised Overseas Pension Schemes (QROPS). The changes didn’t end there, the Isle of Man’s award winning 50C scheme was also affected by the changes and is no longer open for business. A number of New Zealand based providers were also delisted and this led to a complete change in the pension legislation for NZ based schemes and a vast reduction in the number of providers. In addition to these changes, quoted as being the most radical since A Day, there have also been changes (or as some observers say – clarification) regarding the rules and criteria for Qualifying NonUK Pension Schemes (QNUPS). Now the contributions are means tested and have to be in line with a standard of living in retirement, some schemes even use an actuarial calculation. To round it all off, there have also been amendments/ clarification regarding the Double Taxation Agreements between Malta and the various countries and this has caught many advisers and their clients unawares. More information is included in this newsletter. So as advisers, how do you cope with the changes brought in by the Retail Distribution Review and make sure you still offer clients value for money, whilst staying compliant,


within the realms of your ever increasing Professional Indemnity cover and offer a whole of market service, made even harder by the recent changes to the MiFID requirements? The answer is it is not easy. However, help is at hand. Strategic Wealth Limited was created by IFAs for IFAs and private clients to provide advice, support, training and an introducer arrangement to advisers who either need help with a one off case for an offshore product, such as a QROPS, QNUPS or International Annuity, or ongoing training and support with all the changes in the offshore arena. Also, for advisers looking to refer existing clients to Strategic Wealth using our professional network, we can help with all aspects of pensions, savings and investments and we promise always to share fees and commissions and never cross sell to introduced clients. During this issue we will cover some of the current issues facing clients and advisers and go into more detail about how we can help. Please do send up any feedback, we welcome your comments and look forward to supporting you and your business.

For further details see

Advisers turn to the Rock for support post RDR So much has changed over the past 18 months for advisers and clients and coupled with the worst recession since the end of the Second World War, changes in legislation and regulation have not made it any easier for advisers to do business and for clients to get the service they need.


n addition to this the FSA has released new requirements for providing advice to non-UK clients, which include offshore pension trustees. These changes have led to a sharp decrease in the number of firms choosing to remain MiFID passport holders. Research shows that as few as three out of every 10 current MiFID firms will continue to be passported going forward. Many advisers have also seen a dramatic increase in the cost of Professional Indemnity insurance. Some advisers are reporting a 400% increase in costs for next year’s premium. Some firms are even struggling to obtain Professional Indemnity cover going forward, with providers citing legacy UCIS business, ongoing compliance and remaining truly independent as reasons behind the changes in premium or increases in policy excess. So how do firms stay independent post RDR and continue to operate a profitable business? What do current firms do with their non-UK or UCIS clients once they are no longer independent or MiFID passport holders? How can advisers meet the ongoing changes in regulation and their business models, and meet the increasing costs of compliance, training and research and development? What happens to orphaned clients of firms that no longer practise, advisers that do not reach the Level 4 qualifications, or firms that can no longer continue to service them due to changes in their status to a restricted adviser?

These questions and more are just some of the issues that advisers have been dealing with over the past two years. The latest figures from the Chartered Insurance Institute (CII) show that the vast majority of financial advisers have made significant progress towards achieving the diploma qualification, with most either nearly or fully qualified to Level 4 requirements. However, not all advisers have been in a position to be able to change their business model or reach the qualification. Sadly some advisers have been forced to sell their business during a recession; others have taken early retirement or changed careers. However, a number of IFAs are now looking further afield for solutions to their clients’ needs. Local IFA firms in Gibraltar have reported an increase in the number of enquiries from UK-based advisers looking to either outsource their non-UK clients and retain an ongoing income, or transfer some or all of their new and existing business to other regulated advisers with the appropriate licences to advise clients in the UK and overseas. Experienced professional IFA Steve Whittam, Managing Director of Strategic Wealth Limited, believes he has a solution that will meet the needs of these advisers and enable them not only to carry on earning an income in a post-RDR world, but significantly reduce the cost of compliance and other associated costs such as PI cover.

