L&G relents over blocked transfers amid Ombudsman delays
Legal and General has reversed a decision to block a transfer to a pension scheme which has been subject to a number of refusals by life companies over ‘pension liberation’ concerns, and which was subject to a complaint with the Pensions Ombudsman.
In correspondence seen by FTAdviser between Manchester-based Warwick and Eaton, which administers the SCCL scheme subject to the blocks, the Pensions Ombudsman and L&G, it is revealed that the provider changed its stance in April, six months after it had initially decided to block the transfer.
A complaint that had been with the Ombudsman - one of 16 raised in relation to blocked transfers by a number of life companies - was subsequently withdrawn.
Under the Pension Scheme Act 1993, a transfer must take place within six months or the provider risks incurring a penalty. L&G has previously said that where pension liberation is suspected but not proven, the interpretation of this rule becomes a “grey area”.
Simon Walker, director at Warwick and Eaton said in response to L&G’s decision: “We are delighted that L&G took another look at the scheme. They reviewed what we’d said and then decided to transfer.”
Legal and General declined to comment.
Earlier this year it was reported that number of providers were blocking transfers to the SCCL scheme, including major life insurers such as L&G, Aviva and Standard Life.
Warwick and Eaton has now referred 16 cases to the Ombudsman against providers with regard to blocked transfers. However, the firm said these cases still have not been attributed an investigator as delays continue over the publication of a number of complaints.
The Ombudsman has twice delayed the publication of a number of decisions - originally around 45 but now believed to be more than 80 - from an original estimate of May. A further update is expected this month, when publication is likely to be postponed further.
A spokesperson for Aviva said: “The cases remain before the Pension Ombudsman. As a result we have no comment to make at this time.”
A spokesperson for Standard Life said that the firm was unable to comment on individual cases, but added: “We are fully committed to preventing our customers falling victim to pension liberation schemes.
“The decision on whether or not to transfer to a scheme is based on a number of factors, including Pensions Regulator guidance, HMRC advice on the status of the receiving scheme and whether HMRC are aware of any concerns regarding potential liberation.
“We will not make a transfer payment in any case where we suspect that liberation may be involved and in total we have refused over 370 transfers to date.”
Mr Walker added of schemes which are currently blocking transfers: “It doesn’t really matter to us – they are big schemes but for members involved they are laboured with admin charges and it seems quite wrong.
“To us admins it’s frustrating and of course we’d like the members to be in the scheme. They shouldn’t be charging and making profits out of a member while they are awaiting a decision.
“Something appears very wrong... Clarity is what is needed from the Ombudsman in how they are going to act. It seems stupid to wait for the Ombudsman if you know they are never going to report.”
Current rules mean HMRC typically ‘registers’ occupational pension schemes with little to no formal checks, meaning firms are often left in a difficult position if the watchdog refuses to close a scheme during the six-month delay window.
New powers handed to HMRC at this year’s Budget broaden its ability to refuse to register a pension scheme if it believes it will be used as a liberation vehicle.
Legal and General has reversed a decision to block a transfer to a pension scheme which has been subject to a number of refusals by life companies over ‘pension liberation’ concerns, and which was subject to a complaint with the Pensions Ombudsman.
In correspondence seen by FTAdviser between Manchester-based Warwick and Eaton, which administers the SCCL scheme subject to the blocks, the Pensions Ombudsman and L&G, it is revealed that the provider changed its stance in April, six months after it had initially decided to block the transfer.
A complaint that had been with the Ombudsman - one of 16 raised in relation to blocked transfers by a number of life companies - was subsequently withdrawn.
Under the Pension Scheme Act 1993, a transfer must take place within six months or the provider risks incurring a penalty. L&G has previously said that where pension liberation is suspected but not proven, the interpretation of this rule becomes a “grey area”.
Simon Walker, director at Warwick and Eaton said in response to L&G’s decision: “We are delighted that L&G took another look at the scheme. They reviewed what we’d said and then decided to transfer.”
