Retirement Planning Special

Fiduciary Wealth Team

The New Year has always been a great time to focus the mind on some of the more important issues such as how to make sure your pension planning is on track and that your retirement goals are achievable. Long gone are the days when pension planning was simply a case of waiting for your employer to pay up the amount due from your final salary pension scheme or for your insurance provider to commence payments from your annuity.


Nowadays pension provision is all about choice for the majority who no longer have the comfort of a final salary pension scheme to fall back on and that choice is not only the type of scheme in which to invest but also what type of investments to make and at what level of contribution.



For UK residents the most flexible option to consider for pension planning is the self-invested personal pension although for the vast majority the self-investment element is something of a misnomer as most people will be more than happy investing in a range of collectives (unit trusts and Oeics). However the option to self-invest should not be ignored, commercial property either through individual investment or by pooling resources with others is becoming more popular with schemes to invest in property both in the UK and overseas being promoted. Other specialist areas for investment that con be considered are direct investment into company shares, antiques and other collectables.


The rules are relatively straightforward you can get tax relief on your contribution at your highest marginal rate (contribution limit has just been set at £50,000 for the next financial year whereas you were previously eligible to contribute up to 100% of  your  earnings).  In other  words  for  a  403  tax  payer  a contribution of  £50,000  will only  cost  £30.000  from  earned income. The government has set a limit to each individuals fund size, which was £ l.8 million but has just been reduced to £ 1.5 million. There are financial penalties for exceeding the cap and whilst the ceiling might seem to be set at a generous level, tor a high earner in their 30's looking to maximise their pension contributions with reasonable fund growth this ceiling could well become prohibitive. There is certainly merit in reviewing current arrangements and we would be delighted to carry out this review process with you.


One of the great advantages of a SIPP is that there is no need to buy on annuity when securing benefits. Annuities have always been seen as poor value and the ability to be able to draw income from your fund from age 55 to 75 within a broad range set by the government actuarial department (GAD) is a clear benefit. With careful planning income levels can be structured so as not to trigger higher rates of taxation and of course there is the ability take a lump sum of 25% of the accumulated fund tax free.


A flexible pension with tax free growth and the option to receive a tax free lump sum and income to suit might seem an ideal arrangement but consider this:


·         Income taken from pension is taxed at your highest marginal rate

·         A cap of £ l.5 million will only generate maximum income of £62.500 gross at retirement

·         Taking a tax free lump sum triggers a tax charge of 35% on your fund at death

·         If death occurs after age 75 this tax charge is currently 82%

The government's policy is clear. You will have benefitted from tax breaks during the build-up of your pension (relief on contributions and tax free growth on the fund) and apart from the lump sum which can be accessed tax free the remainder of the fund is going to be taxed either as income or as an inheritance. SIPPs should be seen for what they are. an opportunity to build a lump sum to provide an income in retirement not a means of sheltering significant assets from taxation and passing benefits tax free to a  future generation.


What is really important is to pion your pension strategy in tandem with your other financial goals and there may be other structures more suited to your personal requirements such as EFRBS or other plans.



For those lucky enough to be considering retirement outside of the UK there is the potential to transfer pension benefits into a QROPS. On the face of it the ability to be able to draw down a pension in o local currency is interesting but QROPS has much more to offer than just a currency hedge. Saving tax is the key to transferring too QROPS. First the tax charge levied on o

a SIPP fund at the lime of death con be removed by transferring into QROPS. Whether this benefit is immediate or after five complete tax years of residency outside of the UK is a debatable point but clearly the opportunity for a QROPS to be outside of any UK IHT charge should be taken sooner rather than later. The second tax break with QROPS comes in the way income is taxed. I have already mentioned that income is taxed at your highest marginal rate in the UK whereas taking Spain and Portugal as examples, income might be treated as o 'temporary annuity' in which case only a small proportion will be subject to tax. Move your residency to a different tax regime such as Gibraltar where there is no tax levied on annuity income and subject to local tax office approval all of your income from your QROPS could currently be tax free.


Powerful arguments for transferring your pension so who should consider moving their pension outside of the UK?

·         Anyone considering toking up tax residence outside of UK within the next 12 months

·           Anyone currently tax resident outside of UK

·         Anyone tax resident outside of the UK who has token a lump sum from a UK pension



All well and good that you can transfer your UK pension assets into on overseas pension but what about those people who have deliberately kept assets outside of their pension plans and who would like to shelter these from UK tax and local succession tax. There is some good news in this respect: recent legislation passed in the UK has heralded the birth of QNUPS (qualifying non UK pension scheme) which is essentially a retirement pion for expatriates that will allow you to shelter non UK pension assets in a similar way to QROPS. With QNUPS we understand there is a clear confirmation from HMRC that assets are protected from UK inheritance tax from day one even to the extent that should you return to the UK at some future date these assets remain outside of your estate. There is no income requirement to match any level or investment and the broadest range of assets can be included such as property, antiques and works of art. The only requirements are that by age 75 these are used to provide an income for life with the residue being available to beneficiaries on death. The same generous tax treatment of income will apply.


For the expatriate tax resident outside of the UK the QROPS/QNUPS combination is a powerful way of mitigating tax and sheltering assets from UK inheritance tax. Our Rainbow Overseas Retirement Pion and Alpha Star QNUPS have been specifically designed to cater for the expatriate  client  looking for a tax efficient and cost effective solution to their retirement planning  needs.


International Pensions


Of course it is not just retirees looking for tax efficient retirement solutions. We live in an increasingly mobile society where many people will spend a large proportion of their working life outside of the UK and require a portable tax efficient savings solution to enable them to build up a retirement portfolio without the constraints of local taxation.

Our international pension solution does just that, offering employees the chance to build a tax free fund irrespective of where they might be located. For employers, providing this type of pension benefit con often be seen as a useful tool when it comes to recruiting or retaining key staff.


Cross Border Solutions


More than anything it is important to engage with on adviser who understands not just local rules but also the cross border implications of transferring pensions and pension assets. At Fiduciary Wealth we specialise in being able to add this cross border element to our advice proposition so whether you are looking for advice specific to one of our  key market areas. Gibraltar. Spain. UK or Portugal or you wont to benefit from our knowledge of international financial planning please call us in the first instance on +350 200 50982 or email