Speaking recently about the issues that face IFAs, Steve said "there are a lot of advisers that have been doing a great job for their clients over the years and have worked in the profession for a long time. Now they face the heartbreaking decision of either selling, retiring early or changing careers. This also has a negative impact on their longstanding, faithful clients, who will now need to find a new adviser and start a new relationship from scratch. We can help; we work closely with IFAs and other professional intermediaries and can take on the responsibility for ongoing advice and service to clients and leave the adviser free to do what they enjoy the most, looking after the client." Strategic Wealth Limited Private Client Director Stephen Burdett added, “We offer a unique facility to advisers, either looking for a solution for their non-UK clients, or existing clients in unregulated collective investment schemes. For UK advisers to remain independent post January 2013, they will have to be able to provide advice on all suitable solutions for a client’s needs. Often these will include UCIS funds for appropriate clients; or offshore structures that advisers may be unfamiliar with, or for which they don’t have the appropriate permissions to introduce business to offshore providers. These firms are mainly based in well regulated jurisdictions within the EU. For flexible arrangements, with the added comfort of an introducer’s agreement, contact Strategic Wealth Limited. For a small share of the fee or commission income available, which is always agreed with the introducer and the client, we will handle all aspects of the advice and compliance. We are fully licensed, regulated and indemnified. Advisers can rest assured that their clients are being handled by a professional firm.


Which of your clients might be interested in investing offshore? As recently identified by the IFA Online, there are distinct types of clients who might benefit from investing offshore. Are any of them yours? Clients with low risk assets Low risk assets, such as cash, gilts and bonds are unlikely to result in noticeable gains if held in the UK as not only are interest rates currently low, but any returns are treated as income and the assets will therefore be taxed annually in a collective investment at the client’s highest marginal rate. Moving these to an offshore bond however, affects the income tax liability and can prove more tax-efficient.

Clients who own property abroad Cheaper properties overseas, and a stronger pound to spend on them, have boosted sales of properties abroad. Whilst the purchase is an investment, it may also become a residence in the future, with the owners retiring overseas and becoming non-UK resident. This will affect other assets, as the individual will become subject to tax in the country to which they retire. Tax-free ISAs in the UK, for example, may not be tax-free following a move overseas. It could therefore be prudent for a client to consider offshore products as these are often taxed more favourably.

Clients wanting ‘openarchitecture’ investment For more clued-up clients who are demanding open-architecture investment, offshore bonds provide a plethora of mutual funds, and all are able to be added to quickly and easily. With the regular, weekly, launch of new funds, and investment trends changing frequently, offshore bonds offer solid solutions to the clients’ choice for existing and future funds.


Clients requiring long-term, fixed-level income Bonds, both onshore and offshore, have often been chosen as the best investment to secure income at a fixed level, due largely to the 5% tax deferred withdrawal facility available on both. However, onshore bonds lose tax at source, equating to 20% on income – with corporate bonds further depleted. In order to avoid capital depletion, and ensure the underlying investment substantiates the selected level of withdrawal, offshore bonds may be more efficient. Offshore, the client will have a choice of a wider range of funds, on which they can benefit from gross roll-up. This could maintain the underlying investment for longer.

Clients with discounted gift trusts Similar to long-term, fixed-level income, the removal of fund tax at source on offshore discounted gift trusts make these a preferable option to onshore equivalents. Trustees of a gift trust must establish a level of lifetime payments at outset, and these can be neither varied or stopped once selected; therefore it is essential to choose the scheme with the tax liability least likely to put strain on the underlying investments. This is frequently offshore.

Clients with loan trusts With loan repayments expected to be around 5% per annum over a period of 20 years, both onshore and offshore bonds are used in combination with a trust and a loan document. The difference being that, with the exception of withholding tax, there is no tax at source for the offshore bond, and therefore less pressure on the investment fund to provide loan repayments.

Clients with gift trusts Widely used in estate and inheritance tax planning now, are gift trusts. Often these are discretionary, with numerous beneficiaries, and therefore a wide spectrum of tax rates. The tax charge on the eventual gain can be minimised, with careful planning, depending on whether the trustee’s or the beneficiary’s rate of tax is used – whichever is lower. An offshore bond is not immediately subject to tax on the chargeable gain.

Non-domicile clients Non-domicile taxation has changed in recent years, meaning that UK income and capital gains tax can now be imposed on the worldwide assets of foreign nationals. However, using an offshore bond could allow them to defer all HMRC tax liabilities until (and assuming they do) return to their home country.

Corporate clients Simply, companies can defer corporation tax by using offshore bonds. By investing in fixed-term deposits, they can cut their corporation tax liability, and also increase the rate of return on cash deposits.