Legal and General declined to comment.
Earlier this year it was reported that number of providers were blocking transfers to the SCCL scheme, including major life insurers such as L&G, Aviva and Standard Life.
Warwick and Eaton has now referred 16 cases to the Ombudsman against providers with regard to blocked transfers. However, the firm said these cases still have not been attributed an investigator as delays continue over the publication of a number of complaints.
The Ombudsman has twice delayed the publication of a number of decisions - originally around 45 but now believed to be more than 80 - from an original estimate of May. A further update is expected this month, when publication is likely to be postponed further.
A spokesperson for Aviva said: “The cases remain before the Pension Ombudsman. As a result we have no comment to make at this time.”
A spokesperson for Standard Life said that the firm was unable to comment on individual cases, but added: “We are fully committed to preventing our customers falling victim to pension liberation schemes.
“The decision on whether or not to transfer to a scheme is based on a number of factors, including Pensions Regulator guidance, HMRC advice on the status of the receiving scheme and whether HMRC are aware of any concerns regarding potential liberation.
“We will not make a transfer payment in any case where we suspect that liberation may be involved and in total we have refused over 370 transfers to date.”
Mr Walker added of schemes which are currently blocking transfers: “It doesn’t really matter to us – they are big schemes but for members involved they are laboured with admin charges and it seems quite wrong.
“To us admins it’s frustrating and of course we’d like the members to be in the scheme. They shouldn’t be charging and making profits out of a member while they are awaiting a decision.
“Something appears very wrong... Clarity is what is needed from the Ombudsman in how they are going to act. It seems stupid to wait for the Ombudsman if you know they are never going to report.”
Current rules mean HMRC typically ‘registers’ occupational pension schemes with little to no formal checks, meaning firms are often left in a difficult position if the watchdog refuses to close a scheme during the six-month delay window.
New powers handed to HMRC at this year’s Budget broaden its ability to refuse to register a pension scheme if it believes it will be used as a liberation vehicle.
QROPS ADVICE: Malta gains QROPS approval
Malta has become the latest country to gain QROPS recognition from the HMRC following months of negotiations.
The development means Malta-domiciled pensions schemes that are approved by the Malta Financial Services Authority (MFSA) are eligible for QROPS status.
HRMC said it would assess schemes for suitability on a case-by-case basis.
The MFSA said it was processing a number of applications for retirement schemes under its Special Funds Act. Once authorised under the act, the schemes will be able to seek QROPS status from HMRC.
A number of these schemes are expected to then apply for QROPS status.
A spokesman for the MFSA said: “This is a significant development for Malta indicating. The strong reputation of the Maltese financial services industry coupled with the fact that Malta is an English speaking country, had already generated a lot of interest in this area.”
He added pension schemes established in Malta were included in the Mediterranean state’s network of more than 50 double taxation agreements and were also recognised in all countries in the European Economic Area (EEA).
News of Malta’s approval comes as Gibraltar, the British overseas territory on the tip of Spain, awaits a decision from HMRC over whether it will be able to continue as a QROPS domicile.
The jurisdiction voluntarily stopped processing QROPS business around six months ago after HMRC raised concerns over its tax treatment of pension benefits for over 60s – a zero per cent tax is applied.
HMRC is expected to make an announcement as soon as this week over its fate.
http://www.international-adviser.com/lwm/article/960
The development means Malta-domiciled pensions schemes that are approved by the Malta Financial Services Authority (MFSA) are eligible for QROPS status.
HRMC said it would assess schemes for suitability on a case-by-case basis.
The MFSA said it was processing a number of applications for retirement schemes under its Special Funds Act. Once authorised under the act, the schemes will be able to seek QROPS status from HMRC.
A number of these schemes are expected to then apply for QROPS status.
A spokesman for the MFSA said: “This is a significant development for Malta indicating. The strong reputation of the Maltese financial services industry coupled with the fact that Malta is an English speaking country, had already generated a lot of interest in this area.”
