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If you live in the EU, have a UK pension, QROPS or have been advised to take out an Investment Bond or wish to receive high quality investment advice taking into account Double Tax Treaties, then we are able to assist you.

For many expats living in the EU the key issues or concerns are summarised by us, with some pointers as to how you can avoid the mistakes that we commonly see, and consider the things that make a difference to every EU expat.

We regularly blog on the latest matters affecting you, and within these pages we have put together EU specific pension information for expats. We also focus on the main tax considerations for expats in the EU and then go onto to discuss specific investment strategies including the pro’s and con’s of investment bonds.


Background

There were 1.22 million UK-born people with residency in the EU in 2017, according to the United Nations agency, which used figures reported by the Office for National Statistics. Of these, around one-sixth of them receive the UK state pension.

For expats that need advice on pensions and investments, the investment regulator is here.

For those that need advice on insurance, whether that be car insurance, health insurance or life insurance, the insurance regulator is here.

Aisa Group is registered for both insurance and investment advice for expats resident in the EU through the EEA.

EU Specific Pension Information

All pensions originating from the UK are subject to tax either in the UK or in the EU state that you live in – the classification is residency – where are you resident for tax purposes.

If you go to the UK Revenue and Customs site (www.hmrc.gov.uk), you will be able to find both an English language version of the current UK-relevant EU state Taxation Treaty (https://www.gov.uk/government/collections/tax-treaties) ( Articles 18 and 19 often refer).

KEY POINT: Pensions - the lump sum from a UK pension in some EEA states is taxable and should be declared.

Some people are encourages to take out or transfer to Qualifying Regualted Overseas Pensions Schemes (QROPS) or International SIPPS. However, this should not be undertaken lightly as some countires do not recognise the arrangements, and others will tax them in excess of a UK pension. The legal and tax consequences of a foreign trust are complex and uncertain. Case law is scarce. For an expat living in the EU they should not assume a pension trust or trust arrangement is qualifying in the EU state they live in.

KEY POINT: Trusts – Many countries do not recognise trusts and could well look through a trust structure and tax it accordingly.

EU Tax considerations

Belgium only recognises investments, investment providers and insurance bonds that are registered to be sold in Belgium. There is a suggestion that the sale of non-compliant insurance bonds (whether outside a pension or not) will not enjoy any tax benefits and should be declared on tax returns, but certainly non-regulated investments do not come under any form of protection.

KEY POINT: Trusts - Many countries do not recognise trusts and could well look through a trust structure and tax it accordingly.

The legal and tax consequences of a foreign trust are complex and uncertain. Case law is scarce. For an expat living in the EU they should not assume a pension trust or trust arrangement is qualifying in the EU state they live in.

KEY POINT: For those expats who were advised to take out a trust in the UK and put the investment into an Investment Bond for tax efficiency reasons – you must review this arrangement through a combined UK and relevant EU wealth adviser who has Inheritance Tax specialities (such as ourselves), especially if the expat intends to return to the UK.

For more information go to our Tax Hub

EU specific Investment Strategies

There is a saying ‘Don’t let the tax tail wag the investment dog’. Investors should be interested in the best strategy to get the highest net return after tax AND fees.

KEY POINT: If the fees for a tax strategy are higher than the tax saved, then it would be sensible to look at taxed options with lower fees. When we review existing products often recommended in mainland EU, we discover in 95% of cases that the clients would have been better off not taking out the supposedly “tax-efficient” investment bond!

The adviser should look at alternative strategies, suggest options to discuss with you, finalising a best solution for you, the client, based on investment, fees and the overall tax liability. There is a suggestion that the sale of non-compliant insurance bonds (whether outside a pension or not) will not enjoy any tax benefits and should be declared on tax returns, but certainly non-regulated investments do not come under any form of protection.

KEY POINT: Investments not regulated under EU rules will not be protected under the Financial Services Compensation Scheme. If these investments go bust then the client will lose all their money and have no protection.

Key issues / concerns 

Trusts - Many countries do not recognise trusts and could well look through a trust structure and tax it accordingly.

Investments not regulated under EU rules will not be protected under the Financial Services Compensation Scheme. If these investments go bust then the client will lose all their money and have no protection.

Investment bonds, when sold in a QROPS or International SIPP, are to be avoided. Some investment bonds can be helpful but only with EU regulated investments inside and a “clean” structure (no commissions).

The main consideration should be the balancing of tax efficient advice which takes into account future plans, and charges of products.

If the fees for a tax strategy are higher than the tax saved, then it would be sensible to look at taxed options with lower fees. When we review existing products often recommended in the EU mainland, we discover in 95% of cases that the clients would have been better off not taking out the supposedly “tax-efficient” investment bond!

The vast majority of expat advisers (differ from regulated local regulated advisers), providing investment or pension investment advice to UK expats, do not have investment licences and are circumventing this by selling insurance wrappers that are expensive and commission laden.

What should you be considering?

  1. If you are confident enough, then do your research, and place investment directly.
  2. If you need assistance, then seek advisers who are regulated themselves in the UK for pensions advice, and / or regulated for INVESTMENT advice in Belgium.
  3. Consider not only tax efficiency, but also costs!
  4. Point 4 – is, make sure the costs are accurate! If you are told the costs are 1% or 1.5% per annum in total and there is no fee up front, then you are probably being lied to in 95% of cases.

Some advisers, providing investment or pension investment advice, do not have investment licences and are circumventing this by selling insurance wrappers (investment bonds) that are expensive and commission laden.

  1. Don’t get taken in by the great claims over QROPS and Insurance bonds or investment platforms that are really investment bonds. These add layered charges and are usually not the best outcome for clients (although we accept that in around 15% of cases they are).
  2. Don’t be a sheep. Just because your best friend was advised to do something, never assume this is the right thing. Each person is an individual and requires individual solutions. If your friend were to walk off a cliff, would you follow them?

Our Empirical evidence from clients we have spoken has shown us that many expat sales advisers in the EU (outside of the UK), just sell a product to their clients for commission and do not provided financial solutions. The product is often a QROPS or an International SIPP or an investment bond, which may or may not be the best advice but this is not really considered. Don’t listen as 85% of the time you would be better off doing something else with your hard earned money or pension.



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REGULATION STATEMENT

European Economic Area regulation:
Aisa Direct, a U.K. limited corporation, is authorised and regulated by the FCA – Reg.189652, for provision of intermediary services through the EEA under both the IMD and MiFID, including a branch called Aisa International.

Trading Names: TailorMade is a registered trading name, but does not provide expat pension advice in that name. This website is aimed at individuals not resident in the UK or USA. Please see www.aisagroup.org in order to ensure that you are dealing with the most appropriate group company.