Expatriate clients Holding an offshore bond until they return to the UK, a UK national who has moved or plans to move abroad is permitted HMRC ‘time apportionment relief’ against the gains made when they are UK-non resident. So, a UK national who holds a bond for ten years yet is out of the country for five, will only have tax calculated on the gain for the five years of residency.

Malta’s Double Taxation Agreements


ntil recently Malta was very much the new kid on the block in terms of its popularity as a QROPS jurisdiction. However, with the delisting of more than 300 QROP schemes in the recently published HMRC-recognised QROPS list, Malta has quickly become the QROPS destination of choice. In accordance with HMRC rules, Malta’s pension schemes are available to both residents and non-residents, relying on the 60 DTAs to provide for the latter. Any expat with residency in a country on the list of

Malta DTAs will pay no tax on their pension income in either the UK or Malta.

first for online sophistication and full online availability.

As a full EU member since 2004, Malta has a legal and regulatory framework compliant with EU standards. With a fast time to market, and responsiveness, Malta has progressively developed into a premier financial centre. The City of London’s Global Financial Services Index (2010) named Malta as one of the three financial centres expected to grow in importance over the coming years and a study commissioned by the EU Commission in 2009, placed Malta

Whether Malta is a suitable destination for your clients pension investment or not will be dependent on, among other things, their residency status abroad and their overall financial position. Since Malta became an established QROPS jurisdiction, many have advocated Malta as being the jurisdiction most likely to offer the best solution. The importance of the 60 DTAs should not be underestimated, especially in light of the HMRC changes.

Malta’s wide network of DTAs facilitates cross-border business and investment across many continents. Here’s your at-a-glance guide to which countries Malta has entered into, or is negotiating, agreement with: •





Signed but not yet ratified:




San Marino
















Saudi Arabia


Hong Kong







South Africa










Initialed/Being Negotiated:





Azerbaijan Bosnia & Herzegovina


Isle of Man



Czech Republic























Are HMRC’s tax amnesties working? The UK Government has recently been putting pressure on HMRC to expose tax avoidance, which has led to a number of crackdowns across various professions and taxpayers, including doctors, dentists, people owning property or holding bank accounts abroad, and anyone making gains from sales on auction sites such as eBay.


n addition, to allow people to declare untaxed income before it is detected, HMRC has also launched a series of tax amnesties, encouraging offenders (either deliberate or accidental) to come forward first. For those who do voluntarily disclose unpaid tax, the consequences are simple: they will be asked to pay it. It is unlikely that any penalty will be charged, but in the instance that a penalty is necessary, it is unlikely to be any more than 10%. Compare this to the penalty charge of 100% of the value of the unpaid tax (in addition to paying the tax itself) that will be imposed if the offender is exposed by HMRC without coming forward. Furthermore, in the case of voluntary disclosure, most cases have a cap of five years on the unpaid tax, meaning that any overdue tax going back further than five years will be written off. Again, a much lighter eventuality than the 20 years of tax you’ll be expected to pay back if you do not disclose your own situation, which also includes the possibility of a criminal investigation and prosecution. Voluntary cooperation, clearly, is far preferable.

But are the amnesties working? According to figures from both HMRC and the Ministry of Justice, yes. Over £510 million has been repaid through voluntary disclosures. 18,000 cases have been looked into, with another 4,600 pending.


And seeing its warnings through, HMRC is coming down hard on those who have not come forward. It has already collected more than £120 million from investigations into tax avoidance so far, with more to come as the number of tax tribunal disputes rose by more than a third last year. Volunteering your tax information to HMRC will always put you in a far preferable position than if they begin the investigations first. Whether or not your profession is in one of the declared amnesties, the terms HMRC offer to resolve the situation will be much more lenient – likely to be penalties of just 10-20% rather than the full 100%. It certainly means your clients should structure properly if thinking of returning to the UK. To discuss any tax queries, or better understand the situation, contact Strategic Wealth Limited now.