He added pension schemes established in Malta were included in the Mediterranean state’s network of more than 50 double taxation agreements and were also recognised in all countries in the European Economic Area (EEA).
News of Malta’s approval comes as Gibraltar, the British overseas territory on the tip of Spain, awaits a decision from HMRC over whether it will be able to continue as a QROPS domicile.
The jurisdiction voluntarily stopped processing QROPS business around six months ago after HMRC raised concerns over its tax treatment of pension benefits for over 60s – a zero per cent tax is applied.
HMRC is expected to make an announcement as soon as this week over its fate.
http://www.international-adviser.com/lwm/article/960
QROPS Advice: Why HMRC will not be happy bunnies this year
QROPS are very much in the news at the moment. Recent newspaper articles have screamed at readers “Take your money and run” (The Telegraph) and “Get your money out of Britain” (Sunday Times). Much to the annoyance of HMRC, it seems people are doing just that. Recently released figures showed there was a 154% increase in transfers to QROPS in the 2007/08 tax year compared to the year before, while
uptake of new QROPS was said to have doubled in the last three months of 2009.
HMRC, which has already penalised pension rules abusers and closed down Singapore as a QROPS jurisdiction for misrepresentation, will not be amused by the headlines or pleased by the growth of a market that diverts revenue from government coffers.
Regardless, for the right person in the right place QROPS are highly attractive.
Since April 2006 it has been possible, providing you have been non-resident for five years, to:
■ receive your pension free of tax (dependent on where you transfer it to);
■ avoid purchasing annuities;
■ avoid an Alternatively Secured Pension at 75, resulting in losing 82% of fund in taxes on death;
■ unlimited fund size;
■ pass on to your beneficiaries the balance tax-free.
But to continue to enjoy such benefits, more respect needs to be given to HMRC
– quite simply, do not abuse the rules and do not delay making a transfer. Pension legislation changes like the breeze, and all the current inflammatory press attention
could bring an ill wind sooner than you think.
uptake of new QROPS was said to have doubled in the last three months of 2009.
HMRC, which has already penalised pension rules abusers and closed down Singapore as a QROPS jurisdiction for misrepresentation, will not be amused by the headlines or pleased by the growth of a market that diverts revenue from government coffers.
Regardless, for the right person in the right place QROPS are highly attractive.
Since April 2006 it has been possible, providing you have been non-resident for five years, to:
■ receive your pension free of tax (dependent on where you transfer it to);
■ avoid purchasing annuities;
■ avoid an Alternatively Secured Pension at 75, resulting in losing 82% of fund in taxes on death;
■ unlimited fund size;
■ pass on to your beneficiaries the balance tax-free.
But to continue to enjoy such benefits, more respect needs to be given to HMRC
– quite simply, do not abuse the rules and do not delay making a transfer. Pension legislation changes like the breeze, and all the current inflammatory press attention
could bring an ill wind sooner than you think.
QROPS Advice: Equity Trust challenges QROPS Decision
Equity Trust, trustee of the Panthera ROSIIP pension fund, is taking the UK tax authority to court to challenge the removal of Singapore’s QROPS status in May 2008.
The trust company, which established Panthera in a joint venture with Credit Suisse subsidiary Clariden Leu, said it has tried to come to a mutual agree-ment with HMRC over the future status of the scheme but has so far failed. In a letter to policyholders dated 20 January, Equity Trust said it issued a letter to HMRC under the ‘Pre action Protocol’ within the Civil Procedure Rules in December but received
no response. It has subsequently made an application to the UK’s High Court for ROSIIP to be restored to QROPS status.
The letter from Equity Trust director Fredrik van Tuyll also said ROSIIP had always been managed within QROPS legislation. The reasons for the decision to bar Singapore have never been fully explained due to the Revenue’s silence on the matter. Industry
sources suggested at the time the problem could lie with Singapore’s taxation of pensions, rather than a single scheme’s actions.
