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TailorMade Investments & Taxation Stories have been carefully written to help you understand tax matters and investment advice from around the world. We aim to build this section into insightful comment that will sometimes touch on the controversial, but always make you think. Do you want to be like everyone else? If not, then read on!


Background

In 2015, it was estimated that 375,000 jobs are supported in the UK / Dutch oil and gas industries through BP and others. Many large oil companies, such as Shell, employ thousands in the Netherlands with their very particular tax laws.  Well paid workers, oil and gas industry staff, have accrued international investments and pension benefits and no longer live in their country of birth.

Given the sometimes large salaries that this industry enjoys, the accrued pension benefits are often significant and this makes oil and gas industry staff an attractive target for advisers including scammers.

KEY POINT: Unregulated salesman and offshore companies often refer to themselves confusingly as “ fully qualified independent financial advisers”. The terms “fully qualified” and “independent” have no legal enforcement in most of the world and a second hand carpet salesman can often portray themselves as an expert adviser whereas in reality, they are a second hand carpet salesman selling a commission product.

Oil & Gas Industries Specific Pension Information

Many oil and gas employees are members of final salary schemes, examples being BP and Shell. These schemes provide valuable benefits and protections that are unlikely to be matched by transferring to private schemes, such SIPPs or QROPS. Whilst it is wholly appropriate for those, not of a cautious disposition, to consider their options there have to be good reasons for moving away from the guarantees on offer.

KEY POINT: Advice on final salary schemes should only ever be given by those with the specialist pension qualification in the relevant country. It has become common practice for offshore salesmen with no qualifications to refer the advice to a “Spanish company” and suggest that the Defined Benefit advice being offered is appropriate. You should seriously question this and your protections and if the answer is that you can complain to the Spanish regulator, then be aware that in a recent case, the Spanish regulator said they had no jurisdiction over a British pension transfer, whilst the UK FOS also said they had no jurisdiction. We would argue that anyone transferring should talk to the UK adviser signing it off, and ask for their UK terms of business, or client agreement, and accept nothing less.

Oil & Gas Industries Tax considerations

Shell Overseas Contributory Pension Fund (SOCPF)

Those that have accrued benefits in the SOCPF, having worked in The Netherlands need specialist tax advice before transferring (or ‘buying off’) their accrued pension. There could be severe tax consequences.

KEY POINT: Don’t listen to the hype that moving your pension offshore somehow saves you tax, it is the Double Tax Treaty between your residency at retirement and the jurisdiction of your pension that dictates the tax that is payable. Not the product!

Offshore Investment bonds, or Offshore Insurance Bonds

Those who have been sold offshore insurance bonds, who later return to the UK, need urgent tax advice in the tax year before their planned return to ensure that they are not personalised bonds subject to penal tax rates.

KEY POINT: Time Apportionment Relief is available in the UK, for certain investments that have gained a profit offshore , that allows for lower tax on profit- however, careful planning is required as additional tax on unmade profits could be payable. Time Apportionment relief can be used for capital gains, and is not linked to any particular product or investment, rather any asset.

Oil & Gas Industries specific Investment Strategies

Offshore Investment bonds, or Offshore Insurance Bonds  (known as wrappers) that are sold on a commission basis should not be used for investments, nor pensions that are transferred. Commission based bonds are often opaque and expensive, with hefty exit fees in the early years. The fact is that where an Offshore Investment bonds, or Offshore Insurance Bonds is appropriate it can be obtained from the same providers without commission and far reduced annual cost, thus reducing the risk required to obtain the same returns.

KEY POINT:In many jurisdictions, Offshore Investment bonds, or Offshore Insurance Bonds  are not recognised by the local tax authorities and provide no tax savings at all, limited benefits, and limited assets available for investment. Where they do hold a wider range of assets they can often become classed as “Personalised bonds” which will lead to further advice being required upon return to UK to avoid penal tax rates.

KEY POINT:Time Apportionment Relief is available in the UK, for certain investments that have gained a profit offshore , that allows for lower tax on profit- however, careful planning is required as additional tax on unmade profits could be payable. Time Apportionment relief can be used for capital gains, and is not linked to any particular product or investment, rather any asset.

If Offshore Investment bonds, or Offshore Insurance Bonds  is the right solution then avoid the 1% regime, those who sell on the basis of fees being 1% per annum. All investments should be ‘clean’ (without commission) and there should be no exit fees, with all other fees being listed transparently. Only a fee-based adviser will be able to offer you these types of investment. Avoid ‘free’ investment advice at all costs.

Key issues / concerns 

By the very nature of the job, oil and gas staff are likely to move frequently and accrue substantial investments and pension benefits with differing employers and differing locations.

Oil and gas industry staff an attractive target for advisers including scammers. Unregulated salesman and offshore companies often refer to themselves confusingly as “ fully qualified independent financial advisers” when they are not.

BP and Shell have large pension schemes which are particularly targeted, often with carefully thought out reasons to transfer guaranteed pensions into QROPS or International SIPP often based outside of the regulatory protection of the UK. The most common areas recommended are Gibraltar and Malta.

Don’t listen to the hype that moving your pension offshore somehow saves you tax, it is the Double Tax Treaty between your residency at retirement and the jurisdiction of your pension that dictates the tax that is payable. Not the product!

In many jurisdictions, Offshore Investment bonds, or Offshore Insurance Bonds  are not recognised by the local tax authorities and provide no tax savings at all, limited benefits, and limited assets available for investment. They should NEVER be used inside a QROPS or SIPP as the pension provides any tax benefit and not the bond. Where they do hold a wider range of assets they can often become classed as “Personalised bonds” which will lead to further advice being required upon return to UK to avoid penal tax rates.



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REGULATORY STATEMENT

Providing advice on cross-border tax and pensions is complex and there is no ‘one size fits all’. None of our advisers are commission based and so we work for a fee paid for by our clients, not the commission based product providers. Tailormade is a brand linked to Aisa Group which is regulated in many jurisdictions and provides advice on a transparent basis, advisers being at Chartered level.

Aisa International is registered with the FSB as Aisa International (PTY) Ltd – No. 47638 and authorised for provision of intermediary services in South Africa. We also have a US registered company with the SEC. 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. Please see www.aisagroup.org in order to ensure that you are dealing with the most appropriate group company.