HMRC confirms Gibraltar’s status as QROPS provider


fter some three years in legislative limbo, pension fund administrators in Gibraltar have now been given approval by HMRC to once again include Qualifying Recognised Overseas Pension Schemes amongst the financial solutions they offer to their clients. The HMRC announcement follows amendments made to the Gibraltar law on local pension schemes in June 2012, and extensive discussions and consultations between the Gibraltar Association of Pension Fund Administrators (GAPFA), the Gibraltarian government, and HMRC. In correspondence on 31 August 2012, a senior HMRC official stated that ‘there is no HMRC objection to Gibraltar QROPS commencing or resuming the acceptance of transfers from UK-registered pension schemes’, and GAPFA chairman Steven Knight has added that the Association is confident that Gibraltar schemes are fully compliant with HMRC requirements, namely that the majority of any fund be used solely for the provision of an income for life on retirement. With this formal endorsement by HMRC, Gibraltar schemes now offer more security than many which appear only on the HMRC list of notified schemes, and which are not necessarily HMRC-approved – an important credential following the unexpected removal of around 300 unacceptable schemes from that same list earlier this year. GAPFA also fully accepts that further changes may become necessary, and therefore regulations will be regularly updated to ensure that Gibraltar remains fully compliant and able to offer the highest standard of QROPS provision.

Strategic Wealth IFA Introducer Proposition

Meeting the needs of clients and keeping in line with compliance and regulation is paramount for today’s financial advisers. We understand that just like your clients, your requirements are going to be different, so we don’t offer a one size fits all approach. Instead, we have a flexible introducer agreement that can be tailored around your requirements and adapted when necessary. Our standard framework focuses around three main areas, these include:

Pension Transfer Suitability Reports


e have a CF30 G60 pension transfer specialist who can assist with pension transfer analysis reports for UK pensions and transfers to international schemes such as a QROPS. We can also assist with TVAS reports for transfers from Defined Benefit Occupational Pensions and help you determine the suitability of a transfer for your client. These services are on a fixed fee basis:

Case mentoring and professional advisory


f you are a fully independent financial adviser and have the full Passporting permissions to provide the advice yourself, but need external professional support and opinion, then we can help. We have a panel of professional advisers and tax specialists at our disposal. With expert knowledge of the available products and providers, we can guide you through the process and introduce you to the relevant providers and any third party professional advisers, leaving you free to advise your client. In return we will share up to 75% of any earned income and fees with you.

• Money Purchase/Defined Contribution pension transfer reports: £995.00 • Final Salary/Defined Benefit pension transfer reports: £1495.00 Once you have the report you and your client can decide on whether or not to complete a pension transfer. Any follow up investment advice can be done by you or an appointed investment adviser

Client referral


or some advisers, especially those that will offer restricted advice post RDR, we have a solution that will enable you to retain your client and give them access to the advice they need. For example, if you

have a client that requires advice about their retirement or investment planning and they either live abroad or plan on emigrating in the future, we can advise on a range of structures including: • QROPS (Qualifying Recognised Overseas Pension Schemes) • QNUPS (Qualifying Non UK Pension Schemes) • Section 615 & 50B Pensions for multi nationals • International Annuities • International Portfolio Bonds • International Savings Plans The process is simple, you refer the client to us and we handle the whole enquiry end to end. In return for the introduction, we will remunerate you up to 25% of any fees or commissions generated.



trategic Wealth is fully licensed and regulated by the Gibraltar Financial Services Commission (FSC). Our partner firm, Gibro Wealth Limited is regulated by the UK Financial Services Authority (FSA). All of our professional service providers and advisers are fully vetted by us. We have full Professional Indemnity Insurance and MIFID Passporting within the European Union via Gibro Wealth Limited. All advice is covered by our PI and we have a dedicated compliance department, so you can rest assured that your clients will receive the same great level of service and protection they receive in the UK.


About Strategic Wealth Limited Founded 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.


ince 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: • Offshore product development & training • QROPS & QNUPS advice • International Lifestyle Annuities • Private Client referrals • MiFID Passporting (via our UK regulated partner) • International Investment Bonds • Advice to non-UK resident clients

We look to build long term professional relationships based on mutual trust. Our skilled, trained and motivated staff 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.

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 or give us a call: +350 20065370

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.

• Pension transfer Analysis Reports



S t r a t e gi c We a l t h Li m i t ed, M ont a gu P a v i l i on, 8- 10 Q ue e ns w a y, G i br a l t a r 00 350 200 65370

Strategic Wealth Limited Newsletter  

Strategic Wealth Limited Newsletter Edition: 01