Alan Hall: Blog
Sometimes it’s beneficial to remind clients of life’s essentials and why the basics matter.
And, although sales of offshore lifestyle products have declined this year almost across the board, the fundamental factors to support having life insurance have not changed.
Here, Alan Hall highlights ten factors why a life insurance policy is still necessary.
There is often a popular misconception that financial advisers only sell products and little mention is made of the financial planning aspects of their services.
Of the large number of advice-based solutions in the financial adviser‘s toolbox, there is one that is often underutilised and it is the trust.
Protecting and increasing wealth is one of the cornerstones of financial planning. The correct use of trusts plays a big part in this.
What are QROPS?
QROPS stands for Qualifying Recognised Overseas Pension Schemes as recognised by Her Majesty’s Revenue and Customs the HMRC.
QROPS came into affect with the Pension simplification rules on the 6th April 2006. The purpose of this part of the legislation was to enable pension holders to transfer their funds to another country when they retire to another jurisdiction.
What are the Benefits of a QROPS transfer?
- To have your pension paid in the same currency as the country you are living in so as to avoid the erosion of your income as currency rates change.
- The ability to avoid UK income tax on your pension income, which dependent on your new country of residency could mean you pay a lower rate of tax and therefore receive more money in your pocket.
- To never need or be forced to purchase an annuity and the restrictions this can place upon you. This means you are free to receive pension income in the way you see fit.
- To be able to pass your remaining pension fund to your loved ones on death instead of paying 55% to the tax man as you would in the UK.
- Greater investment choice and flexibility which means you are able to maximise your fund growth and therefore the money you receive in the future.
What are the Benefits of a SIPPS transfer?
Sipps stands for “self-invested personal pensions”. These are a ‘do-it-yourself’ form of pension that allows an individual to make his or her own investments into a personal pension pot.
But you don’t have to be an investment genius to have a Sipp. They’re great for:
- pulling a whole load of personal pensions together,
- having a wider variety of investments than in a normal personal pension including shares and commercial property
- giving you day to day control over the “big picture” such as moves from shares to cash or vice versa
- letting you into “income drawdown” – a way of having your tax free cake while keeping your pension invested.
PFM International is one of the few bonafide British run financial services companies operating out of Thailand. You can check the references of the CEO Alan Hall and/or speak to his current clients before going ahead with your QROPS or SIPP transfer.
About half of UK pensioners overseas are caught by the pensions free
More than half a million UK pensioners living overseas will continue to have their pensions frozen after a European court decision.
Pensioners who moved to countries such as Australia and Canada only receive the level of pension paid at retirement – which might be only £6 per week.
The European Court of Human Rights rejected an appeal from a group of pensioners by an 11 to 6 majority.
The group wanted to receive increases in line with inflation.
The decision has saved at least £500m a year for the government, which said that its first responsibility was with pensioners living in the UK.
The expatriate pensioners say they have been fighting “tooth and nail” against the UK government in an eight-year court battle.
Pensioners who have moved abroad want their UK state pensions to rise in line with inflation each year.
Inflation-proofing only applies to UK pensioners who live in the European Economic Area or in 15 other countries, but not in some Commonwealth states.
John Markham, a pensioner living in Canada, said: “There is an image of people living well in the sunshine – but there are plenty of cases of real hardship.”
The applicants did not contribute to the UK economy, in particular, they paid no UK tax to offset the cost of any increase in the pension
European Court of Human Rights
He said the decision was the end of the legal road, but they wanted to take the case to the “court of public opinion”.
He told the BBC News website that they would take 48 hours to consider the decision.
The campaigners argue that they paid into the pensions system when they were working and are entitled to the same benefits as those who remained in the UK.
For the oldest overseas pensioners, who retired in the early 1970s, the pension can be as low as £6 a week. Those who retired in the early 1980s are left on about £30 a week, and those who retired in the early 1990s get about £50 a week.
The current basic state pension is £95.25 a week.
There are more than a million UK pensioners living overseas – with about half of them affected by the pensions freeze.
South Africa resident Annette Carson was among those who started the case
If pensioners have moved to countries with a reciprocal arrangement – such as in the European Union or the United States – then they receive pension increases.
But if pensioners have emigrated to countries without any such agreement – such as Australia, Canada and South Africa – their pensions have been frozen at the level of when they moved overseas.
