Should you recommend a Kiwi QROPS?

Here we go again

Rex has picked up on reports elsewhere about this claimed group of New Zealand advisers. Yet to my knowledge nobody has admitted participating in any such group. I have made enquiries of our New Zealand connections and they are equally mystified. So if anybody in that group reads this article perhaps they would care to identify themselves and comment accordingly. I am also surprised that Rex has stooped so low as to scaremonger in the typical way of Guernsey trustees. Guernsey providers seem completely unable to accept that other QROPS jurisdictions behave differently to Guernsey. Guernsey schemes are not regulated. Therefore they are subject to the provision that at least 70% of the UK tax relieved fund must be used to provide an income for life. New Zealand schemes are regulated. New Zealand has a double taxation treaty with the United Kingdom. The presence of these two conditions means that New Zealand schemes are not subject to the 70% rule (SI 2006 / 206 ) - thus it is local legislation that applies. To therefore state a risk of a tax charge is disingenuous on your part Rex when you know perfectly well (I know you do because I have had this discussion with you face-to-face) how New Zealand QROPS work. HMRC are also fully aware. It would be incredibly naive to think that they are not. Indeed in the discussion document just published by the Treasury where the Government are considering allowing UK nationals earlier access to their pension funds, the specific example of New Zealand schemes is used.

Posted by: Stephen Ward

Tax Implications

Whilst the ethics of NZ QROPS engender much lively debate, the issue of personal taxes for the client seems to get lost in the argument. Taking 100% in cash from your pension may sound like great news to some, but I wonder if the advisers actually explain to the clients the largely negative tax implications on doing so. Possible income & capital gains tax, inheritance tax, wealth taxes etc, all of which may come into play once funds have been liberated from their pension and in the client's own name. The end result could be financially very damaging. Best thing is to get regulated independent advice from a suitably qualified intermediary who will explain to you the benefits and pitfalls of all the differentjurisdictions.

Posted by: Bethell Codrington

Lets have quality QROPS advice - not transaction only

Mr Ward makes some interesting and constructive comments, but as always he seems to be oblivious to the bigger picture, a world does actually exist outside. So please let’s not forget, the vision of the New Zealand Prime Minister, John Key to turn New Zealand into a financial services hub. As also should we reflect on the old chestnut of it being a case of don’t tell me what the country can do for you, tell me what you can do for your country? And that is the point he is not picking up on and why there is such interest in “cash and run”. Perhaps Stephen’s request for revelation would best be served by he himself approaching leading lights in New Zealand with the key question, “Are overseas advisers abusing the New Zealand tax and financial system and if so what should be done to stop it?” Now that would be a very positive move and would certainly be beneficial for one and all. So please why all this knocking? Yet Mr Ward (and I will give him the benefit of the doubt as his perhaps loose use of the word regulated depends on jurisdiction interpretation) is essentially right as New Zealand has a tax and legislative system that permits encashment. But the nub of the issue is not what New Zealand permits – it’s what is best for New Zealand. And Mr Codringtons comment (which may not be what was intended) about ethics of the New Zealand system may not go down to well with advisers and legislators in New Zealand, their system is ethical as it fits New Zealanders in New Zealand and that is the issue. The New Zealand system was not set up so that it could turn New Zealand into an “in one door and out the back door” operation, that was not the intent and I doubt it would be the intent of any country. So are overseas advisers using the New Zealand system ethically? Rex is of course Guernsey connected and he would know that Guernsey is not necessarily the right jurisdiction for everybody. I think his arguments are relatively well balanced and he raises key advice factors. But what I am not hearing is, where is how do you deliver financial advice in all of this? I hear lots of talk of transactions and what is possible and what is not, but little about financial planning and advice. Why? Where is the talk on financial planning or is it transaction merchants masquerading as advisers where advice stops at “Cash your pension?” So let’s turn the talk to advice and not to transactions. Professional advisers give quality advice and having been involved with pension transfers overseas since my first year in the business in 1982, that’s what we set out to do when we designed the first ever off the shelf purpose built scheme to receive a transfer from UK in 1995. Advisers want their clients looked after with the right advice – lets debate where QROPS fit into a clients portfolio.

Posted by: Geraint Davies

A Question of Advice

I could not agree more with the sentiment on Geraint Davies. The issue is whether its ‘good and prudent advice’ to cash in a pension and to answer this we have to revisit the very essence of why pensions exist at all? The humble pension is one of the noblest forms of ‘trust’ as they have one fundamental aim. That is to protect that capital contributed to it and provide an income stream for the lifetime of the primary beneficiary (often the sole beneficiary) when they can no longer work. It should also be remembered that a pension is just part of a portfolio of products and assets that should be used for retirement planning. Mr Codrington points to some of the issues clients will face by bring pension assets into their personal name and whilst other structures can be used to remove these very assets from a client’s estate these are typically very costly and this questions the reason for taking them out of a pension in the first place. Whilst there may be valid reasons to cash in a pension because of an individual's personal set of circumstance but the consequences both now and in the future have to be considered carefully. Hence it seem that much of the discussion is misplaced and distract from this most fundamental of fundamental points – what is the right thing to do for the client and under what circumstance should what be done?

Posted by: Rex Cowley

from a client's perspective

I don't trust pension companies. You have seen the biggest banks in the world go bankrupt. The biggest insurance company in the world AIG go bankrupt. How can anybody trust a pension company will deliver an annuity related income for my lifetime. I cannot even trust governments. There is nothing in this world called safe investment. So what is the best thing i can do to minimise all these risks i.e. pension companies going bust, banks going bust, governments going bust. It is to cash the pension and keep in under your control. Under the SIPP rules in the UK, the government only allows one to invest in others businesses or gamble on derivatives. If a person wants to use the pension money for his/her own business he/she cannot. I do not understand the insane logic the government has applied in telling me that I would not care about my own money but other people would care more about my money. Why should I buy barclays shares in my pension when instead i can use it in my own business. Why/how can i trust barclays bank to care about my well being in my old age? Best is to cash out! I am more worried about my pension than trust companies or banks or pension companies. New Zealand here I come.

Posted by: abc

Providers

How many companies are advising on full encashment? qrops@msn.com

Posted by: Graeme