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Clarity for QROPS


AnOther

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The Chancellor's Autumn statement left the question of whether the new pension rules coming in on April 6th. would extend to QROPS however HMRC have subsequently clarified the situation and the answer is yes.

[url]http://www.international-adviser.com/news/retirement/qrops-to-receive-full-flexibility[/url]

There is a remaining question mark however and that is whether the rules in the tax jurisdiction where the QROPS is held will permit or adopt the changes either fully or in part.

TBH I can't see how they couldn't even if it meant changes to those rules because to not could effectively kill their entire QROPS industry on the spot and result in a flood of scheme wind ups and transfers to more accommodating providers, or even back to the UK.

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  • 2 weeks later...
It has been 'suggested' to me that being resident in France if I were to take the whole of my pension under the changes I would normally have to pay tax after any tax allowance has been subtracted in the UK. As I am not tax resident in the UK but in France I can pay tax here and that the tax on pensions is much lower than in the UK. A figure or 7.5% was mentioned for France but I have not looked into the matter further so can't confirm if this is true or not. My problem is that my 'pot' has not grown in the UK for some time and they are charging me a lot to manage it and to be honest I would be better off putting it in a normal savings account (I am aware there are better places to put it). I also understand that the rules on buying an annuity will change as well which means I can return the money to buy one and the British annuity system is a better way to get a pension that the French one. As you say all this would make the QROPS system pointless. Having said that I looked into QROPS some time back from the French end and although it would release some money the type of pension you can get in France for the same money makes it not worth doing but then these companies don't tell you that bit. I think some will find it quite a shock when they actually draw on their pension that they moved to France.
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I'm not sure what you mean by 'QROPS from the French end' or 'pension that they moved to France' ?

Most QROPS are established in offshore jurisdictions and I'm certain there will not be any in France !

BTW, to put the controversy about people 'blowing their pensions on a Ferrari' into perspective, it's said that the average private pension pot in UK is an wholly underwhelming £30k

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QROPS is as far as I understand it a way of moving your 'pot' and at the same time taking a certain amount (upto to 25%) of money from it and not pay tax but since the law changes it's a bit pointless as you can now take 25% tax free anyway. The catch is you have to move it to a recognised(by HMRC) pension fund (QROPS List) and in France they are...

ACM Vie

France

Areas Vie-Plan D' Epargne Retraite Inter-Entreprise Multi Employer Retirement Plan

France

Aviva Retraite Perp

France

Batiretraite PERP

France

BNP Paribas PERP

France

BNP Paribas PERP

France

Cardif Multi Plus Perp

France

Concordances PERP

France

Concordances PERP Advance

France

Defined Contribution Pension Scheme No RG 150 018 842

France

Dimension Avenir RIP Gan Assurances

France

Epicea

France

Figures Libres (Fli) AXA France Vie

France

Fonds Pension AXA

France

Fonds Pension AXA

France

La Retraite 08

France

La Retraite Generali

France

Le PERP ERES 163X

France

Lignage

France

Nuances 3D

France

Nuances 3D

France

Perpelia

France

Plan D'Epargne Pour La Retraite Collectif (PERCO) Du Groupe Eads

France

Plan d'Epargne Retraite Populaire (P.E.R.P.) Mondiale Solutions Retraite

France

Plan d'Epargne Retraite Populaire (PERP) formule "Plan Vert Vitalite"

France

Plan d'Epargne Retraite Populaire (Perp)(Suravenir)

France

Plan d'epargne Retraite Populaire PERP formule securite

France

Plan d'epergne retraite populaire - PERP Confort AXA

France

Plan Elysees Retraite Patrimoine

France

Plan Epargne Retraite Populaire (P.E.R.P.) Complement Epargne Retraite

France

Plan Epargne Retraite Populaire (PERP)(LCL)

France

Plan Retraite Revenue (PERP)

France

Regime de Retraite Decathlon SA Contrat Arial Assurance RG 132 074 327

France

The thing is there are not that many countries that operate the annuity system (France doesn't, it does not exist here) which for instance benefits me as I smoke, drink, am asthmatic, have inherited heart decease and am diabetic. This means that I would get well over double the income when I change it to an annuity and start drawing my pension than a healthy person. This is based on a 'bet' by the annuity company that I won't live very long and of course they get their hands on the pot.

The benifit of moving it to France would be that the tax you pay on the pension when drawn would be less than the Uk but the money you wold actually get is a lot less anyway. The same if you put the money into an off shore fund, eventually the money has to arrive in France so you can spend it and you have to declare it so you will pay tax but possibly at the full amount. Basically people have used QROPS in the past as a method of getting their hands on part of their pot as a cash lump sum and in doing so paying as little tax as possible. Now, since April 2014, there is no benifit in using QROPS because you can draw down on your UK pension pot (once only) up to 25% and pay no tax anyway.