The Department for Work and Pensions welcomed the ruling and said the department’s first responsibility was to support pensioners in the UK.
“We note that the court has found in favour of the government. We do not therefore plan to make any changes to the current arrangements, which allow for the exportability and up rating of UK state pensions,” a department spokesman said.
“We will, nonetheless, study the terms of the judgment carefully to ensure that we continue to comply with our obligations under the terms of the European Convention on Human Rights.”
The department has said that pensioners who chose to move to a country without a reciprocal pensions arrangement would have been aware of what it would mean for their state pension.
The case has seen a series of courts reject the arguments of pensioners including Annette Carson, who moved to South Africa in 1990.
After emigrating, she continued to make full contributions to her UK state pension and, on retirement in 2000, began to receive pension payments. But since then, the UK authorities have frozen the level of payments at £67.50 a week.
Judges at the European Court of Human Rights were the latest to declare that National Insurance contributions did not have an “exclusive link” to retirement pensions.
“As non-residents, the applicants did not contribute to the UK economy, in particular, they paid no UK tax to offset the cost of any increase in the pension,” a statement from the court said.
The court said that it was hard to draw any genuine comparison with the position of pensioners living elsewhere.
But Michelle Mitchell, of Age Concern and Help the Aged, said: “This ruling is bad news for half a million pensioners whose only fault is to retire to the ‘wrong’ country in the international ‘postcode lottery’ of pensions up-rating.”
This is totally unfair. It in effect tells pensioners where they may live. Retired people should have the right to live wherever they choose.
Art Hampton, USA
It’s probably the right decision. People who have chosen to retire outside of the safety net of the UK or those countries with reciprocal agreements have taken a risk not only with potential currency fluctuations but have accepted a stagnant income in the face of decades of inflation. I feel sorry for those who face genuine hardship but the UK has enough to worry about without throwing £2.5 billion at citizens who abandoned her shores and no longer make any contribution to her economy.
Mark, Bath, UK
Again we the pensioners have been duped – no increase in pension and no health assistance. The big question could be if all the pensioners decided to return to the UK what would the cost be to the government? Not £500 million per year but possibly five times that including health costs.
John Leighton, Braslia DF Brazil
I have an English born great aunt who moved to South Africa as a child. She lived there until retirement age, paying absolutely nothing into the UK economy whatsoever for more than 50 years. After reaching retirement age she relocated back to the UK. Now she receives a full state pension, housing and council tax benefits and all other assistance as provided by the government. Although she is family, how can it be right that those who spent their working lives paying into and benefitting the tax system and the wider economy be entitled to less of a pension than someone who only came back to this country to claim what they may be entitled to, but are certainly not deserving of? The money that people like my great aunt claim should be reallocated to those who have paid their dues, regardless of where they decide to spend their retirement.
Anon, Nottingham, UK
“The campaigners argue that they paid into the pensions system when they were working” and what they paid in was immediately paid out again! When are people going to stop trotting this non-argument out? NI is not a bank or an investment fund. What I pay NOW is used to fund pensions NOW. When I retire, I will be funded, in turn, by those paying in at the time. As far as I know, the only relevance that my payments have is in the proportion of the pension I will eventually be entitled to receive.
Mike, Wisbech, UK
The European ruling is a start, maybe now we can move to a position where if you leave this country, you thereby give up your right to any state pension whatsoever! When the original calculations were done it was assumed that the pension money would be spent in this country and benefit everyone.
James Strachan, Peterhead, UK
I have been paying voluntary NI contributions for some nine years while living in Japan, so that I can receive a full state pension when I retire – irrespective of where I may be living. The argument that we expats do not deserve index-linked pensions because we do not pay UK tax is flawed. We do not send our children to state schools in the UK, benefit from UK law and order, drive on UK roads, claim any form of UK benefit etc. I want to also point out that unlike our pensions, our voluntary NI contributions DO increase with inflation.
David James, Kyoto, Japan
For an excellent comprehensive ‘FAQ’ on QROPS: A Qualified Recognised Overseas Pension Scheme, visit the following link QROPS: Frequently Asked Questions.
If this does not answer your question or for more information on LOW COST QROPS, contact us today!
Best Wishes from Alan Hall and the rest of the team at PFM International…
The UK Treasury has decided to postpone the publication of eagerly awaited draft legislation which would have established a statutory residency test.