BY SIMON DANAHER
The trust company, which established Panthera in a joint venture with Credit Suisse subsidiary Clariden Leu, said it has tried to come to a mutual agree-ment with HMRC over the future status of the scheme but has so far failed. In a letter to policyholders dated 20 January, Equity Trust said it issued a letter to HMRC under the ‘Pre action Protocol’ within the Civil Procedure Rules in December but received
no response. It has subsequently made an application to the UK’s High Court for ROSIIP to be restored to QROPS status.
The letter from Equity Trust director Fredrik van Tuyll also said ROSIIP had always been managed within QROPS legislation. The reasons for the decision to bar Singapore have never been fully explained due to the Revenue’s silence on the matter. Industry
sources suggested at the time the problem could lie with Singapore’s taxation of pensions, rather than a single scheme’s actions.
BY SIMON DANAHER
QROPS Advice: Time to move
The screws are tightening on the bank accounts of high net worth individuals, particularly those in the City. With effect from April, anyone earning more than £100,000 will see their personal tax allowances reduced, and those with an income of more than £150,000 will be taxed at a top rate of 50 per cent. Individual bonuses to bank workers of more than £25,000 paid before April, meanwhile, are subject to a 50 per cent levy paid by the bank; the employees also pay income tax on the money they receive.
So, who's leaving?
There's been talk of an exodus of high net worth individuals since the Chancellor first outlined his tax hike plans in last April's Budget. David Anderson of London law firm Sykes Anderson thinks the new regime "may be the last straw for high net worth individuals who have already been directly targeted by the changes to non-domicile taxation and the abolition of taper relief for capital gains tax (CGT) purposes."
However, Paddy Dring, head of the international residential department at property consultant Knight Frank, believes that only a relatively small number have actually left the country so far. "Others are making preparations but are waiting to see what happens over the coming year," he says.
"There are without doubt some who will leave London, but many are realising they have underestimated the complexities of going," adds Jonathan Hewlett, head of Savills' London office. "More and more, we are hearing about people who've looked at moving but can't find the right place to go - a place where their partner will be happy and there are good school choices. The young are more transient, however, and there is a perception that they will go wherever the good deals are."
Tax issues
Those complexities extend well beyond school choice. Paul Garwood, head of personal financial planning at London accountant Smith & Williamson, points out that HM Revenue & Customs (HMRC) has not been making it any easier to escape the UK tax system recently.
The test for residency (which governs the requirement to pay UK tax) used to be that if you were in the UK for more than 183 days in a tax year, or more than 90 days a year over a four-year period, then you were UK resident. But as Mr Garwood explains: "Now, if you haven't qualified for resident status in another country and you keep your UK home, they may just count you as UK resident anyway if you return at all, so you really need to plan carefully and burn your UK boats if you're serious about it."
That may well mean selling your home, rather than renting it out. It also means ensuring you spend enough time in your new jurisdiction to qualify as tax resident there. You can no longer work in Paris during the week but nip home to see your family in Britain at the weekends if you want to escape the UK tax regime.
The tougher regime is a particular problem for people trying to move directly to a tax haven such as Monaco, says Mr Anderson. "First, it is harder to prove you've left the UK for good, as the Revenue is far less likely to accept you are moving your life away from the UK," he explains. "Secondly, Monaco has no double tax treaty in place with the UK, so you could find you’re a dual resident for tax purposes, and therefore remain liable for UK income tax. (Double tax treaties contain a test to establish your residency for tax purposes in either one country or the other; dual residency is not possible.)
"It can be much simpler therefore to move to a country which has a more favourable regime than the UK but also has a double tax treaty with the UK, such as France," Mr Anderson suggests.
Pension planning
Apart from tax residency itself, you need to plan other tax-related aspects of your finances. Pensions are one key consideration. If you are in your employer's pension scheme, you will be able to remain in the scheme when you're working abroad for a maximum period of ten years; after that you may be able to negotiate a move into a local equivalent scheme.
