This is ESSENTIAL reading for anyone with a Guernsey QROPS as Guernsey QROPS Rules have changed and created an issue for many current holders.
Guernsey QROPS Rules – background
For those with long memories, HMRC removed Guernsey as a QROPS jurisdiction in 2012. The status of the existing Guernsey QROPS Rules did not change, contrary to a lot of uninformed comment, and those with pensions in Guernsey QROPS were able to maintain their QROPS as before with no pressing need to take any action.
On 2nd October 2015, Guernsey QROPS Rules changed when they introduced flexi-drawdown in response to UK pension rules changing the previous April 2015. However, the changes in Guernsey QROPS Rules had an intentional consequence and there could be issues for those with monies that came from the UK, should they wish to access flexi-drawdown ( Subject of another blog).
People are confused by trustees whose sole aim appears to be to make more money for themselves or get them to transfer into another scheme with an unjustifiable cost attached, and the most recent is for people to suggest the use of ROPS instead of QROPS. So,….
What alternative actions should be considered?
- If the pension originated from the UK, then clients MUST check to see if they are now caught by Inheritance Tax. Everyone previously advised to do a QROPS transfer to avoid Inheritance Tax, should consider going back to those original advisers as the new Guernsey QROPS Rules actually can create a bigger problem than if the pensions had been left in the UK
- If someone is happy with their current arrangement and fees, lives in a jurisdiction that would deem Guernsey to be suitable by virtue of the relevant Double Tax Treaty and have no requirement for a flexible income then there may be an argument to leave the QROPS in Guernsey under Guernsey QROPS Rules.
- If the charges are not competitive, the QROPS not flexible enough and there is no tax advantage received by having the QROPS in Guernsey under Guernsey QROPS Rules then a movement to another product or trustee or another location may be appropriate.
What should you be considering?
- How and when you wish to access your pension
- Tax rules where you live now and, separately, where you wish to retire
- Flexibility you will or will not require
- The new Guernsey QROPS Rules versus:
- Other QROPS jurisdictions
- Reversing into the UK- now that the UK has flexible access to pensions
- Moving to a flexi-access Guernsey Product ( subject of another blog )
- Heavy exit fees levied by some providers, or biased incentives
- Ongoing fees comparison
As a result of the review, someone with a pension in Guernsey will then be able to make an informed decision as to whether to maintain the status quo with Guernsey QROPS Rules or improve their retirement prospects if this is possible.
The demand for more flexibility, even if not utilised, is high. However, people do not want to be stuck in the same “products” that locked them in previously, causing them losses in many cases.
To date we have helped several people, often without any assistance from trustees, who seek to protect their “book” of business. While we have found exit charges to be high the truth is that, with much lower cost products elsewhere, any penalties are more than cancelled out within 2 years. After that point, ongoing lower fees lead to more money being retained and the potential for larger funds at retirement.
Unfortunately, we have found many people did not consider the Double Tax Treaties of where they intended to retire (Some back into the UK, Spain or France where they are effectively heavily penalised), or were not advised well at the initial transfer.
The new UK rules on death benefits, and the family wealth planning opportunities that have risen to the fore , are now a major consideration for moving and reconsidering Guernsey QROPS rules.
There could be a sting in the tail in store for those that have QROPS in Guernsey from pension funds that originated in the UK with the new Guernsey QROPS rules. This we will cover in our next blog.
We would advise anyone that has a Guernsey QROPS to look at all the options now newly available under the new Guernsey QROPS rules to make the most of their retirement.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
- Guernsey Pension. QROPS and Flexible Access Rules 2016
- Drawdown vs UFPLS
- Money Purchase Annual Allowance (MPAA) and QROPS
- QROPS and a Pension Returning to the UK- Part One- the Expat Returns
- Access Your QROPS Within 5 Years
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