The legislation had been due to be published in the draft Finance Act 2012 which was published by the Treasury recently. However, the Treasury announced it has decided to delay the draft legislation until the Finance Act 2013 and for the test to then take effect from April 2013, rather than April 2012.
In a statement, the Treasury said it decided to postpone the publication in order to give it more time to “consult thoroughly on the detail of these changes well in advance of implementation”.
It added: “The Government is committed to the form of the statutory residence test outlined in consultation. It will make a further announcement around Budget 2012 when it will publish its response to the recent consultation together with a further consultation on policy detail and draft legislation.”
On 18 June 2011 the Treasury launched its consultation on a new statutory test for what constitutes tax residency in the UK. The new test is designed to provide certainty for taxpayers in assessing their residency treatment. While this certainty will be welcomed, it does come at a price and some of the permissiveness of the current regime will be lost. For many individuals, this will be a price worth paying. The new rules are intended to be introduced with effect from 6 April 2012.
The Safe Harbours
The effect of the new rules is firstly to introduce a number of ‘safe harbour’ guidelines within which an individual cannot be treated as tax resident in the UK. These are:
1. for those who have not been UK resident in the previous three years, spending less than 45 days in the UK;
2. for those who have been UK resident in the last three years, spending less than 10 days in the UK; and
3. working abroad full time.
At the other end of the spectrum, those who spend more than 182 days in the UK or who work in the UK full time will always be treated as resident.
A Qualified Recognised Overseas Pension Scheme is an excellent option for people with a UK private pension who are living, or planning to live, overseas.
- Greater control – more say over where your pension fund is invested
- Tax efficient – no tax to pay when drawing down your pension
- Inheritance benefits – possibility of passing on your pension fund to your beneficiaries, free from UK Inheritance Tax
- Easy to manage – numerous pensions can be consolidated into one QROPS
- No annuity – you do not have to buy an annuity within a QROPS
Do you qualify?
- Have you ever worked in the UK?…Yes!
- Did you contribute to a private or occupational pension scheme while you were there?….Yes!
- Are you UK non-resident or do you intend to become non-resident?….Yes!
- Do you have an existing QROPS that you may wish to transfer….Yes!
PFM International is currently offering a reduction on all fees for the life of a QROPS invested with us…that could mean thousands in savings over 10 years not including the capital reinvestment which would actually double your savings over this time!
All our clients funds are held in trust by the QROPS provider in Guernsey, Carey Group, and invested via Friends Provident International in the Isle of Man offering the highest levels of investment protection and security.
Call +66 (0)8-1764-3048 or Email to ask Alan direct for free, no obligation QROPS advice
Considered a local delicacy, albeit in the street-food category, fried insects are sold on Chiang Mai’s famous Sunday Walking Street. Choose from grasshoppers, bamboo worms, silk larvae, crickets, weevils, ant queens and scorpions. The ‘menu’ changes according to the season while silk larvae and crickets are available all year round, scorpions are considered a rare delicacy…
I get asked for advice on a whole range of subjects in my role as CEC President and as an Expat myself, who has lived for 11 years in Chiang Mai. One of the issues that comes up again and again is, unsurprisingly, to do with cultural differences. There are far more grey areas in Thailand than there are in say, Europe or The States, and we, as Expats, have to learn to ‘fit in’ and accept that fact.
Now, I’m not suggesting you go as far as to enjoy eating bugs (though they are considered delicious and nutritious by the locals here in Chiang Mai), but fitting in here and going with the flow is a necessity if you want to enjoy your time as an Expat, and, let’s face it, guest, here in Thailand. I guess my main point is that you can’t apply U.S or U.K values here, you need to be much more flexible when dealing with Thai people personally or with the authorities.
A friend of mine recently moved into a place within earshot of a pig farm…he, in turn, started making noises about calling in the authorities to address the noise issue. For me, it’s a classic case of who was there first? That farm has been around for over 50 years providing a livelihood for the locals – I think it’s up to us to ‘fit in’ with them and not up to Thais to ‘fit in’ with us. Part of the reason we are here as Expats is because of the wonderful cultural diversity we find. Let’s not forget, the days of the British Empire are over…
For advice and assistance on any topic, Contact Alan Hall who is always happy to help.