If you are moving overseas indefinitely, you could consider transfer your UK pension into a Qualified Recognised Overseas Pension Scheme (QROPS) - an overseas pension scheme approved by HMRC. The advantage is that they are governed by the local tax rules, and these tend to be more flexible than the UK system. For example, you may not have to buy an annuity with the bulk of your fund; there may be less or no tax to pay on pension payments; or it may be possible to take the whole lot as a lump sum.
by:Faith Glasgow
http://www.investorschronicle.co.uk/InvestmentGuides/FinancialPlanning/article/20100208/b01de62e-125c-11df-bbca-0015171400aa/Time-to-move.jsp
So, who's leaving?
There's been talk of an exodus of high net worth individuals since the Chancellor first outlined his tax hike plans in last April's Budget. David Anderson of London law firm Sykes Anderson thinks the new regime "may be the last straw for high net worth individuals who have already been directly targeted by the changes to non-domicile taxation and the abolition of taper relief for capital gains tax (CGT) purposes."
However, Paddy Dring, head of the international residential department at property consultant Knight Frank, believes that only a relatively small number have actually left the country so far. "Others are making preparations but are waiting to see what happens over the coming year," he says.
"There are without doubt some who will leave London, but many are realising they have underestimated the complexities of going," adds Jonathan Hewlett, head of Savills' London office. "More and more, we are hearing about people who've looked at moving but can't find the right place to go - a place where their partner will be happy and there are good school choices. The young are more transient, however, and there is a perception that they will go wherever the good deals are."
Tax issues
Those complexities extend well beyond school choice. Paul Garwood, head of personal financial planning at London accountant Smith & Williamson, points out that HM Revenue & Customs (HMRC) has not been making it any easier to escape the UK tax system recently.
The test for residency (which governs the requirement to pay UK tax) used to be that if you were in the UK for more than 183 days in a tax year, or more than 90 days a year over a four-year period, then you were UK resident. But as Mr Garwood explains: "Now, if you haven't qualified for resident status in another country and you keep your UK home, they may just count you as UK resident anyway if you return at all, so you really need to plan carefully and burn your UK boats if you're serious about it."
That may well mean selling your home, rather than renting it out. It also means ensuring you spend enough time in your new jurisdiction to qualify as tax resident there. You can no longer work in Paris during the week but nip home to see your family in Britain at the weekends if you want to escape the UK tax regime.
The tougher regime is a particular problem for people trying to move directly to a tax haven such as Monaco, says Mr Anderson. "First, it is harder to prove you've left the UK for good, as the Revenue is far less likely to accept you are moving your life away from the UK," he explains. "Secondly, Monaco has no double tax treaty in place with the UK, so you could find you’re a dual resident for tax purposes, and therefore remain liable for UK income tax. (Double tax treaties contain a test to establish your residency for tax purposes in either one country or the other; dual residency is not possible.)
"It can be much simpler therefore to move to a country which has a more favourable regime than the UK but also has a double tax treaty with the UK, such as France," Mr Anderson suggests.
Pension planning
Apart from tax residency itself, you need to plan other tax-related aspects of your finances. Pensions are one key consideration. If you are in your employer's pension scheme, you will be able to remain in the scheme when you're working abroad for a maximum period of ten years; after that you may be able to negotiate a move into a local equivalent scheme.
If you are moving overseas indefinitely, you could consider transfer your UK pension into a Qualified Recognised Overseas Pension Scheme (QROPS) - an overseas pension scheme approved by HMRC. The advantage is that they are governed by the local tax rules, and these tend to be more flexible than the UK system. For example, you may not have to buy an annuity with the bulk of your fund; there may be less or no tax to pay on pension payments; or it may be possible to take the whole lot as a lump sum.
by:Faith Glasgow
http://www.investorschronicle.co.uk/InvestmentGuides/FinancialPlanning/article/20100208/b01de62e-125c-11df-bbca-0015171400aa/Time-to-move.jsp