Is tax free - tax free?

Mr Tully 's comments make interesting reading - but there are technical corrections required to his commentary. Tax free lump sums are now of course pension commencement lump sums but it is his interpretation of the status of the lump sums that raises my concerns But first why the view that "In addition to state pensions, people clearly need to consider their company or personal pension. It may be possible to transfer this to an overseas arrangement although this is a complex area, which has many pitfalls". Why is it a case of it may be possible to transfer overseas? Reality confirms the only schemes that cannot be transferred overseas now are final salary schemes in payment and life annuities. Furthermore you don’t have to leave the UK to move into a Qualifying Recognised Overseas Pension Scheme (QROPS) – that ended with A-Day. Though seemingly inadvisable a QROPS for a UK resident I am aware of a number of reasons why such a transfer could be highly advantageous. We as advisers must always consider the potential of a Qualifying Recognised Overseas Pension Scheme (QROPS) in any pension advice whether it is as immediate advice or advice lined up for the future. Indeed whether we like the pitfalls or not, preservation of funds in UK could lead to much worse than a pitfall. How about a case where a client could have lost the right of abode ex-UK because a QROPS solution was not considered? As one who has specialized since 1982 in guiding migrants and returning nationals on their retirement planning, the retirement planning market place worries me. We as a firm are for ever seeing advice delivered by UK advisers whereby a UK pension solution devoid of international considerations is best advice when simply it is not. QROPS or its sister QNUPS can offer greater benefits and life planning opportunities, than a one eyed UK strategy. In reality one must merge advice thinking i.e. what is UK created must be considered with UK and offshore exit options to give best advice. This is indeed dangerous territory. And those advisors wandering in the advice world delivering advice options factoring UK only solutions may be perhaps a tad naive thinking and believing that they can advise a would be or actual resident of another country without considering the international consequences. It certainly does raise TCF questions. Mr Tully is right that "the pension could be left within the UK scheme" but he really must check his assertion that benefits can be "taken as normal when the client wants, or needs, to access their tax-free lump sum and pension income" for the following reasons 1. Benefits cannot be taken as normal if resident in another country - local tax and social rules can impact on when options should be taken. 2. And as for a tax free lump sum, many countries actually tax lump sums for their tax residents. Of course one has to consider where to pay the pension in payment monies, but managing the FX rate of pounds v local currency does perhaps determine the banking strategy – booking a long term FX rate out of a UK bank does work. I do hope Standard Life are not writing to their clients resident in other countries advising them that the lump sum is tax free? It may be out of a QROPS but not necessarily from a UK scheme, most countries don’t recognise the tax free lump sum concept. Geraint Davies Managing Director of Montfort International plc www.miplc.co.uk and www.qrops.co.uk

Posted by: Geraint Davies