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[quote user="AnOther"]
I'm not sure France is where I'd want to park my pot though !
[/quote]

That’s the thing and your dead right. Apparently what I got from my interview at the French end (in this case Axa) that the way it works is you are offered a fixed interest rate on the pot which is one or two percent above the average paid monthly. Alternatively you can have the same fixed interest with a draw down on your pot which is the more common but then the pot gets smaller so you get less income on the percentage side and eventually it runs out.

The other issue of course is you live in France so are tax resident here. Putting your money offshore may mean better interest rates but often the fees for running your fund is more and at the end of the day you have to bring the money in to France to spend it and you will pay the same tax wherever your pot is located outside of France.

Before the only way to get your 25% was at the time you bought your annuity in the UK. QROPS meant that as you were taking your money out of the UK and putting it a fund say in France you could get your hands on the 25%. However you were only allowed to do it once and just like the UK a QROPS compliant fund does not allow you to take any further cash lump sum ever, it can only be used for your pension. It will be a few years before the first people start to see what they actually get from say a French pension compared to what they would have got from a UK annuity and from the model I was presented with it will be just over half the monthly pension amount. They will then of course claim that they have been fiddled by the broker or whoever when what they should have done was really looked into it from the French end rather than just focus on getting their hands on the 25%.

As far as I can see the best place to get your pot changed to a pension is still the UK. The plus side of the new rules for 2015 is you can put lump sums in to annuity so technically you could move the money back to buy your annuity but the costs involved may make it not worth your while, we have to wait and see what happens.

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[quote user="Quillan"]

Before the only way to get your 25% was at the time you bought your annuity in the UK.[/quote]

Not so.  There has always been the opportunity to draw the TFLS (Tax-free lump sum) of up to 25% at the time of  "crystallising" a DC pension pot, whether annuity, drawdown, or just leaving the rest to grow.

There has also been no legal requirement to purchase an annuity since 2006 (although the pension providers have not made this particularly clear). 

Current annuity rates are, with a few exceptions, extremely poor value for money - but the alternatives so far have been complicated, highly regulated and restrictive.  This will change in April 2015 and the new flexible drawdown will be a far better option for those wishing to take a little more control over their future finances. 

I'm finding it hard to see any point in a QROPS after April, and they were always a rather expensive way to get at your money.

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[quote user="Visky"]I'm finding it hard to see any point in a QROPS after April, and they were always a rather expensive way to get at your money.[/quote]Quite likely the after April bit but the cost of a QROPS (basically a SIPP) depends on how involved and astute an investor you are.

That said in the face of the impending changes it's hard to see any tangible advantage to them any more.

Lucky for those approaching making a decision, not so lucky for those who had to make theirs 5 years ago although the option to bail out is there which is why QROPS providers are going to have to fall in line with what the new rules allow or face a crippling outflow of funds, either that or reduce the costs to encourage existing client to stay onboard.

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[quote user="Visky"]

Current annuity rates are, with a few exceptions, extremely poor value for money - but the alternatives so far have been complicated, highly regulated and restrictive.  This will change in April 2015 and the new flexible drawdown will be a far better option for those wishing to take a little more control over their future finances. 

[/quote]

Well for 2014 both the ABI and the FSA put the rate at 7% or in their terms £700 for every £10,000 of your pot if you are a healthy person and live in a reasonable post code area. Of course if you put your money is a long term savings account you may get 4% over a fixed period. If you want more then as you rightly say you can, like in France, draw down each year from your pot but then your pot gets smaller each time so you end up drawing down more and more of your pot. You could also invest the money and get a better rate but thats like playing the horses. If however you are long term ill like heart problems etc you can apply for an 'enhanced annuity which in my personal case gave me a multiplier of 2.3, in other words I would get (June 2014) £1,610 (or £1,574 after fees) per £10k (per year) or 16% (minus the 2.2% admin fee) interest and lets be honest there is not that much out there that can garentee that sort of income until you die. I shall take mine in April this year which will require another medical back in the UK (I need to put a few kilos on before hand), a bit inconvient but then it's worth it in the long term. As you rightly say most peope take their annuity from the company that holds their pot but you can indeed go anywhere but you need to do your research first.

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You can calculate the possible effect of drawdown on a pension pot here:

[url]http://www.invidion.co.uk/drawdownsim/index.php?linker=http://www.invidion.co.uk/css/tools.css[/url]

It's very interesting to see effect of a mere 1% difference in annual fund performance !

There are a number of useful calculators on that site

[url]http://www.invidion.co.uk/calculators.php[/url]

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